In-Depth Guide to the New 2022 Verification Act in Germany

There’s a new change in the employment process when you hire an employee in Germany. According to new amendments under German employment law, employers must now request all new hires to sign their employment contract by hand in wet ink before the start of the employment relationship to avoid penalties. An electronic form and signature are no longer sufficient.

The German legislator passed the new regulations under the New Verification Act (Nachweisgesetz - NachwG), which came into effect on August 1, 2022. The new laws hope to provide more transparent employment relationships and predictable working conditions to comply with the EU Directive and ensure safety in the workplace.

What other changes must companies make to the employment contract?

The updated legislation requires employers to include additional information in the employment contract. Employers should update their employment contract template to outline the existing requirements and essential working conditions:

Existing requirements to include

• Name and address of employer and employee
• Start of the employment relationship, duration, and end date for fixed-term employment relationships
• Place of work
• Work hours
• Description of the activity to be performed
• Composition and amount of the fee, including surcharges, allowances, etc.
• Length of annual vacation leave
• Notice periods
• Reference to applicable collective agreements or company agreements

New conditions of employment to include

• A specific end date if the contract is limited 
• Reference to the possibility of free choice of work location if applicable 
• The duration of the probationary period which, if applicable, must be in reasonable proportion to the duration of the fixed-term employment and the nature of the work
• Remuneration, due date, method of payment including any overtime arrangements, bonus allowances, premiums, and special payments
• Agreed rest breaks and rest periods
• Any company pension entitlements along with the name and address of the pension scheme and pension provider
• For shift work, include details on the shift system, the shift pattern, and the conditions for shift changes
• For on-call work, include precise details of the design
• Any entitlement to training provided by the employer
• The procedure to be followed in the event of termination, the written form requirement, and the notice periods, as well as the time limit for filing an action for protection against unfair dismissal

What is the deadline for these essential terms?

The employer must provide the most important conditions to the employee in writing by the first working day. However, German law stipulates different deadlines for different subjects:

What other documents require handwritten signatures?

Companies must also provide and obtain handwritten signatures for:

• Notice of termination
• Fixed-term contracts
• Part-time and limited-term employment contracts
• Post-contractual non-competition agreements

What happens in case of non-compliance?

The law allows for a fine of up to 2,000 EUR if an employer fails to provide a correct contract, provides an incomplete document, does not provide a hard copy, or fails to meet the deadlines.

Under the old law in Germany, there were no sanctions in case of violations.

Does the new law apply to existing employment contracts?

No, but all current employees are entitled to request a hand-signed hard copy of their employment contract containing the additional information and contractual conditions listed above. The employer will then have seven days to amend the standard employment contract and return it to the employee.

In addition, if the essential terms and conditions of employment in the existing employment relationships change, the employer must inform the employee at the latest on the day of the change in wet-ink.

Failing to provide the information in time would also be considered a violation of the new Verification Act. You could receive a fine of up to EUR 2,000 for each case.

Does the new law impact other employment documentation?

The new law does not apply to statutory provisions, collective agreements, works agreements, or service agreements. Independent contractor agreements are also unaffected.

Does the new law invalidate electronic employment contracts?

An employment contract in electronic form does not invalidate the employment contract. Employers can continue to effectively conclude employment contracts electronically if they provide an additional hard copy containing the essential terms of the employment relationship signed by hand in wet ink.

Navigate international legal compliance with Deel

Building an international team can be time-consuming, especially when compliance is involved. Germany’s new contract guidelines left many scrambling to keep up. Deel’s local hiring expertise can keep up with it all for you.

If you’re hiring an employee from Germany, Deel can take care of all the regulations for you as your employer of record. We also help you navigate common compliance challenges such as:

• Financial compliance including tax obligations, payroll taxes, income tax, and more
• Employment laws regarding minimum wages, working hours, termination, and more
• Data protection and privacy requirements that keep customer and company data safe

With Deel you can hire anyone, anywhere in the world, within minutes. With legally-vetted contracts and global compliance, we'll have your new hires set up to work in no time.

Book a demo with our team today to find out.