Termination of Employment in Germany

Ending an employment relationship in Germany is subject to detailed legal requirements that provide significant protection for employees while imposing strict procedural obligations on employers. Businesses hiring staff in Germany should not assume that employment can be terminated simply by giving notice. In many cases, dismissals are only lawful if they are based on valid statutory grounds, follow the correct procedure and comply with applicable notice periods.

For international employers, understanding German dismissal rules is essential to minimise legal risk, avoid unfair dismissal claims and ensure compliance with local labour law. Companies expanding into Germany often choose an Employer of Record in Germany to manage employment terminations in accordance with local legislation.

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German Employment Protection

Germany has one of the strongest employee protection systems in Europe. The legal framework governing dismissals is primarily based on the German Civil Code (Bürgerliches Gesetzbuch – BGB), the Protection Against Dismissal Act (Kündigungsschutzgesetz – KSchG), collective bargaining agreements and individual employment contracts.

The Protection Against Dismissal Act generally applies where:

the employer regularly employs more than ten employees; and
the employee has completed at least six months of continuous service.

Where these conditions are met, an employer cannot terminate employment without a legally recognised reason.

Even where the Act does not apply, employers must still comply with contractual notice periods, anti-discrimination laws and general principles of good faith.

Types of Employment Termination in Germany

Employment relationships in Germany may end in several different ways depending on the circumstances.

Ordinary Termination

Ordinary termination is the most common form of dismissal. It requires statutory or contractual notice and must usually be supported by a legally valid reason where dismissal protection applies.

Typical grounds include:

operational redundancies;
long-term capability issues;
serious performance deficiencies;
business restructuring;
permanent closure of business operations.

Employers must be able to demonstrate that termination is proportionate and that no reasonable alternative employment exists where applicable.

Extraordinary (Summary) Dismissal

German law also allows termination without notice in exceptional circumstances.

Immediate dismissal is only permitted where continuing the employment relationship would be unreasonable, even for the duration of the normal notice period.

Examples may include:

theft;
fraud;
violence;
severe breaches of confidentiality;
intentional damage to company property;
serious workplace misconduct.

Employers generally have only two weeks from becoming aware of the relevant facts to issue an extraordinary dismissal.

Lawful Reasons for Dismissal

Where dismissal protection applies, employers normally need to rely on one of three recognised categories.

Termination may be justified where an employee repeatedly breaches contractual obligations despite prior warnings.

Examples include repeated lateness, refusal to follow lawful instructions, unauthorised absence or repeated violations of workplace policies.

In most situations, employers are expected to issue one or more formal written warnings before dismissal.

An employee may be dismissed if they are permanently unable to perform their duties.

This could arise from long-term illness, loss of professional qualifications or an inability to fulfil essential job requirements despite reasonable adjustments.

Employers should carefully assess medical evidence and consider alternative roles before proceeding.

Operational Dismissal

Operational dismissal occurs where the position itself is no longer required due to business reasons.

Typical examples include:

restructuring;
automation;
relocation;
department closure;
declining business activity;
economic necessity.

German employers are often required to conduct a social selection process (Sozialauswahl), taking into account factors such as age, length of service, family responsibilities and severe disability when deciding which employees are selected for redundancy.

Notice Periods in Germany

German law establishes minimum statutory notice periods, although employment contracts and collective agreements may provide longer periods.

The standard statutory notice period for employees resigning is four weeks to either the fifteenth or the end of a calendar month.

For employer dismissals, notice periods generally increase with the employee’s length of service.

Employment contracts may provide longer notice periods but generally cannot reduce statutory minimum requirements.

Written Notice Requirement

Termination of employment in Germany must always be provided in writing.

Electronic signatures, scanned copies, email notifications and verbal dismissals are generally not legally valid.

The notice must bear an original handwritten signature from an authorised representative of the employer.

Failure to meet this formal requirement can render the dismissal invalid.

Probationary Period

Employment contracts commonly include a probationary period of up to six months.

During probation, either party may generally terminate employment by providing two weeks’ notice.

Although dismissal protection under the Protection Against Dismissal Act usually does not apply during the first six months, employers must still comply with anti-discrimination legislation and other statutory protections.

Protection Against Unfair Dismissal

Certain employees benefit from additional legal protection against dismissal.

Special protection may apply to:

pregnant employees;
employees on parental leave;
works council members;
employees with severe disabilities;
employees taking family care leave;
individuals performing military or public service.

In many cases, employers must obtain approval from the relevant public authority before termination can lawfully proceed.

Employee Resignation

Employees may resign at any time by providing written notice in accordance with their employment contract or statutory notice period.

The resignation must also be submitted in writing with an original signature.

Employees are generally expected to continue working throughout the notice period unless both parties agree otherwise.

Garden Leave

German employers may place employees on paid garden leave during the notice period where permitted by the employment contract or by mutual agreement.

Employees remain employed, continue receiving salary and benefits, but are relieved from performing their normal duties.

Garden leave is commonly used to protect confidential information, client relationships and business interests.

Severance Pay

Unlike some jurisdictions, Germany does not automatically require employers to pay severance following every dismissal.

However, severance payments commonly arise through:

negotiated settlement agreements;
redundancy programmes;
court settlements;
social plans;
collective bargaining agreements.

A commonly referenced benchmark is approximately half of one month’s gross salary for each completed year of service, although actual amounts vary significantly depending on negotiations and individual circumstances.

Final Salary and Outstanding Payments

When employment ends, employers must ensure that all outstanding financial obligations are settled correctly.

This may include:

unpaid salary;
overtime payments where applicable;
accrued but unused annual leave;
commissions;
bonuses due under contractual arrangements;
expense reimbursements.

Accurate payroll processing is essential to avoid disputes and maintain compliance with German payroll requirements.

Exit Documentation

Employers are required to provide several important employment documents upon termination.

These commonly include:

final payslip;
employment certificate (Arbeitszeugnis);
tax documentation;
social insurance records;
confirmation of employment dates.

The German employment certificate is particularly important because future employers frequently request it during recruitment.

Common Employer Mistakes

International employers often encounter legal issues because they underestimate Germany’s employment protections.

Common mistakes include:

terminating employment without a legally valid reason;
failing to provide written notice;
ignoring statutory notice periods;
insufficient documentation of performance issues;
inadequate redundancy selection procedures;
dismissing protected employees without regulatory approval;
failing to calculate final payroll correctly;
overlooking accrued annual leave entitlements.

These mistakes can result in reinstatement claims, compensation, court proceedings and unnecessary legal costs.

Managing Terminations for International Companies

Companies expanding into Germany should establish termination procedures before hiring their first employee.

A compliant process should include:

legally compliant employment contracts;
documented performance management;
accurate payroll administration;
proper annual leave tracking;
secure HR documentation;
consultation with employment law specialists where necessary.

Businesses without a local legal entity frequently rely on an Employer of Record in Germany to manage compliant hiring, payroll administration and employment termination while reducing legal and administrative complexity.