There were a total of 3.87 million new employees subject to social insurance contributions in Germany in 2018. And of those, 38 percent were given fixed-term contracts (befristete Arbeitsverträge), according to a study by the Institute for Employment Research (IAB) based in Nuremberg.
Fixed-term employment contracts are popular with employers in Germany. They can be used to cover a temporary demand for labour, but they are more often used as extended probationary periods.
According to the research, 85 percent of fixed-term contracts offered in Germany are based on the firm's long-term needs, while only a tenth of hires are for temporary needs (such as for cover for parental leave).
So, for example, an employer is likely to offer a temporary contract of a year and then decide if they want to extend the contract or terminate it.
As they do not offer stability like a permanent contract, they are less attractive to employees which can make it more difficult for HR departments to recruit.
As the graph below shows, 60 percent of new starts in 2018 were offered an unlimited or permanent contract. A total of about 24 percent were offered a limited or fixed-term contract lasting between eight to 18 months.
Temporary contracts lasting six months were offered to about seven percent of new workers, while around six percent were given a fixed-term contract lasting more than 18 months.
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Graph translated by Statista for The Local.
The number of temporary contracts offered to new-starts last year has gone down slightly compared to the fixed-term employment rate in 2017 which was 41 percent. However, the change is insignificant, and is not reflected in other figures, said researchers.
According to the IAB Establishment Panel, a total of around 3.21 million employees in Germany had a fixed-term employment contract in 2018. This corresponds to a share of all employees (excluding trainees) of around 8.3 percent.
The discrepancy between the proportion of fixed-term new hires and the overall number of fixed-term employees overall reflects that limited employment agreements are either converted into permanent contracts – or are not extended after the expiry date of the contracts.
Which companies offer fixed-term contracts?
The study states that larger companies in particular are taking advantage of fixed-term contracts.
Meanwhile, smaller firms with fewer than 10 employees, for whom the provisions of the Dismissal Protection Act do not apply, make less frequent use of this option.
The study is based on data from the IAB job survey, for which more than 10,000 companies are regularly surveyed.
What else should I know about fixed-term contracts?
If an employee is hired on a fixed-term contract without objective reasons (for example if it is not to cover parental leave), then it can last a maximum of two years and the extension of the contract is permissible by a maximum of three times, according to German law.
However, fixed-term employment will soon be subject to stricter regulation. The coalition, made up of the Christian Democrats and Social Democrats, has agreed to make the maximum limited contract 18 months, and only allow one extension of term.
There are also a host of other rules (and upcoming changes) that employers must follow so that they adhere to the fixed-term-contract (befristeter Vertrag) and part-time and fixed-term contract Law (teilzeit-und-befristungsgesetz).