Employment contract in Germany: clauses to review

An employment contract forms the legal basis of the employment relationship. It should describe not only the position and remuneration but also the practical expectations of both parties in a clear and understandable manner.

Identify the correct contracting parties and start date

The contract should identify the employer precisely and state when the employment relationship begins.

Within a corporate group, the correct contracting company is particularly important. It may affect instructions, remuneration claims and the allocation of the employment relationship.

Review duties and responsibilities

The description of duties defines the work the employee is contractually required to perform.

Very broad wording may give the employer substantial flexibility. Very narrow wording may make later organisational changes more difficult.

For executives, the following issues may require particular attention:

• area of responsibility
• management and personnel responsibility
• reporting lines
• budget authority
• decision-making powers
• powers of representation
• target responsibilities
• organisational position

Assess remuneration as a complete package

Remuneration may consist of several elements:

• fixed salary
• bonuses
• commission
• target-based remuneration
• special payments
• company car
• occupational pension arrangements
• other benefits

Variable-remuneration provisions should explain when an entitlement arises, who sets the targets and how achievement is assessed.

Check working time and overtime clauses

The contract should state the regular working time and its distribution.

Broad clauses stating that all overtime is included in the salary may require closer legal review. It should remain identifiable what additional workload is covered by the agreed remuneration.

Review workplace and remote-work provisions

The agreed workplace determines where the work is generally to be performed.

Remote-working provisions may need to address:

• extent of remote work
• attendance requirements
• withdrawal rights
• technical equipment
• expenses
• data protection
• occupational health and safety
• return to the employer’s workplace

Examine reassignment and mobility clauses

Reassignment clauses may permit changes to duties, workplace or organisational allocation.

Their scope should be reviewed carefully. It may be important whether any new role must remain equivalent and which statutory limits and mutual interests apply.

Distinguish probationary periods and fixed terms

A contractual probationary period is not the same as a fixed-term employment relationship.

Notice periods may arise from statute, collective agreements or the employment contract. Extended periods should be reviewed for reciprocity and their practical effect on future job changes.

Review holiday entitlement

The contract should state the holiday entitlement clearly.

Statutory minimum holiday and additional contractual holiday should be distinguished. Different rules may apply to additional holiday where the contract makes that distinction sufficiently clear.

Assess secondary work and competition restrictions

Clauses concerning secondary work may protect legitimate employer interests, but should not prohibit all additional activity without distinction.

Post-contractual restrictive covenants may significantly limit future employment. Their duration, scope, geographical reach and compensation should therefore be reviewed.

Do not overlook contractual exclusion periods

Contractual exclusion periods may cause salary and other claims to expire after only a few months.

The starting point, required form of assertion and any second procedural stage should be examined carefully.

Check repayment clauses

Repayment obligations may concern:

• training costs
• relocation costs
• special payments
• signing bonuses
• other employer-funded benefits

Such clauses should be transparent and must not bind the employee disproportionately in duration or scope.

Document later amendments

Changes to duties, remuneration, workplace or working time should be documented clearly.

Oral arrangements may be legally relevant but frequently create evidential difficulties. Amendments and supplementary agreements should therefore be reviewed carefully and retained completely.