A Practical HR Guide For Employee Termination in Germany

Your up-to-date guide for employee termination in Germany in a fair, legal and practical manner for international HR leaders and business owners.

Terminating an employee in Germany is never routine. Unlike in the US or the UK, where employers often have wider latitude, German law builds in multiple formal protections for workers such as written-form requirements, strict notice rules, mandatory consultation with works councils in many cases, and a statutory “social justification” test for many dismissals. Get any step wrong and you can face lengthy litigation, high compensation awards or even orders to reinstate the employee.

Why does this matter? Because a dismissal in Germany is as much a legal process as an HR decision. Employers must follow specific statutory steps (for example, Unlike in many jurisdictions, Germany explicitly requires dismissals to be in writing with a wet-ink signature under § 623 BGB. Emails, scans or DocuSign signatures are invalid, and failure to meet this requirement makes the dismissal void.) and consider local structures such as works councils and collective agreements before proceeding. These safeguards aim to balance business needs with employee protection, which is good for fairness, but means the HR playbook must be precise and early.

This guide explains how termination works in Germany, and everything you need to know about it. Whether you are managing a small team or overseeing large operations, understanding these rules will help you avoid costly mistakes and ensure that any termination is handled fairly and legally.

Grounds for Termination in Germany

Before initiating a termination, employers in Germany must have a legally justifiable reason. Unlike in some countries where at-will employment allows dismissals without cause, German law restricts terminations to specific grounds under the Protection Against Dismissal Act (Kündigungsschutzgesetz – KSchG). Understanding these categories is essential to avoid disputes and potential legal liabilities.

1. Personal Reasons (Personenbedingte Kündigung)

Termination on personal grounds relates to the employee’s individual circumstances, such as ill health, poor performance, or an inability to meet job requirements. For instance, repeated absenteeism due to chronic illness, or lack of qualifications for a role despite training, may justify dismissal. However, employers must demonstrate that they considered all reasonable alternatives, like reassigning the employee or offering support measures, before proceeding.

Dismissals on personal grounds are closely scrutinised, and the employer must provide evidence that the employee’s shortcomings have a tangible impact on the business. A proper warning system, documentation of performance reviews, or medical assessments may be required. Without thorough preparation, such dismissals are frequently overturned by labour courts.

i) Dismissal on grounds of ill-health

A person-related dismissal may be considered if the employee is no longer able to fulfil contractual obligations even though he/she is willing to do so.

The most common reason for a dismissal based on personal reasons is Illness. Both long-term illness and repeated short-term illness (more than 6 weeks per year over the last few years) may justify a dismissal, with different legal approaches to be taken.

For dismissal on grounds of ill-health, a negative prognosis of the employee’s future state of health is essential and the employer must also be able to demonstrate that the employee’s health issues have resulted in a considerable interference in the employer’s operating ability either because of failures of the operating process or because the employee’s ill-health has resulted in an unreasonable economic strain being imposed on the employer.

Prior to dismissal employers are obliged to take following measures:

rehabilitation after six weeks at the latest of long-term or repeated illness;
looking into possible ways of avoiding the dismissal, e.g. proposing treatments at a health resort, changing positions with another employee to give the person a job fit for his health situation, taking pressure of certain difficult responsibilities from the employee etc.;
implementing reasonable stop-gap measures such as reorganising the person’s work between other staff or hiring temporary staff to try to cover the absence.

ii) Dismissal on grounds of poor performance

So far as poor performing employees are concerned, a person-related dismissal is only possible if the employee’s performance is significantly below the average of the other employees doing comparable jobs and if the employee (whether through a lack of skills or capabilities) is not able to meet or exceed the average performance level utilising the full potential of his skills. Pursuant to the Federal Labour Court, this negative deviation from the average performance must be long term and the employee concerned must have achieved less than one-third of the average performance within the comparison group.

If this is the case and the employee will never be able to attain this level, a previous written warning is not required by law; however, employers are recommended to give a warning as a precaution.

Where there is a possibility to remedy the employee’s poor performance, the employer is obliged to choose the most moderate of several available measures, such as the offering of an alternative role within the organisation.

2. Behavioural Reasons (Verhaltensbedingte Kündigung)

Behavioural or conduct-related terminations concern breaches of workplace rules, misconduct, or inappropriate behaviour. This includes serious infractions like theft, harassment, or violations of health and safety protocols. Lesser issues, such as tardiness or insubordination, generally require prior warnings and documented attempts at corrective action.

A dismissal for behavioural reasons must prove that the employee’s behaviour constitutes a significant disruption or breach of duty. Employers must also ensure that the employee was informed of the consequences and provided with a chance to improve. In cases where a works council exists, consultation is mandatory before termination.

Cases of immediate termination for gross misconduct are scrutinised heavily by the courts and can be contested by employees. Employers are advised to collect sufficient evidence and consult legal experts before proceeding.

3. Operational or Economic Reasons (Betriebsbedingte Kündigung)

Operational or economic terminations occur when business needs change. Common examples include company restructuring, downsizing, automation, or economic downturns that reduce the necessity of certain roles. Under this category, the employer must show that the dismissal is unavoidable and that a fair selection process has been applied.

A social justification test (Sozialauswahl) is used in many cases to ensure that employees are not unfairly dismissed. This involves assessing factors such as length of service, age, family responsibilities, and disability. The employer must prove that the selection was balanced and not discriminatory.

In businesses with more than 10 employees, the social justification test is legally mandatory when dismissals are based on operational reasons.

Failing to follow this process exposes the company to claims of wrongful dismissal.

4. Special Considerations and Mutual Agreements

In addition to the standard categories, terminations by mutual consent are also widely used. This option allows employers and employees to agree on the terms of separation, including notice periods and severance arrangements. Such agreements must be carefully drafted and may require notarisation or consultation with relevant authorities to be enforceable.

Furthermore, certain employee groups enjoy additional protections.

Pregnant women, severely disabled employees, and members of a works council have stricter dismissal requirements and often need approval from labour agencies before termination can proceed. It is also important to note that the dismissal of pregnant employees is often outright prohibited unless under extreme circumstances of misconduct.

Employers must ensure they understand these provisions to avoid inadvertently violating protections.

Step-by-Step Termination Process in Germany

Terminating an employee in Germany isn’t simply a matter of handing over a letter. The process is governed by strict rules that ensure fairness, transparency, and compliance with labour laws. Employers must be prepared to follow a structured procedure that safeguards both the company’s interests and the employee’s rights.

Here’s how the process typically unfolds.

Step 1: Assess the Grounds and Documentation

Before moving forward with termination, employers must confirm that the chosen grounds, whether personal, behavioural, or operational, are supported by sufficient documentation. For personal and behavioural terminations, this means keeping records of performance reviews, warning letters, medical reports, or evidence of misconduct. For operational dismissals, data supporting the restructuring or downsizing must be available, along with a fair selection process.

Failing to document the grounds properly can lead to disputes at the labour court (Arbeitsgericht), where the burden of proof often rests on the employer. A poorly documented case can result in reinstatement or compensation awards.

Step 2: Consult with the Works Council (if applicable)

Where a works council exists, consultation is not optional. Under § 102 of the Works Constitution Act (Betriebsverfassungsgesetz – BetrVG), employers are required to notify and discuss the proposed dismissal with employee representatives before proceeding.

The consultation process involves sharing the reasons for the dismissal, selection criteria, and any alternatives considered. Ignoring this step can render the dismissal procedurally invalid and expose the employer to legal challenges. Even in companies without formal works councils, informing employees and offering dialogue is a best practice that can prevent reputational damage and morale issues.

Step 3: Provide a Written Notice of Termination

Termination must be communicated in writing, clearly stating the grounds for dismissal, the applicable notice period, and any compensation or benefits owed. For ordinary terminations, this written notice is crucial and serves as the official record of the employer’s action. In very small businesses employing fewer than ten people, the rules are less strict: no specific reason for dismissal is required.

However, the employer must still observe the statutory notice periods and act in line with the principles of good faith and fair dealing. It’s also important to note that certain groups of employees such as pregnant employees, those on parental leave, and severely disabled employees enjoy special protection against dismissal. In these cases, prior approval from the competent state authorities is required, and such approval is rarely granted in practice.

The notice period begins on the date the employee actually receives the termination letter, not the date it is written. If delivered late in the evening, the start date may shift to the next day. Termination dates usually align with either the 15th or the end of a calendar month under § 622 BGB or contractual notice period if it is higher (for statutory notice period see below). Miscalculating this can shift obligations by weeks. Only individuals with company representation authority (managing directors, authorised signatories) may sign. If another person signs, a written power of attorney must accompany the termination. Otherwise, the dismissal is invalid.

Step 4: Honour the Notice Period

Once the notice is issued, the employee is typically entitled to continue working through the notice period unless both parties agree to waive it. The length of the notice period depends on the employee’s tenure and is outlined under § 622 of the German Civil Code (Bürgerliches Gesetzbuch – BGB).

Employers must continue paying full compensation during this time or agree on a payout in lieu of notice. Cutting short the notice period without mutual consent can lead to claims for unpaid wages or breach of contract.

Step 5: Discuss Severance and Exit Benefits

In operational dismissals or negotiated terminations, severance payments are often agreed upon to provide financial security to the departing employee. While not mandatory in all cases, severance can prevent disputes and facilitate smoother exits.

For wrongful dismissals, courts may award compensation up to 12 months’ salary depending on the case’s complexity and severity. It’s important to clarify severance terms upfront, ensuring that they comply with legal requirements and contractual obligations.

Step 6: Issue Final Documents

Upon termination, employers are legally obliged to provide specific documentation:

A work certificate (Arbeitszeugnis) that summarises the employee’s role and performance.
Final pay statements and any outstanding payments.
Information on unemployment benefits (Arbeitslosengeld), including how to claim them.

Failure to issue these documents promptly may lead to disputes or delays in benefit claims. Transparent communication and timely processing of final paperwork are critical to ensuring goodwill and protecting the company from potential liability.

Notice Periods, Severance, and Legal Remedies in Germany

When an employer in Germany terminates an employee, it’s a legal commitment. The rules governing notice periods and severance pay are detailed and enforceable, with strict remedies available to employees if things are handled incorrectly. Understanding these obligations is essential not only to stay compliant but also to maintain trust and avoid costly disputes.

Notice Periods

The length of the notice period depends on how long the employee has been with the company and is set out in Section 622 of the German Civil Code (BGB). The statutory minimums range from four weeks to seven months, depending on the length of service. A typical structure looks like this:

Within Probationary Period of 6 months: two weeks’ notice
Up to 2 years of service: four weeks’ notice (ending on the 15th or end of the month)
2 to 5 years of service: one month
5 to 8 years of service: two months
8 to 10 years of service: three months
10 to 12 years of service: four months
12 to 15 years of service: five months
15 to 20 years of service: six months
20+ years of service: seven months

Employers can extend these periods in employment contracts, but they cannot reduce them below the statutory minimums. Failing to honour the correct notice period exposes the employer to claims for back pay and other compensation. In extreme cases, courts may even invalidate the dismissal if proper notice wasn’t given.

Severance Pay

Germany’s labour laws do not automatically require severance payments except in cases of mass layoffs or negotiated exits. However, it is common practice for employers to offer severance to avoid disputes, especially in economic terminations.

For operational dismissals, the Protection Against Dismissal Act (Kündigungsschutzgesetz – KSchG) plays a role, as employees with longer tenure are afforded protections that could lead to severance claims. Courts typically award compensation based on tenure and salary, and in wrongful dismissal cases, settlements can reach up to 12 months’ salary, however, this is dependent on case specifics and judicial discretion.

It’s also worth noting that agreements reached in works council negotiations or collective bargaining agreements can include additional provisions on severance. Employers should be cautious about drafting settlement agreements that could later be challenged if the terms are ambiguous or discriminatory.

Special Cases: Immediate Termination Without Notice

If the employee has committed serious or gross misconduct, employers are permitted to terminate the employment without notice. Grounds include theft, fraud, violence, or breaches of trust. However, immediate dismissal is closely scrutinised by courts, and failure to properly document the misconduct can result in reinstatement or hefty compensation awards.

For this reason, employers should gather evidence and ideally consult legal counsel before proceeding with such terminations. Even where the misconduct is clear, process violations during dismissal can turn an otherwise justified termination into a liability.

Legal Remedies For Employees

Employees who believe they were dismissed unfairly or without proper cause can bring their case to the Labour Courts (Arbeitsgerichte). The employee must file the claim within three weeks of receiving the dismissal notice, or the case will be barred by statute.

If the court finds that the dismissal was unjustified, it can order reinstatement or award compensation, sometimes up to six or even twelve months’ salary depending on the case. Some cases focus on procedural errors like failure to consult with the works council, rather than the grounds for dismissal itself.

For employees, this process is designed to ensure fairness. For employers, it’s a reminder that even minor oversights can lead to costly litigation, reputational damage, and strained employee relations. Taking proactive steps, like consulting with works councils and documenting every stage, can prevent disputes from escalating.

Waiver of Right to Sue/ bring in a claim

Employees cannot validly waive protection against dismissal before being served a notice of dismissal. Any statement they make to this effect after receiving the notice of dismissal should always be confirmed in writing.

Best Practices for Employers Handling Terminations in Germany

Employee termination in Germany requires more than knowing the rules, it’s about applying them thoughtfully. Employers who approach the process with care, transparency, and thorough documentation are far less likely to face disputes or reputational damage. Below are best practices designed to help organisations manage terminations smoothly, while safeguarding both the business and its employees.

Plan Ahead and Involve the Right People

Termination shouldn’t be an impulsive decision. Before proceeding, it’s vital to review the employee’s file, performance records, and contractual obligations. Engage HR, legal counsel, and where applicable, the works council early in the process. Consultation with the works council is not optional in many cases; failure to seek their input can render the dismissal invalid under Section 102 of the Works Constitution Act (Betriebsverfassungsgesetz – BetrVG). Documenting the process ensures that the employer can demonstrate fairness if the case is challenged.

Be Transparent and Communicate Clearly

Employees value honesty and clarity, especially during difficult conversations like a termination. Clearly explain the reasons for dismissal, whether it’s due to personal performance or economic challenges. Avoid vague phrases such as “business restructuring” or “unsatisfactory performance” without context, as courts expect detailed reasoning. Providing evidence and actionable feedback shows respect and reduces the likelihood of misunderstanding.

In some industries, offering outplacement support or career coaching is not just appreciated but reinforces the employer’s reputation. Employees who feel supported even in difficult times are less likely to pursue legal action.

Ensure All Documentation Is Accurate and Timely

Every step of the process, from preliminary meetings to written notices, must be formally documented. Employers should include details like the reason for termination, length of notice, applicable severance, and applicable collective agreements. Using templates can help, but they must be tailored to the specific circumstances and comply with statutory requirements.

An incomplete or improperly worded termination letter can lead to litigation, as courts often side with employees when procedural errors are proven. Employers should review all documentation carefully and, where needed, seek professional advice.

Handle Sensitive Information with Care

The data involved in a termination process such as medical records, performance reviews, or disciplinary reports, is highly sensitive. Germany’s Federal Data Protection Act (Bundesdatenschutzgesetz – BDSG) and the General Data Protection Regulation (GDPR) require that personal data is handled securely and lawfully. Employers must ensure that data is only shared with those who need to know, that access is controlled, and that records are retained or disposed of according to legal obligations.

Failure to protect employee data can lead to regulatory fines and damage to the company’s brand, making data governance a critical part of the termination process.

Support the Employee’s Transition

While compliance is the foundation of a sound termination, empathy makes the difference. Providing clear information about unemployment benefits, health insurance coverage, and pension rights helps employees plan their next steps. In Germany, employers are also encouraged to discuss financial entitlements like severance pay and holiday compensation in a transparent way.

Offering support services or counselling may not be mandatory, but it signals that the company values its people. Positive handling of terminations reinforces trust across the organisation and can reduce employee turnover in the long term.

Review and Learn After Each Case

A termination process doesn’t end with the employee’s departure. Conducting a review helps organisations understand what went well and what could be improved. Were deadlines met? Were consultations properly documented? Was communication clear and compassionate?

A structured review process helps refine policies, avoid recurring issues, and build a culture of fairness and accountability. It also equips the company with better practices for future situations, strengthening leadership and compliance alike.

How Beyond Borders HR Can Help

At Beyond Borders HR, we understand that managing employment termination in Germany requires more than knowing the rules, it’s about applying them thoughtfully and consistently. Our team of experts helps employers navigate complex labour laws, tailor termination strategies to their unique situations, and ensure that every step is handled with clarity and care.

We work with businesses of all sizes to:

Review and structure compliant termination processes.
Interpret German labour laws and collective agreements.
Train managers and HR teams on best practices.
Assist in employee communications and post-termination support.
Minimise risks while protecting both the organisation and its people.

Termination doesn’t have to be a legal minefield. With the right support, it can be an opportunity to act with integrity, build trust, and reinforce a positive company culture. Reach out to Beyond Borders HR to ensure that when it’s time to part ways, you do so confidently and compassionately.

Need help handling German dismissals with confidence? Chat to Beyond Borders HR for expert guidance.

A Practical HR Guide For Employee Termination in Germany