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Employment Contract Template

Drawing up a comprehensive and legally binding employment contract can be a daunting process. But with our free and customizable employment contract template, you can streamline the process and ensure that all of your arrangements are in order. The following template allows you to tailor your contract to meet your specific needs and requirements while saving valuable time and resources.

What is An Employment Contract?

A private law agreement that regulates the rights and obligations between employee and employer is known as an employment contract. For example, the employee undertakes to do the agreed work, while the contract, conversely, also stipulates that the employer pays the employee a salary in return.

The employment contract therefore forms the basis of the employment relationship. According to the law, the employment contract is a form of so-called service contract, in which both contracting parties agree on the services to be provided. Services of any kind may be subject matter of the service contract. The employment contract is therefore a service contract in which the service consists in the provision of work.

The most important provisions for employment contracts can be found in Sections 611 to 630 BGB. These rules regulate, inter alia, the following points:

• Employers and employees
• Start and end of employment
• Nature and scope of activity
• Place of work
• remuneration
• termination

The important framework conditions of an employment contract are defined by law. In addition to legal regulations, parts of employment contracts can also be regulated by collective agreements and works agreements. Collective agreements are agreements concluded between employer associations and trade unions, which apply to all employees and employers subject to the collective agreement. Works agreements are agreements between the employer and the works council that apply to all employees of the company.

How is an Employment Contract Concluded?

In principle, there is freedom of form for the employment contract. This is what the Act provides in Section 622 (1) of the German Civil Code. This means that the employment contract can be concluded orally, in writing or even through coherent conduct.

However, fixed-term employment contracts are excluded from this rule. Fixed-term employment contracts must be in writing. This means that the fixed-term employment contract must be set down in writing and signed by both parties to the contract.

However, for reasons of proof, it is always advisable in practice to agree an employment contract in writing. In the event of a dispute, this makes it possible to prove which agreements have been made.

The Benefits of a Written Employment Contract

Protection Against the Burden of Proof

A written employment contract creates clarity and security for both parties to the contract. All important agreements are set out in black and white and can be used to clarify the facts in the event of a dispute.

What did you actually agree on if you didn't agree on anything?

As an employer, you should be aware of this issue. Because if you do not talk to an employee about important key points of an employment contract or do not make a written agreement about them, the usual is considered agreed. This means that in the event of a dispute, the employee is entitled to the usual salary, the usual working hours and the usual period of notice.

Negotiations Protect Against Assumptions and Fallacies

The employment contract also offers the opportunity to clarify often controversial issues right at the start of the employment relationship. This allows you to make sure right during the negotiation whether you want to work together as parties over a longer period of time. These critical topics often include vacation, overtime, working time regulations, home office and attendance requirements.

Professional Negotiations Create the Framework For Professional Work

Employment contracts help to establish a professional working relationship between employer and employee. By defining working conditions, the contract helps to create trust and lay the basis for a successful working relationship.

The Written Employment Contract Complies With the Verification Act

The Evidence Act (NachWG) is unequivocal: Employers are required to record the essential contractual terms in writing within one month of the start of an employment relationship.

As already mentioned, there is no explicit obligation to draw up a comprehensive, written employment contract and to sign it. At the same time, the Evidence Act requires you to record at least the essential conditions of employment in writing and to make them available to the employee.

What happens if the Evidence Act is not observed? Although the law itself does not provide for direct sanctions, the above mentioned lack of proof will once again come into play here. In plain language, this means: You haven't written anything down? Then prove which agreements you have actually made with your employee. In such a conflict, you are accused of failing to comply with the Evidence Act and you could end up in the unpleasant situation of having to pay the “usual wage” instead of the originally calculated salary.

Since you are required by law to set down essential contract terms in writing anyway, you should not enter into an employment relationship without a written contract in future.

What Should Be Included in an Employment Contract?

Even though the content of an employment contract may differ depending on the state and nature of the employment relationship, the following conditions and provisions are usually included in such contracts.

Regulations on the Duties and Rights of the Employer

Obligations of the Employer

The basic obligation to pay remuneration

At the heart of every employment relationship is the employer's basic obligation to pay a salary or wage. While this duty appears self-evident to many, it is the foundation on which the relationship of trust between employer and employee is built.

The amount of this remuneration is not only an agreement between the two parties, but is also influenced by legal regulations. Legislative requirements, such as the minimum wage, ensure that employees are fairly remunerated for their work. According to data from the Federal Statistical Office, the minimum wage is an essential basis for income security for around 8% of employees in Germany.

This further highlights the importance of a formal and written employment contract. A clearly defined remuneration not only protects the employee, but also provides the employer with legal security. It also ensures transparency and trust, two essential building blocks for a successful, long-term working relationship.

Obligation to pay remuneration on time

In addition to the core obligation to pay remuneration, employers in Germany must also fulfill other significant obligations. This includes, for example, that the agreed fee must be paid punctually and in full. It is interesting here that even an employee's illness does not release the employer from this obligation. In addition, the employer has the obligation to correctly calculate and pay payroll taxes and social security contributions.

Therefore, regulate in your employment contracts how and, in particular, when the agreed remuneration is to be paid.

Special attention is also paid to companies with more than 19 employees: In such cases, it is mandatory to issue a detailed, written payslip. According to the Pay Certification Ordinance, the type and amount of surcharges, deductions, reductions and subsidies must be clearly stated here.

The employer's duty of care cannot be ruled out

In addition, there are so-called ancillary obligations, which are no less important. A key concept here is the employer's duty of care, codified in Sections 617 to 619 of the Civil Code (BGB). Employers are therefore required by law to ensure the safety and health of their employees. This also includes compliance with regulations in various laws such as the Workplace Ordinance, the Occupational Health and Safety Act and the Occupational Safety Act.

Special attention is paid to special regulations for specific groups of workers. For example, employers must strictly comply with the provisions of the Maternity Protection Act (MuSchG) for pregnant employees and the requirements of the Youth Employment Protection Act (JarbSchG) when employing persons under 18 years of age.

All of these obligations illustrate the importance of a formal and written employment contract. It not only serves as a basis for remuneration, but also as a legal framework for the many other duties and responsibilities that employers in Germany have to fulfill.

Even though the duty of care is not explicitly mentioned in the employment contract, it applies to the employer by law. Nor can it be excluded or limited, as stipulated in Section 619 BGB.

Employer's rights

While there is a lot of talk about the employer's duties, it should not be forgotten that he also has certain rights.

Right to issue instructions

Probably the most distinctive of these is the law of instruction, also known as management law, which is enshrined in Section 106 of the Trade Code (GewO). This right allows the employer to determine in more detail the type, place and time of work. But this power is not limitless. Directorate law ends where instructions issued become illegal, unreasonable or immoral. In such cases, employees are not required to follow the instructions.

”The employer may determine in more detail the content, place and time of work performance at its reasonable discretion, unless these working conditions are defined by the employment contract, provisions of a works agreement, an applicable collective agreement or legal regulations. This also applies with regard to the order and conduct of employees in the company. When exercising discretion, the employer must also take account of the employee's disabilities.”

In addition, the role of the works council must be considered, provided that one exists in the company. The right to issue instructions may not be used to circumvent the works council or impair its functions. Management law is therefore a balanced instrument which, although assigning the employer a leadership role, also ensures that the rights of employees and the works council are protected.

Obligations and Rights of the Employee

Obligations of the Employee in the Employment Relationship

Duty to work

In the world of industrial relations, it is not only the rights and obligations of employers that are important, but also those of employees. A fundamental element in this structure is the employee's main obligation to perform: the work obligation. In accordance with Section 611 of the Civil Code (BGB), the employee is obliged to provide the agreed service in person. Interestingly, the Act (Section 613 BGB) stipulates that this obligation cannot simply be transferred to third parties unless there are other agreements.

Another characteristic of the work obligation is its intermediate nature: The employee must perform the work before he is paid for it. However, there are situations in which this obligation does not apply, for example in case of illness, maternity leave or during vacation.

The details of the work obligation, such as the exact execution of tasks or any performance standards, are usually defined in the employment contract. It is therefore crucial that both parties, employer and employee, carefully review and understand the contract to avoid subsequent misunderstandings or conflicts.

Focus on employee loyalty duties

Apart from the main duties that define an employment relationship, there are also secondary obligations that are often underestimated. They are mainly expressed in the employee's duty of loyalty. In fact, the employee is not only obliged to perform his work, but must also keep an eye on the interests of the employer and may not do anything that is contrary to these interests.

The duty of loyalty is presented in various facets:

Confidentiality obligation: Discretion is the be-all and end-all. The employee has the duty to keep trade and trade secrets secret. This includes information such as balance sheets, creditworthiness, and price lists. Reputation-damaging statements are also taboo.

Prohibition of competition: Employment contracts often contain a clause which prohibits the employee from working for competing companies in the same sector during the duration of the employment relationship. Depending on the contract, this ban may even last up to two years after the employment relationship has ended.

Compliance with these ancillary obligations is not only a question of legality, but also of professionalism and personal integrity. They lay the foundation for a harmonious and productive working environment and reduce the risk of legal disputes. They are therefore no less important than the main duties and should be clearly formulated in the employment contract to avoid subsequent misunderstandings.

Worker rights: More than just working hours and pay

As already explained above, the employment relationship is not just a one-way street of duties and requirements for the employee; it also offers the employee a range of rights that go far beyond mere wage claims.

One such right is the right to access the file in accordance with Section 83 of the Works Constitution Act (BetrVG). This law allows employees to view the personnel files kept about them, which ensures transparency and fairness in the employment relationship.

Another right that should not be forgotten is the right to break times. According to Section 4 of the Working Hours Act (ArbZG), employees who work six to nine hours are entitled to at least a 30-minute break. If the working time exceeds nine hours, this break time is extended to 45 minutes. Note that this break time can also be split up, with one of the blocks not being shorter than 15 minutes.

The regulation on smoking breaks is also interesting: These do not count as official breaks and do not have to be accepted by the employer. Failure to comply with this rule may even result in a warning.

Basic Elements of an Employment Contract

As we have explained above, an employment contract is more than just a document — it is an essential tool for setting the rules and expectations between employer and employee. While the content may vary depending on the specific nature of the employment relationship, there are, however, a number of basic elements that should generally be found in every employment contract.

1. Job title and description: The employment contract should clearly state the job title and the duties that the employee must perform. This helps to avoid misunderstandings about the type of work.
2. Remuneration: One of the most important parts of the employment contract to ensure clarity, protection, compliance, and attraction/retention of talent. By setting out the compensation package in the contract, both the employer and the employee have a clear idea of what is being offered to them and are protected in the event of a dispute. For these reasons, a typical employment contract should include the salary or hourly rate, any bonuses, commissions or other forms of remuneration. It should also include information on when and how often the employee is paid.
3. Performance conditions: They are an important aspect of any employment contract as they describe the additional benefits and benefits that an employee can receive in addition to their base salary. The employment contract should list the benefits to which the employee is entitled, such as health insurance, paid time off, retirement benefits, and other benefits offered by the employer.
4. Working hours: The contract should include information on the worker's working hours, including overtime or shift work, and any arrangements for home or remote work.
5. Termination: The contract should specify under which circumstances the employment relationship can be terminated by both employer and employee and which notice periods must be met. It should also determine all severance payments or other benefits to which the employee is entitled upon termination of the employment relationship.
6. Confidentiality and secrecy: The contract should contain provisions which oblige the employee to keep trade secrets or other confidential information that he comes across in the course of his employment relationship secret.
7. Intellectual property: If the employee is involved in the creation of intellectual property (such as software, works of art or documents) while employed by the company, the contract should specify who owns the intellectual property.
8. Non-competition clauses: The contract may contain provisions which prohibit the employee from working for a competing company for a specified period of time after leaving the company.
9. Governing law: This refers to the jurisdiction whose laws apply to all disputes that may arise from the contract. An employment contract should state which state or country law applies to the contract and any disputes. This is an important step towards creating clarity and orientation as to which laws apply to the employment relationship.

The Diversity of Employment Contracts: An Overview of The Different Types

Employment contracts are by no means uniform; they can come in various forms and structures, depending on the needs of the parties involved and the nature of the work. Here are some of the most common types:

• Permanent employment contract: An open-ended employment relationship without a specific end date, which offers stability and security for both the employer and the employee and usually includes a period of notice.
• Fixed-term employment contract: A fixed-term contract that has a specific end date and is generally used for seasonal work or projects and automatically ends on the specified date without the need for cancellation.
• Part-time contract: With this type of contract, the employee works less than usual full-time working hours, ideal for those who need flexibility.
• Mini-job or 450-euro job: This is a minor job in which the employee can earn up to 450 euros a month tax-free.
• Free employee contract: In this case, the person is more of an external service provider and not, in the traditional sense, an employee of the company.
• Internship contract: Often used by students or career starters to gain practical experience in a specific area.
• Work contract: Here, the employee is paid for completing a specific project or work, not for the working time spent.
• Temporary contract: Mostly used for short-term or seasonal work where additional workers are needed quickly.

Each of these contracts has its own special features, advantages, and disadvantages. It is therefore important for employers and employees alike to carefully select the type of contract that best suits their needs.

How to Use an Employment Contract Template

An employment contract template can be a helpful tool to speed up the contract drafting process and ensure that all essential points are covered. But be careful: A referral is not always a one-size-fits-all solution and should never replace advice from a specialized labor law lawyer.

The legislator places certain requirements on employment contracts, and a minor mistake or an ambiguously formulated passage can result in serious legal consequences. A lawyer can not only help ensure compliance with all legal requirements, but can also suggest specific contractual clauses that are tailored to the individual needs of your company.

Our urgent advice is therefore: Use a template as a starting point, but always consult a lawyer to ensure that the employment contract meets all legal requirements and optimally protects your interests.

1. Review the template

If you have opted for our employment contract template, the first step is a thorough review. Be sure to include all relevant sections and clauses. You may need to adapt the template to meet your specific needs, as it may be more extensive than your business needs.

2. Customize the template

A template is not a one-size-fits-all solution. Therefore, fill out the basic information first, such as the name and address of the employer and employee as well as the respective job title. If necessary, add or remove specific clauses — for example in the area of confidentiality, non-competition, or intellectual property.

3. Review the contract with the employee

After you have adapted the template to suit your needs, you should review it with the future employee. This ensures that the employee understands all contract terms and that misunderstandings or future disputes are avoided. Give the employee time to read the contract calmly and clarify any questions.

4. Sign the contract

Once the contract has been reviewed by the employee and found to be good, it is signed. Both parties — employer and employee — should sign and date the contract. Each party should also receive a copy of the contract. Modern contract management tools also enable electronic signatures.

5. In case of electronic signature: hand over the term sheet

If you sign the contract electronically, it is advisable to also provide the employee with a printed term sheet with the most important contract conditions. This is a requirement of the Evidence Act and provides additional legal certainty.

6. Keep the signed contract on file

Last but not least, the signed contract should be stored securely in company records or in a digital contract management solution. This is particularly important if legal disputes should arise in the future. A properly stored contract serves as central evidence here.

By following this 6-step plan, you ensure that the employment contract not only meets the company's requirements, but also meets legal requirements. And remember: When in doubt, consulting a lawyer is always recommended.