Terminating an Employment Contract (Arbeitskündigung) in Germany: A Comprehensive Guide
Terminating an employment contract (Arbeitskündigung) is one of the most important issues in employment relations in Germany, both for employees and employers. The termination process involves a variety of legal and procedural aspects, as well as rights and obligations on both sides. In this comprehensive guide, we explain what termination means, which types of termination exist, and which steps must be observed under German law.
What Is Termination of an Employment Contract (Arbeitskündigung)?
Termination of an employment contract means that one of the parties – either the employee or the employer – ends the contractual relationship between them. In Germany, the termination process is governed mainly by the German Civil Code (Bürgerliches Gesetzbuch – BGB), the Protection Against Dismissal Act (Kündigungsschutzgesetz – KSchG), as well as by collective bargaining agreements (Tarifverträge) and internal works agreements (Betriebsvereinbarungen), depending on the sector and the company.
Types of Termination in Germany
1. Ordinary termination (Ordentliche Kündigung)
In an ordinary termination, either the employee or the employer gives notice in accordance with the notice periods laid down by law, the employment contract or an applicable collective bargaining agreement.
The length of the notice period usually depends on the employee’s length of service with the company. A common minimum period is four weeks to the 15th or the end of a calendar month.
For employees with longer service, the notice period can increase to several months.
2. Extraordinary or immediate termination (Außerordentliche / Fristlose Kündigung)
Extraordinary or summary dismissal takes place without any notice period, provided there is an important reason that makes continuation of the employment relationship unreasonable.
Typical examples include serious breaches of duty, criminal acts against the employer, or gross violations of contractual obligations.
The reason for the immediate termination must be documented in writing, and the termination usually has to be declared within two weeks of the employer becoming aware of the serious breach.
3. Termination during the probationary period (Kündigung in der Probezeit)
The probationary period (Probezeit) usually lasts between three and six months.
During this time, shorter notice periods (often two weeks) apply, and both parties can end the relationship more easily.
A detailed justification is not always required by law, but anti-discrimination rules and special protection regulations must still be observed.
4. Termination by mutual agreement (Aufhebungsvertrag)
An Aufhebungsvertrag is a mutual agreement between employer and employee to end the employment relationship without using the normal notice rules.
It often includes individual arrangements, such as:
payment of severance pay (Abfindung),
agreed release from work,
or special clauses regarding the employment reference.
The contract must be in writing and may affect entitlement to unemployment benefits (e.g. a possible waiting period or benefit sanction).
Legal Aspects of Terminating an Employment Contract
Protection Against Dismissal Act (Kündigungsschutzgesetz – KSchG)
The Protection Against Dismissal Act applies to businesses with more than ten employees (on a regular basis) and to employees whose employment has lasted more than six months.
It limits the employer’s right to dismiss and requires that termination be socially justified, for example for:
Operational reasons (e.g. restructuring or job cuts),
Conduct-related reasons (e.g. repeated breaches of duty),
Personal reasons (e.g. long-term illness, permanent lack of suitability).
Notice periods under § 622 BGB
Section 622 of the Civil Code sets out the statutory minimum notice periods.
For employees, the basic statutory notice period is usually four weeks to the 15th or the end of a calendar month.
For terminations given by the employer, the notice period increases with the employee’s length of service, up to several months.
Written form requirement (Schriftform)
Any termination of an employment contract must be in writing and personally signed.
Termination by e-mail, telephone, SMS or fax is legally invalid.
Collective agreements and works agreements (Tarifverträge & Betriebsvereinbarungen)
Collective bargaining agreements and works agreements may contain additional or deviating rules on termination, such as:
longer notice periods,
special procedures for redundancies,
or additional compensation arrangements.
Special protection for certain groups of employees
Some groups of employees enjoy special protection against dismissal, including:
pregnant women and mothers during maternity protection (Mutterschutz),
parents on parental leave (Elternzeit),
members of the works council (Betriebsrat),
severely disabled persons (Schwerbehinderte).
For these groups, termination is only possible under very strict conditions and often requires approval from the relevant authority.
Steps and Procedures for Termination by the Employer
1. Identifying the reason for termination
The employer must clearly identify the legal basis for the termination (operational, conduct-related or personal reasons).
Where the Protection Against Dismissal Act applies, careful documentation and evidence are particularly important.
2. Informing and consulting the works council (if applicable)
If a works council exists, it must be consulted before the termination is issued.
The employer has to explain the reasons for the intended dismissal. A termination without proper works council consultation can be invalid.
3. Drafting the termination letter
The termination letter must:
be in writing,
state the date on which the employment will end or the applicable notice period,
specify the type of termination (ordinary or extraordinary),
include the employee’s details and the employer’s signature.
In the case of summary dismissal, the important reason must be documented; whether it must be fully stated in the letter depends on the specific case.
4. Delivery and proof of receipt
To ensure legal proof of delivery, the termination can be:
handed over personally with a written acknowledgement of receipt, or
sent by registered mail (e.g. with return receipt).
Proof of receipt is often crucial in potential court proceedings.
5. Settlement of outstanding entitlements
Before the employment relationship formally ends, the employer must settle all outstanding payments, such as:
remaining holiday entitlement (or monetary compensation for unused vacation),
overtime pay, if applicable,
bonuses or other contractual payments.
Steps and Procedures for Termination by the Employee
1. Reviewing the employment contract
The employee should check the notice periods specified in the contract and any collective agreements.
In many cases, the employee’s notice period corresponds to the statutory minimum period.
2. Informing the employer verbally (optional)
It can be helpful to discuss the intention to resign with the manager or HR department in advance.
However, from a legal perspective, only the written resignation letter is decisive.
3. Drafting the resignation letter
The letter should include at least:
full name and address of the employee,
date of writing,
a clear statement such as:
“I hereby terminate the employment relationship with you as of … / at the earliest possible date.”
personal signature.
4. Formal delivery of the letter
For legal certainty, the employee can:
deliver the letter in person and obtain a receipt, or
send it by registered mail.
5. Coordination with the employer
During the notice period, the employee may need to:
hand over tasks and ongoing projects,
return company property (laptop, keys, ID cards etc.),
request a certificate of employment (Arbeitszeugnis).
Employee Rights and Compensation After Termination
Employment reference (Arbeitszeugnis)
Every employee is entitled to an employment reference stating the duration and nature of the employment and assessing performance and conduct.
A qualified reference is essential when looking for a new job. Employees should ensure that it is formulated in a fair and constructive manner.
Severance pay (Abfindung)
There is no general statutory right to severance pay in Germany.
However, severance payments are often negotiated:
in the context of a mutual termination agreement (Aufhebungsvertrag),
as part of a social plan in collective redundancies,
or in settlement of a lawsuit before the labour court.
Unemployment benefits (Arbeitslosengeld)
If the employee does not immediately find a new job, they may be entitled to unemployment benefit I (Arbeitslosengeld I / ALG I) from the Federal Employment Agency (Bundesagentur für Arbeit), provided they meet the contribution requirements.
It is important to register as a jobseeker in good time – usually no later than three months before the employment ends, or immediately after receiving notice if the notice period is shorter.
Maintaining health insurance coverage
Employees should make sure that their health insurance coverage continues seamlessly after the employment relationship has ended.
This can be done, for example, through:
health insurance as an unemployed person, or
voluntary continuation of statutory health insurance.
Legal action before the labour court
If the employee believes the termination is unfair or unlawful, they can file a claim for protection against dismissal (Kündigungsschutzklage) with the labour court (Arbeitsgericht).
The deadline for such a claim is generally three weeks from the date the termination letter is received.
Missing this deadline usually means the termination is deemed legally valid.
Legal Tips and Practical Advice
Seek advice in advance
Before giving or accepting notice, it is often advisable to consult a lawyer specialising in labour law or a trade union, to fully understand your rights and risks.
Keep documentation
Employees and employers should keep copies of all key documents, such as:
the employment contract and any amendments,
written warnings, if any,
correspondence concerning the termination,
internal notes that may be relevant in a dispute.
Be aware of internal company rules
Many companies have internal policies regarding:
disciplinary procedures,
complaint mechanisms,
additional conditions for termination.
Knowing these rules in advance can prevent misunderstandings and conflicts.
Act quickly in case of disputes
Anyone wishing to challenge a termination must act quickly, especially because of the three-week deadline for filing a claim.
Early legal advice and swift action greatly increase the chances of a satisfactory outcome.
Conclusion
Terminating an employment contract (Arbeitskündigung) is a crucial turning point for both employees and employers in Germany. It is tied to a number of legal, procedural and practical requirements that should not be underestimated.
Understanding the types of termination, notice periods, legal protections and mutual obligations helps both sides manage the process more fairly and transparently. Open communication and timely legal advice remain the best tools for avoiding unnecessary disputes and limiting the negative impact of termination.
The editorial team of this website endeavours to provide accurate and reliable information based on thorough research and consultation of multiple sources. Nevertheless, errors or incomplete information cannot be completely ruled out. The information contained in this article should therefore be regarded as an initial point of reference. For binding and up-to-date advice, you should always contact the competent authorities or qualified professionals.
