German vs. Czech Employment Contracts

Why is German labour law so treacherous for Czech companies?

This scenario is not fiction, but a real risk stemming from one fundamental misunderstanding. While in the Czech Republic we are governed by a single, comprehensive Labour Code, no unified code exists in Germany. Labour law is fragmented across several key acts, such as the Civil Code (Bürgerliches Gesetzbuch - BGB), the Act on Protection Against Dismissal (Kündigungsschutzgesetz - KSchG), or the Working Hours Act (Arbeitszeitgesetz).

This legislative fragmentation is the first and biggest trap for Czech entrepreneurs. Without expert guidance, it is almost impossible to navigate the system flawlessly and ensure one hundred percent compliance with regulations, which, moreover, often differ based on collective agreements for the given sector.

Our lawyers navigate the German legal system on a daily basis. We will help you understand the legislation and prepare all documentation in accordance with applicable regulations. For an immediate solution to your situation, write to us at consultation@arws.cz.

The contract and probationary period: First steps, first risks

The foundation of every employment relationship is the contract. Here, too, we encounter significant differences. Although a German employment contract (Arbeitsvertrag) can theoretically be concluded orally, the employer is obliged to confirm its key terms in writing within one month. Relying on an oral agreement is a huge risk for a company, one that does not pay off in the event of a dispute.

Probationary period (Probezeit): Different rules, different protection

German law allows for a probationary period of a maximum of six months. During this time, a much shorter notice period of only two weeks applies to both parties, without the need to state a reason. This can be advantageous for the employer.

However, there is a crucial exception. Even during the probationary period, very strong protection for pregnant employees applies in Germany, making them practically impossible to dismiss. Ignoring this fact leads to the invalidity of the dismissal and an inevitable lawsuit.

Dismissal in Germany: Why is it so difficult to part ways with someone?

The area of terminating employment is by far the riskiest. While in the Czech Republic dismissal is primarily a procedural matter, in Germany the Act on Protection Against Dismissal (Kündigungsschutzgesetz - KSchG) comes into play. It applies to all businesses with more than 10 employees and to employment relationships lasting longer than 6 months.

The key concept here is "social justification" (sozial gerechtfertigt). Every dismissal by an employer must fall into one of three categories defined by law:

1. Operational reasons (betriebsbedingt): For example, company restructuring. However, the employer must carry out a very complex process of so-called social selection (Sozialauswahl), where employees are compared based on criteria such as length of employment, age, or maintenance obligations.

2. Personal reasons (personenbedingt): Most often, this involves a long-term illness with a poor prognosis or the loss of a key qualification (e.g., a driver's license for a professional driver).

3. Reasons related to the employee's conduct (verhaltensbedingt): Breach of work duties, such as late arrivals, unexcused absences, or failure to complete tasks. And it is precisely here that another major trap lies in wait.

Warning letter (Abmahnung) – a necessary step before dismissal

If you want to dismiss an employee for a breach of duties, you must almost always first deliver a formal written warning, the so-called Abmahnung. This document must precisely and in detail describe the specific misconduct (with date and time), point out the breach of a contractual obligation, and explicitly warn that a repeat offence will result in dismissal.

Without the prior delivery of a valid warning letter, a dismissal for reasons of employee conduct is almost always invalid. This is a fundamental difference from Czech practice, where a less formal warning is sufficient.

Consequences of an invalid dismissal: A financial nightmare

If a German court rules that a dismissal was invalid, the employment relationship never ended. The employer is obliged to pay the employee their full salary for the entire duration of the court dispute, even though the employee performed no work. This claim, known as Annahmeverzugslohn, can easily reach tens of thousands of euros and be ruinous for a smaller company.

Termination of employment in Germany

Wages, overtime, and holiday: How to set up remuneration correctly and avoid penalties?

Correctly setting wages is key in Germany. The statutory minimum wage (Mindestlohn) is EUR 12.82 per hour as of 1 January 2025. This rate applies to all employees, including foreign ones. But the complexity doesn't end there.

Many Czech companies are unaware that in a number of sectors (e.g., construction, roofing, cleaning services, social care), sectoral minimum wages set in collective agreements (Tarifvertrag) apply, which are often significantly higher than the statutory limit. Paying only the statutory minimum wage in these cases is a gross violation of the law.

Compliance with wage regulations is monitored by the German customs authority (Finanzkontrolle Schwarzarbeit), which is uncompromising. Fines for failing to pay the correct wage can reach up to EUR 500,000.

Overtime (Überstunden) and holiday

Another surprise for Czech employers is the fact that there is no statutory entitlement to overtime pay in Germany. An entitlement to a supplement only arises if it is explicitly agreed in the employment or collective agreement. In practice, however, it is standard in Germany, and if a company does not offer it, it becomes an unattractive employer.

The statutory holiday entitlement is a minimum of 24 working days for a six-day working week, which corresponds to 20 days for a five-day week. However, the common practice, often enshrined in collective agreements, is 25 to 30 days of holiday.

Wages and working conditions in Germany

Posting workers to Germany: Are you sure that Czech law applies to you?

Many companies believe that if they only temporarily post their employees to Germany, their employment relationship is governed exclusively by Czech law. This is a dangerous misconception. Even if the employment contract is concluded under Czech law, key German regulations on minimum working conditions always apply to posted workers.

This means you must comply with the German (often sectoral) minimum wage, maximum working hours, and minimum holiday entitlement. Of course, you must also comply with German regulations on health and safety at work. Don't forget the obligation to obtain an A1 form for the employee, which proves the payment of social security in the Czech Republic.

Thanks to the ARROWS International network, built over ten years, we handle cross-border cases of posting workers almost daily. We will ensure that your operations in Germany and elsewhere abroad are legally secure. Do not hesitate to contact our office – consultation@arws.cz.

Non-compete clause: How to effectively protect your know-how in Germany?

Protecting company know-how after the departure of a key employee is crucial. However, the Czech and German regulations on post-contractual non-compete clauses differ dramatically. The German clause (nachvertragliches Wettbewerbsverbot) is valid only if strict conditions are met: it must be in writing, protect a legitimate business interest, and be reasonable in scope and duration (maximum 2 years).

But the most important difference is the mandatory financial compensation. The employer must pay the employee so-called Karenzentschädigung for the entire duration of the ban, the amount of which must be at least 50% of their last total contractual income (including bonuses, commissions, and the value of a company car).

If the compensation is agreed at a lower amount, the clause is non-binding (unverbindlich) for the employee – they can choose whether to comply with it or not. If compensation is completely missing from the contract, the entire clause is void from the outset (nichtig) and the company has no protection.

ARROWS: Your partner for safe business in Germany

As is clear, the differences between Czech and German labour law are fundamental, and ignorance of them can lead to serious financial and reputational damage. The ARROWS law firm provides Czech companies with comprehensive legal services for their activities in Germany.

Our services include:

• Preparation and revision of bilingual employment contracts and internal directives.

• Representation before German courts and administrative authorities, including inspections by the Zoll.

• Legal opinions on the issue of sectoral wages and collective agreements.

• Expert training for management and HR focused on the specifics of German labour law.

We have a long-standing history of providing services to more than 150 joint-stock companies and 250 limited liability companies. Our experience is your guarantee of speed and the highest quality. Moreover, we actively help our clients in business as well. We are happy to connect interesting business and investment opportunities and listen to your business ideas ourselves.

Are you planning to expand into Germany or want to verify that your existing contracts and procedures comply with German law? Don't take risks and turn to us. Connect with us at consultation@arws.cz and get a tailor-made legal solution.