Free Employment Contract Template - Customize and Download

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**Note Disclaimer: **This template is for general information only. It is neither legal advice nor a substitute for independent legal advice that meets your specific requirements. By accessing this template, you agree to these terms and agree that use is at your own risk. top.legal is not responsible for reliance placed on this document.

Employment Contract Template

Drafting a comprehensive and legally binding employment contract can be a daunting process. With our free and customizable employment contract template, you can streamline the process and ensure that all your agreements are in order. Using the template below, you can tailor your contract to your specific needs and requirements, while saving valuable time and resources.

What is an employment contract?

A private-law agreement that governs the rights and obligations between employee and employer is called an employment contract. Under it, the employee undertakes to perform the agreed work, while the contract conversely also stipulates that the employer pays the employee remuneration in return.

The employment contract therefore forms the foundation of the employment relationship. Under German law, the employment contract is a form of so-called service contract (Dienstvertrag) in which both parties agree on the services to be provided. The subject matter of a service contract can be any kind of service. The employment contract is consequently a service contract in which the service consists of the performance of work.

The most important provisions for employment contracts are found in §§ 611 to 630 BGB (German Civil Code). These provisions regulate, among other things, the following points:

• Employer and employee
• Start and end of the employment relationship
• Type and scope of the activity
• Place of work
• Remuneration
• Termination

The key framework conditions of an employment contract are prescribed by law. In addition to statutory provisions, parts of employment contracts can also be governed by collective bargaining agreements (Tarifverträge) and works agreements (Betriebsvereinbarungen). Collective bargaining agreements are agreements concluded between employer associations and trade unions that apply to all employees and employers subject to the agreement. Works agreements are agreements between the employer and the works council that apply to all employees of the establishment.

How is an employment contract concluded?

In principle, employment contracts are not bound to any particular form. The law provides for this in § 622 paragraph 1 BGB. This means that the employment contract can be concluded orally, in writing, or by conclusive conduct.

Fixed-term employment contracts, however, are exempt from this rule. For fixed-term employment contracts, the written form is mandatory. This means that the fixed-term employment contract must be set down in writing and signed by both parties.

Nevertheless, for reasons of evidence, it is always advisable in practice to conclude an employment contract in writing. This makes it possible to prove which agreements were made in the event of a dispute.

The advantages of a written employment contract

Protection against the burden-of-proof trap

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

What have you actually agreed if you have not agreed anything?

As an employer, you should be aware of this question. Because if you do not talk to an employee about important cornerstones of an employment contract, or if you do not make any written agreement on them, what is customary is deemed to have been agreed. This means that in the event of a dispute, the employee has a claim to the customary wage, the customary working hours, and the customary notice period.

Negotiations protect against assumptions and misunderstandings

The employment contract also offers the opportunity to clarify often contentious topics right at the start of the employment relationship. This way, during negotiations, you can determine whether you as parties want to work together over a longer period. Such critical topic blocks often include holidays, overtime, working-time arrangements, as well as home-office and on-site attendance obligations.

Professional negotiations create the framework for professional work

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

The written employment contract complies with the Verification Act

The Verification Act (Nachweisgesetz, NachwG) is unambiguous: employers are obliged to record the essential contractual conditions in writing within one month of the start of an employment relationship.

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

What happens if the Verification Act is not observed? While the Act itself does not provide for direct sanctions, the previously mentioned evidentiary difficulty will come into play here once again. Put plainly: you have nothing in writing? Then prove which agreements you actually made with your employee. In such a conflict, your failure to comply with the Verification Act will be held against you, and you could end up in the unpleasant situation of having to pay the "customary wage" instead of the salary originally calculated.

Since you are legally obliged to record essential contractual conditions in writing anyway, you should not enter into any future employment relationship without a written contract.

What should an employment contract contain?

Even though the content of an employment contract can vary depending on the circumstances and nature of the employment relationship, the following terms and provisions are typically included in such contracts.

Provisions on the duties and rights of the employer

Duties of the employer

The fundamental duty to pay remuneration

At the heart of every employment relationship is the employer's fundamental obligation to pay remuneration or wages. While this duty seems obvious 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 statutory rules. Legislative requirements, such as the minimum wage, ensure that employees are paid fairly for their work. According to data from the Federal Statistical Office, the minimum wage is an essential basis of income security for around 8% of employees in Germany.

This further highlights the importance of a formal, written employment contract. A clearly defined remuneration not only protects the employee but also provides legal certainty for the employer. It also creates 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 duty to pay remuneration, employers in Germany must fulfill further essential obligations. These include, for example, that the agreed remuneration must be paid on time and in full. Interestingly, even an employee's illness does not release the employer from this obligation. The employer also has the duty to correctly calculate and remit wage tax and social security contributions.

You should therefore set out in your employment contracts how and, above all, when the agreed remuneration is to be paid.

Particular attention also applies to companies with more than 19 employees: in such cases, issuing a detailed, written payslip is mandatory. According to the Remuneration Statement Ordinance (Entgeltbescheinigungsverordnung), the type and amount of supplements, deductions, reductions, and subsidies must be clearly shown.

The employer's duty of care cannot be excluded

In addition, there are so-called ancillary duties, which are no less important. A key concept here is the employer's duty of care (Fürsorgepflicht), codified in §§ 617 to 619 of the BGB (German Civil Code). Employers are legally obliged to ensure the safety and health of their employees. This also includes compliance with provisions in various laws such as the Workplace Ordinance (Arbeitsstättenverordnung), the Occupational Safety and Health Act (Arbeitsschutzgesetz), and the Occupational Safety Act (Arbeitssicherheitsgesetz).

Special rules for certain groups of employees also deserve attention. Employers must strictly comply with the provisions of the Maternity Protection Act (MuSchG) for pregnant employees as well as the requirements of the Youth Employment Protection Act (JArbSchG) when employing persons under 18 years of age.

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

Even if the duty of care is not explicitly mentioned in the employment contract, it applies to the employer by operation of law. It also cannot be excluded or limited; § 619 BGB establishes this.

Rights of the employer

While much is said about the employer's duties, it should not be forgotten that the employer also has certain rights.

Right to issue instructions

The most distinctive of these is probably the right to issue instructions (Weisungsrecht), also called the right of direction (Direktionsrecht), which is anchored in § 106 of the Trade Regulation Act (Gewerbeordnung, GewO). Through this right, the employer can specify the type, place, and time of the work to be performed. However, this power is not unlimited. The right of direction ends where the instructions given become unlawful, unreasonable, or contrary to public policy. In such cases, employees are not obliged to follow the orders.

"The employer may further determine the content, place, and time of the work performance at reasonable discretion, insofar as these working conditions are not laid down by the employment contract, provisions of a works agreement, an applicable collective bargaining agreement, or statutory provisions. This also applies with regard to the order and conduct of employees in the establishment. When exercising discretion, the employer must also take account of any disabilities of the employee."

In addition, the role of the works council must be taken into account, where one exists in the company. The right to issue instructions may not be used to circumvent the works council or to impair its functions. The right of direction thus represents a balanced instrument that, while assigning a leadership role to the employer, also ensures that the rights of employees and those of the works council are preserved.

Duties and rights of the employee

Duties of the employee in the employment relationship

Duty to work

In the world of labor relations, it is not only the rights and duties of employers that are important, but also those of employees. A fundamental element in this structure is the employee's main performance obligation: the duty to work. Pursuant to § 611 of the BGB (German Civil Code), the employee is obliged to render the agreed performance personally. Interestingly, the law (§ 613 BGB) provides that this duty cannot simply be transferred to third parties unless there are other agreements.

A further feature of the duty to work is its character as advance performance: the employee must render the work before being paid for it. However, there are situations in which this duty lapses, for example in case of illness, maternity protection, or during vacation.

The details of the duty to perform work, such as the precise execution of tasks or any performance standards, are usually laid down in the employment contract. It is therefore crucial that both parties, employer and employee, carefully examine and understand the contract in order to avoid later misunderstandings or conflicts.

The employee's duties of loyalty in focus

Apart from the main duties that define an employment relationship, there are also ancillary duties that are often underestimated. They manifest themselves primarily in the employee's duty of loyalty. The employee is not only obliged to render their work performance, but must also keep the employer's interests in mind and must not do anything that runs counter to those interests.

The duty of loyalty has several facets:

Duty of confidentiality: Discretion is paramount. The employee has a duty to keep operational and business secrets confidential. This includes information such as balance sheets, creditworthiness, and price lists. Statements damaging to the employer's reputation are likewise off limits.

Non-compete: Often found in employment contracts is a clause that prohibits the employee, during the term of the employment relationship, from working for competing companies in the same industry. Depending on the contract, this prohibition can even last up to two years after the end of the employment relationship.

Observing these ancillary duties is not only a matter 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 later misunderstandings.

Rights of the employee: more than just working hours and pay

The employment relationship, as already described above, is not a one-way street of duties and requirements for the employee; it also offers the employee a range of rights that go far beyond the mere claim to wages.

One such right is the right to access personnel records pursuant to § 83 of the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG). This law permits the employee to inspect the personnel files kept on them, which ensures transparency and fairness in the employment relationship.

Another right that should not be forgotten is the entitlement to break times. Pursuant to § 4 of the Working Hours Act (Arbeitszeitgesetz, ArbZG), employees working between six and nine hours are entitled to at least a 30-minute break. If working time exceeds nine hours, this break time is extended to 45 minutes. Note that this break time can also be split, provided that one of the blocks is not shorter than 15 minutes.

The rules on smoking breaks are also interesting: these do not count as official breaks and do not have to be accepted by the employer. Disregarding this rule can even lead to a formal warning (Abmahnung).

Fundamental components of an employment contract

An employment contract is, as we have shown above, more than just a document — it is an essential instrument for setting the rules and expectations between employer and employee. While the content can vary depending on the specific nature of the employment relationship, there are a number of fundamental components that should generally be found in every employment contract.

1. Job title and description: The job title and the tasks that the employee is to perform should be clearly stated in the employment contract. This helps to avoid misunderstandings about the nature of the work.
2. Remuneration: One of the most important parts of the employment contract, ensuring clarity, protection, compliance, and the attraction/retention of talent. By setting out the compensation package in the contract, both the employer and the employee have a clear understanding of what is being offered and are protected in case of disputes. For these reasons, a typical employment contract should include the salary or hourly rate, any bonuses, commissions, or other forms of compensation. It should also contain details about when and how often the employee will be paid.
3. Benefits conditions: They are an important aspect of every employment contract because they describe the additional perks and benefits that an employee may 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 provision, and other perks the employer offers.
4. Working hours: The contract should contain information on the employee's working hours, including overtime or shift work, as well as any arrangements for home or remote work.
5. Termination: The contract should set out the circumstances under which the employment relationship can be terminated by both the employer and the employee, and which notice periods must be observed. It should also specify any severance pay or other benefits to which the employee is entitled upon termination.
6. Confidentiality and secrecy: The contract should contain provisions that oblige the employee to keep business secrets or other confidential information that they encounter in the course of their employment confidential.
7. Intellectual property: If the employee is involved in the creation of intellectual property (for example, software, works of art, or written documents) while employed by the company, the contract should specify who owns the intellectual property.
8. Non-compete clauses: The contract may include provisions that prohibit the employee from working for a competing company for a specified period after leaving the company.
9. Applicable law: This refers to the jurisdiction whose laws apply to any disputes that may arise from the contract. An employment contract should indicate which state or country's law applies to the contract and any disputes. This is an important step to create clarity and orientation regarding which laws apply to the employment relationship.

The variety of employment contracts: an overview of the different types

Employment contracts are by no means one-size-fits-all; 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 (Unbefristeter Arbeitsvertrag): An open-ended employment relationship without a specific end date, providing stability and security for both employer and employee and typically including a notice period.
• Fixed-term employment contract (Befristeter Arbeitsvertrag): A fixed-term contract that has a specific end date and is typically used for seasonal work or projects, and ends automatically on the specified date without the need for termination.
• Part-time contract (Teilzeitvertrag): With this type of contract, the employee works less than the usual full-time working hours, ideal for those who need flexibility.
• Mini-job or 450-euro job: This is a marginal employment relationship in which the employee can earn up to 450 euros per month tax-free.
• Freelance contract (Freier Mitarbeitervertrag): In this case, the person is more of an external service provider rather than an employee of the company in the traditional sense.
• Internship contract (Praktikumsvertrag): Often used by students or career starters to gain practical experience in a specific field.
• Contract for work (Werkvertrag): Here, the worker is paid for the completion of a specific project or work product, not for the time spent working.
• Temporary contract (Aushilfsvertrag): Mostly used for short-term or seasonal work, when additional workers are needed quickly.

Each of these contracts has its own particularities, advantages, and disadvantages. That is why it is equally important for employers and employees to carefully select the type of contract best suited to 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 template is not always a one-size-fits-all solution and should never replace advice from a lawyer specialized in employment law.

The legislator places certain requirements on employment contracts, and a small mistake or an unclear wording can have serious legal consequences. A lawyer can not only help ensure compliance with all statutory provisions, but also suggest specific contract clauses 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

Once you have decided on our employment contract template, the first step is a thorough review. Make sure that all relevant sections and clauses are included. You may need to adapt the template to your specific requirements, as it may be more extensive than necessary for your company.

2. Customize the template

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

3. Review the contract with the employee

After you have adapted the template to your needs, you should go through it together with the future employee. This way, you ensure that the employee understands all contract terms and that misunderstandings or future disputes are avoided. Give the employee time to read the contract in peace and clarify any questions.

4. Sign the contract

Once the contract has been reviewed and approved by the employee, signing follows. 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. With electronic signature: provide a term sheet

If you sign the contract electronically, it is advisable to additionally hand the employee a printed term sheet containing the key contract terms. This is a requirement of the Verification Act and serves additional legal certainty.

6. Keep the signed contract on file

Finally, the signed contract should be kept securely in the company's files or in a digital contract management solution. This is particularly important should legal disputes arise in the future. A properly stored contract serves as central evidence in such cases.

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