An employer can be an individual person or a legal entity that employs at least one employee.
An employee is a person who performs “dependent” work for the benefit of another person or legal entity. The fact that an employee is dependent on an employing person or entity is what distinguishes the work of an employee from services performed by a freelancer or independent contractor.
An employee is dependent on the employer because the employer has the right to issue directives on the place and time as well as details of the work of the employee. Typically, employees are also integrated in the organization of the employer by being assigned a certain workplace and being integrated into workplace hierarchies.
Personnel who take entrepreneurial risks, which are able to determine their modalities and time of work and are not subject to directives, are normally defined as freelance staff. The often-difficult differentiation between employees and freelance staff is subject to an examination and evaluation of the facts of individual contracts. This distinction is crucial because the employer is legally obligated to deduct wage tax and social security contributions for his employees, while freelance staff are responsible for themselves in regards to tax and social security matters. Additionally, mandatory employment law rules such as dismissal protection rules do not apply to freelancers.
Even where a contract specifically describes a worker as an independent worker, that worker can still, in fact, be an employee given the circumstances of their employment relationship, and can still be entitled to the same rights as an employee.
German law has traditionally distinguished between blue-collar workers and white-collar workers. Today, however, this distinction no longer has any legal relevance in practice. German constitutional law requires both groups of employees to be treated equally unless objective grounds exist for unequal treatment. Differences do remain, however, in matters regarding employee representation and collective bargaining agreements.
Managerial employees are also considered employees, but often act as an employer vis-a-vis the other employees. Because of this there are certain exceptions to the general labor and employment law rules for managerial employees. These are particularly notable with respect to protection against termination and the applicability of the Works Constitution Act.
Temporary employment exists when a business (namely a temporary work agency) employs an individual on a permanent basis and dispatches him temporarily to another employer (the user enterprise). The employee works during this period under the supervision and in line with the instructions of the user enterprise.
Vocational training contracts that primarily intend to train young people in a profession are not considered employment contracts. They are governed by the Occupational Training Act. This Act does stipulate that the rules and principles governing the contract of employment must be applied, unless the Act expressly states an exception, or when the application of employment law would not be compatible with the nature and aim of the vocational training being undertaken.
As a rule, an employment contract is for an unlimited period. It is, however, possible for the employer and the employee to conclude a contract of a limited period. Any fixed-term contract must be consistent with the Act on Part-Time Work and Fixed-term Employment Relationships. The duration of fixed-term contracts must be set according to conditions such as a specific end date, the completion of a specific task, or the occurrence of a specific event. However, a fixed-term contract may be also lawful without justification, if the contract is concluded for a limited period of up to two years but does not follow any other contract with the same employer.
Most part-time activities in Germany are offered as so-called mini-jobs (also called “450-euro-jobs” or “minor employment”). It is a particular employment relationship in which not more than €450 per month is allowed to be made. According to German law, minor employment workers are not insured in statutory health or unemployment insurances. An employee can also be released from the pension insurance. Note: An employee can have several mini-jobs at the same time, but should inform the respective employers and the earnings limit of €450/month should not be exceeded.
Article contributed by Peter Fürnthaler
This article is meant to provide an overview on the most important rules and provisions. It can, of course, not be a substitute for in-depth legal advice, but might serve as a starting point for those interested in the German marketplace and employment laws.