The Kündigungsschutzgesetz (KSchG) – Germany's Employment Protection Act – shields employees from socially unjustified dismissals. It applies to companies with more than 10 employees and only once an employee has been with the company for at least 6 months. Employers must then justify any dismissal using one of three recognised grounds: person-related, conduct-related, or operational. Errors in the process can result in unfair dismissal claims and severance payments.
What is the Kündigungsschutzgesetz (KSchG)?
The Kündigungsschutzgesetz (KSchG) is a German employment protection law that shields employees from arbitrary or socially unjustified dismissals. It came into force in 1951 and remains the cornerstone of individual dismissal law in Germany.
According to § 1 para. 1 KSchG, a dismissal is socially unjustified if it is not based on reasons relating to the person or conduct of the employee, or on urgent operational requirements. The legislator thereby compels employers to substantiate dismissals in terms of their social justification.
The KSchG does not automatically protect all employees. Two conditions must be met simultaneously for the protection to apply.
When Does the Kündigungsschutzgesetz Apply?
Condition 1: Company Size – More Than 10 Employees
The KSchG only applies to companies that employ more than 10 employees (§ 23 KSchG). Part-time employees are counted proportionally: those working up to 20 hours per week count as 0.5; those working up to 30 hours count as 0.75.
Important special rule: Employees hired before 1 January 2004 may still be able to invoke the old threshold of more than 5 employees in some circumstances.
Condition 2: Waiting Period – 6 Months of Employment
The employee must have been continuously employed at the company for at least 6 months (§ 1 para. 1 KSchG). This waiting period typically coincides with the probationary period. This means that during the probationary period, employees do not yet have KSchG protection and can be dismissed without substantive reasons, subject to a two-week notice period.
Who Is Excluded?
The KSchG does not apply to:
- Employees in companies with up to 10 employees (small businesses)
- Employees during the probationary period (first 6 months)
- Fixed-term employees (the expiry of the fixed term itself does not constitute a dismissal under the KSchG)
- Managing directors and senior executives in certain constellations
Note: Even without KSchG protection, a dismissal must not be discriminatory or contrary to public policy. The General Equal Treatment Act (AGG) and the Civil Code (BGB) always apply.
The Three Grounds for Dismissal Under the KSchG
The KSchG recognises exactly three grounds on which an ordinary dismissal can be socially justified.
1. Person-Related Dismissal (Personenbedingte Kündigung)
A person-related dismissal arises when the cause lies in the employee's personal circumstances – not in any misconduct. The most common scenario is a long-term or frequently recurring illness that permanently impairs the employee's ability to work.
Other grounds can include: the permanent revocation of a professional licence (e.g. a driving licence for professional drivers) or the loss of an official permit. A negative future prognosis is always decisive – meaning it must be expected that the impairment will persist indefinitely.
2. Conduct-Related Dismissal (Verhaltensbedingte Kündigung)
A conduct-related dismissal requires a culpable breach of duty on the part of the employee. Typical cases include: repeated unexcused absences, refusal to work, theft, or a serious violation of company rules.
As a rule, a formal written warning (Abmahnung) is required before a conduct-related dismissal. The warning serves two functions: it notifies the employee of the misconduct (reprimand function) and announces possible legal consequences (warning function). Only in cases of particularly serious breaches – such as criminal offences – may a dismissal without a prior warning be effective.
3. Operational Dismissal (Betriebsbedingte Kündigung)
An operational dismissal is not based on the employee's conduct, but on a business decision: restructuring, outsourcing, site closure, or falling revenues can lead to the permanent elimination of positions.
Operational dismissals trigger a specific obligation: the social selection process (Sozialauswahl).
What Is the Social Selection Process (Sozialauswahl)?
When several employees are candidates for an operational dismissal, the employer must decide who is least entitled to social protection. According to § 1 para. 3 KSchG, four social criteria must be taken into account:
A flawed or omitted social selection renders the dismissal invalid – even if the operational reason itself was justified. Careful documentation of the selection decision is therefore essential for HR professionals.
Exception: Employees with specialist knowledge or skills that are indispensable to the business can be excluded from the social selection process.
Checklist: Preparing a Dismissal in a Legally Secure Way
Before any ordinary dismissal within the scope of the KSchG, you should check the following points:
- Check KSchG applicability: Does the company have more than 10 employees? Has the 6-month waiting period been fulfilled?
- Document the grounds for dismissal: Which of the three grounds applies? Is it substantiated and provable?
- Written warning for conduct-related dismissal: Is there a valid written warning on file relating to the same breach of duty?
- Social selection for operational dismissal: Have all four criteria been taken into account? Is the selection decision documented?
- Observe form and deadlines: Dismissal must be in writing (§ 623 BGB), correct notice periods must be observed, and the works council must be consulted (§ 102 BetrVG) if one exists.
Frequently Asked Questions About the Kündigungsschutzgesetz
When does the Kündigungsschutzgesetz apply?
The KSchG applies as soon as two conditions are met simultaneously: the company employs more than 10 employees (§ 23 KSchG), and the employee in question has been continuously employed for at least 6 months (§ 1 para. 1 KSchG). Part-time employees are counted proportionally (up to 20h = 0.5; up to 30h = 0.75).
Does the KSchG apply during the probationary period?
No. The statutory 6-month waiting period generally encompasses the probationary period. During probation, dismissal without giving reasons is possible with a two-week notice period. Regardless of this, special dismissal protection always applies – for example, for pregnant employees, employees with a severe disability, or works council members.
Does the KSchG not apply to small businesses?
Correct – in companies with up to 10 employees, the KSchG does not apply. Nevertheless, even in small businesses, a dismissal must not be discriminatory (AGG) or contrary to public policy (BGB). If there is a suspicion of discrimination, employers bear a burden of justification.
What is the social selection process and when is it mandatory?
The social selection process is mandatory for operational dismissals when multiple employees are candidates for dismissal. Using four criteria (length of service, age, maintenance obligations, severe disability), it determines who the business is least obliged to protect. A flawed social selection process renders the dismissal invalid.
What is the deadline for filing an unfair dismissal claim?
Employees have 3 weeks from receipt of the dismissal notice to file a claim with the labour court (§ 4 KSchG). If this deadline is missed, the dismissal is deemed effective from the outset – even if it was formally flawed. Retrospective admission of a claim is only possible in cases of excusable failure to meet the deadline.
Is there an automatic entitlement to severance pay under the KSchG?
No. The KSchG does not provide for automatic severance pay entitlement. Employees can apply to the labour court for the dissolution of the employment relationship (§§ 9, 10 KSchG) – the court will then set a severance amount. A common rule of thumb is 0.5 gross monthly salaries per year of employment. In practice, however, many parties reach an out-of-court settlement to avoid litigation.
Is a written warning always required before dismissal?
For conduct-related dismissals, a written warning is generally a prerequisite – it must name the specific misconduct and indicate the possibility of dismissal. Exceptions apply for particularly serious breaches (e.g. theft, severe harassment), where continued employment even for the duration of the notice period is unreasonable. For person-related or operational dismissals, no written warning is required.
Conclusion
The Kündigungsschutzgesetz protects employees in Germany from arbitrary dismissal – and simultaneously places high demands on HR professionals. Anyone seeking to handle dismissals in a legally secure way must have a thorough understanding of the prerequisites (company size, waiting period), the grounds for dismissal, and the obligations around the social selection process. Mistakes are costly: an invalid dismissal frequently results in a reinstatement obligation or a severance payment.
For HR managers, the key rule is: documentation is everything. The more carefully grounds, written warnings, and social selection decisions are recorded in writing, the better positioned the company will be in the event of a dispute.
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Sources
- Kündigungsschutzgesetz (KSchG) – Full text. Federal Ministry of Justice, 2023. https://www.gesetze-im-internet.de/kschg/
- § 1 KSchG – Socially unjustified dismissals. Federal Ministry of Justice, 2023. https://www.gesetze-im-internet.de/kschg/__1.html
- § 23 KSchG – Scope of application. Federal Ministry of Justice, 2023. https://www.gesetze-im-internet.de/kschg/__23.html
- Guide to Employment Law (Ratgeber Arbeitsrecht). Federal Ministry of Labour and Social Affairs (BMAS), 2024. https://www.bmas.de/DE/Arbeit/Arbeitsrecht/Ratgeber-Arbeitsrecht/ratgeber-arbeitsrecht.html
- Erfurter Kommentar zum Arbeitsrecht (ErfKomm). Müller-Glöge / Preis / Schmidt (eds.), 24th edition 2024. C.H. Beck.
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