While global expansion has many advantages, entering a new market requires a deep understanding of complex labor laws. If you are considering hiring employees in Germany, it’s important to know the critical role German works councils play in employer/employee relations.
This guide covers the purpose and requirements of German works councils and explains what their pros and cons might mean for your company as you enter the market.
What Is a Works Council in Germany?
A German works council, or Betriebsrat, is a group of elected employees who collaborate with management on behalf of the company’s workforce. A works council helps reduce workplace conflict, increase the bargaining power of employees, correct market failures through public policy, and provide workers more say in key decisions within the company.
Although they sound similar, works councils differ from unions. A union makes general labor and collective bargaining agreements on the national or industry level, whereas works councils represent employees at the company level. Works councils do not have to include union members, and companies can form works councils without being part of a union.
What Is the Purpose of a German Works Council?
A German works council ensures that all laws, rules, and health provisions benefit the company’s workforce and are applied correctly. The works council advocates for the employees’ best interests through established dialogue with management. Both the works council and the employer agree on the contractual provisions for working conditions binding to all employees.
A German works council also has the following rights:
- Right to information. The works council is informed of all discussions related to matters within the Works Constitution Act, which outlines personnel, social, and economic rights.
- Right to consultation. The works council is consulted about specific issues and can make proposals to management. The employer must listen to the views of each elected member.
- Right to negotiation. The works council negotiates matters related to the Works Constitution Act before they become official company processes, policies, or actions. Sometimes, an employer’s decision may be considered legally invalid if the works council does not agree.
- Right to co-determination. The works council has co-determination rights on issues related to employee hiring, transfers, termination, employee conduct policies, working hours, pay schemes, and restructuring measures.
Is a Works Council Mandatory in Germany?
A German works council is mandatory for companies with five or more fully employed employees. However, works councils form only at the request of the employees, so companies can operate without a works council until the workforce formally requests one.
Explore more information on employment law in Germany here.
Who Are the Members of a German Works Council?
German works council members are elected by their fellow workforce through a formal vote. An eligible member must be a current employee, at least 18 years old, and employed with the company for at least six months. The size of the works council depends on the number of employees at the company. German works council members serve a four-year term.
What Is the Process for Electing German Works Council Members?
In Germany, all applicable businesses hold works council elections every four years from March 1 to May 31. If a company that does not have a works council receives a request to establish one, it must organize an election as soon as possible, regardless of the election cycle.
An election committee of at least three employees oversees and carries out the election. The employer must provide information about each eligible employee for consideration and cover all costs involved in holding the election.
What Are the Advantages and Disadvantages of German Works Councils?
German works councils provide many benefits, but there are also some disadvantages. A global employer should consider the following pros and cons of work councils in Germany:
Advantages of German Works Councils
German works councils have many benefits for both employees and employers. These advantages include:
- Protection of employee rights. German works councils oversee top-level decision-making and ensure all company decisions support employees’ rights.
- Increased wages. German works councils promote higher wages for their fellow employees and increase the likelihood of better overall working conditions.
- Increased productivity. Workers employed at a company with a works council feel like their opinions matter. As a result, employees are more productive and content with management.
- A unified voice for negotiation. With a direct line of communication to management, German works councils ensure all voices are heard and have the right to negotiate any decisions affecting employees.
- Improved relationships. German works councils create positive, coordinated relationships between management and employees, leading to strong unions, low strike rates, and fewer layoffs.
Disadvantages of German Works Councils
There are also some disadvantages to German works councils, which often place more burden on the employer. Some common challenges with German works councils include:
- More costs for the employer. Employers must cover all works council costs, including offices, equipment, communication technology, and election expenses.
- Decrease in profitability. Works councils typically advocate for higher employee wages, adding more cost to the employer. This drawback is especially significant for smaller companies.
- Longer turnaround for decisions. Works councils add more people and opinions to decision-making processes, which results in a longer turnaround for resolutions.
- Difficulty in terminating employees. German employers typically must consult with the works council for all termination proceedings. This process makes terminating employees difficult and often leads to severance payments and long notice periods.
- Removal of some employee freedoms. Decisions agreed upon by the works council and the employer often impact all employees, even if some employees do not agree with the final result.
Compliantly Hire Employees in Germany With Velocity Global
While there are many nuances to German works councils, hiring a team in Germany is simple and effective with the help of an experienced partner. Let Velocity Global help jumpstart your expansion into Germany.
Velocity Global’s Employer of Record (EoR) solution enables international companies to hire in Germany and around the globe without the burden of establishing local entities or dealing with legal headaches and compliance issues.
Not only do we handle onboarding, payroll, and benefits on your behalf, but our experts are well-versed in German labor laws and can ensure your company remains compliant with German works council requirements and other employment legislation.
Take the next step by reading our Germany hiring guide for global employers!
Or contact us to learn more about how we can help quickly and compliantly grow your global team.