Why German Employment Contracts Are Different
If you are a US company expanding into Germany, your first surprise will likely be how comprehensive a German employment contract must be. While in the US many employees start work with only an offer letter and a company handbook, German employment law requires a written, signed contract containing extensive information about the role and conditions of employment.
Unlike in the US, it’s not optional. Every employer must provide written or text-form documentation of key terms to the employee within one month after starting the job – best practice is delivery on or before the first working day. The employer must (the employee should) sign the summary of terms, and the employee must receive a copy for their own records.
Mandatory Elements of a German Employment Contract
Under German employment law, the contract must include a range of specific details to meet legal standards. The following elements are essential:
- Employer and employee details: Legal name, address, and other identification details of both parties.
- Position and job description: A concrete, reasonably detailed description of the employee’s tasks and role within the company.
- Working hours: The total weekly hours, including regular break times, must be stated explicitly.
- Remuneration: Every component of the salary – base salary, bonuses, allowances – needs to be listed individually.
- Vacation and paid time off: Clearly mention the number of vacation days per year. The statutory minimum is 20 working days for a five-day work week, but most employers offer considerably more.
- Overtime and on-call work: If you expect the employee to work overtime or be on-call (“Bereitschaftsdienst”), this must be described in detail — including how it will be compensated.
- Notice periods: Even though statutory notice periods apply by law, they should still be explicitly mentioned in the contract.
- Pension schemes and collective agreements: Any applicable company pension plan or collective bargaining agreement (Tarifvertrag) must be identified.
Formalities and Best Practices
From January 1, 2025, indefinite-term employment contracts can be provided in text form (e.g., email, PDF, or simple digital signature like DocuSign), eliminating the prior wet-ink signature requirement under the updated Nachweisgesetz—though fixed-term contracts (except those to retirement age) and certain sectors (e.g., hospitality, construction) still mandate written form. Employers must ensure the document is accessible, storable, printable by the employee, and request acknowledgment of receipt. While verbal agreements remain valid, providing a signed summary of key terms avoids fines up to €2,000.
Although German law allows digital copies, many employers find that the safest approach is still the traditional “wet ink” signature. Employers should hand the signed contract physically to the employee or, if sent electronically, ensure written acknowledgment of receipt. For compliance and practical reasons, both sets of documents should be stored and archived carefully.
Pay attention to timing – even though there is a one‑month grace period, best practice is to deliver the contract before the employee’s start date. This approach builds trust and ensures compliance from day one.
Key Differences from US Practice
One of the most striking differences between German and US employment arrangements is formality. Whereas in the US the combination of an offer letter and an employee handbook might suffice, in Germany the employment relationship must be defined in a single document signed by the employer (and, in the employer’s interest, also the employee). The strong documentation culture reflects broader differences in employment law protection and employee rights.
If your company is preparing to expand, understanding these differences early can prevent misunderstandings and non‑compliance. It’s often helpful to review your entire HR and compliance setup before entering the German market.
Next Steps for US Companies
Before you hire your first employee in Germany, make sure you know exactly what German employment contract requirements apply to your business. Are your US templates or practices fit for purpose? A good first step to test your EU readiness is our Are You Ready for Europe? check. You can also explore why many US firms use Germany as their hub for EU operations in Market Entry Europe: Why Germany is the Perfect Gateway.
Taking the time to comply with German employment law from the outset ensures a smooth start, protects your company from fines or disputes, and helps you establish a professional and trustworthy reputation in the German market.
