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German Works Council — An Essential Guide For Employers

German Works Council

Key Takeaways

1. A German Works Council (‘works council’, or, ‘Betriebsrat’) is a group of elected employees that represent the interests of a company’s workforce. A works council collaborates with management on key decisions within the company.

2. Although it is formally mandatory for companies with five or more permanent employees to set up a works council, this does not mean that all companies do. Companies can operate without a works council until it is formally requested by employees to hold an election to set one up.

3. The Works Constitution Act grants elected members of a works council a range of rights to effectively conduct their purposed tasks: This includes a right to information, a right to consultation, a right to decline, and a right to co-determination.

4. There are various pros and cons to having a works council within any given company. The pros include that works councils protects employee rights, provide a unified voice for negotiation with employees, are free for employees, and increase productivity. The cons include the costs of operation and maintenance, arguably lesser employee freedoms, and longer decision-making timeframes.

Germany has some of the strictest labor laws in the world, with a key focus on protecting the rights of employees. To ensure a balanced relationship between the employer and employees, two systems exist alongside legislation to bridge the gap that can exist in corporate systems. The work undertaken by a German Works Council within companies is the system that focuses on company-level matters for decisions that impact employees.

If your company is looking at doing business in Germany, it’s important to know what a works council is, how they operate, and what this might mean for your international company.

What Is a German Works Council [betriebsrat]?

A German Works Council or as it is referred to in German, Betriebsrat, is a company-level body of representatives that serves the direct interest of the employees of a company. Any German Works Council representing each company is independent of national trade unions and the German Employer Associations. A works council has significant powers when it comes to employee representation on a large variety of matters.

The work of a German Works Council is governed by provisions outlined under the Works Constitution Act (Betriebsverfassungsgesetz). It is formally mandatory for companies to have a works council, but enforcement of this mandate only happens when a lack of action is taken by a company to set one up at the request of their employees.

What Is the Purpose of a German Works Council?

A German Works Council bridges the gap between employers and employees. The main purpose is to advocate for the interests of the employees of the company and make sure the key decisions of an employer are not taken alone: This is through working in collaboration with management. A works council is granted significant rights to make sure this collaboration happens in a balanced manner. These rights are as follows.

  • Right to Information
  • The works council must be informed of all discussions related to matters specified within the Works Constitution Act (see also co-determination rights).
  • Right to Consultation
  • A works council must be consulted when specific issues are discussed, and the views of each elected member must be listened to by management. Works councils can also make proposals directly to management.
  • Right to Decline
  • If the works council does not agree on a decision made by management, then the decision can, in some cases, be deemed legally invalid.
  • Co-Determination
  • A works council has a co-determination right to work, discuss and negotiate with management on several social, hiring, and economic matters before they are agreed into official company processes, policy, or actions. Some specific matters include issues with company processes, the hiring of temporary workers or full-time employees, wage and bonus structures, furlough, holiday policies, employee benefits, and dismissals.

What Are the Requirements to Elect a German Works Council?

Regular works council elections are held every four years. In 2022, the election period was from March 1 to May 31. The exception is where a workplace does not have a works council, in which case, employees may elect the works council outside this period.

The election is overseen by an election committee, itself consisting of employees. Employers must provide the committee with all the necessary information (about employees) to perform this function. 

Votes are cast either for individual candidates, or for lists of candidates, and immediately following the election, the election committee counts the votes, and announces the outcome. Within one week, the committee must call the first meeting of the new works council which will hold office for four years. 

Note, the employer must bear all costs of the election process. 

Who Sits on a German Works Council?

The work council members are elected by the workforce of each company. Each member elected is an existing employee of the company and must be able to serve a four-year term. 

For employees to be eligible to be elected as a works council member, they must be over the age of 18m and have been at the company for a minimum of 6 months on a permanent basis. Potential selectees do not have to be union members to serve on the council. The number of elected members that make up a works council depends on the size of the company.

Is a Works Council Mandatory in Germany?

A works council is formally mandatory for companies with five or more permanent employees. However, it is possible for companies that meet this criterion to not have a works council. A works council is only set up at the request of the employees. If this request does come up at a company that is yet to set up a works council, then the company must organize an election as soon as possible. Not doing so is in breach of criminal law.

What Are the Pros and Cons of a German Works Council?

Like many forms of employment regulation, there are pros and cons of having works councils within a company. 

Pros of German Works Councils

Some of the pros or benefits of German Works Councils include: 

  • They protect employee rights
  • Sometimes employees and their rights can get lost in top-level decision-making, especially those made without any oversight. A works council is that oversight, ensuring employee rights are always protected in company decisions.
  • Increased wages
  • Employee wages are one of the main matters that a company must discuss with the works council. Having fellow elected employees working with management on this increases the likelihood of better working conditions and higher wages
  • It provides a unified voice for negotiation with employees
  • When issues arise in the workplace, sometimes the voices of the employees can go unheard. A works council ensures that any decisions that will directly affect all employees or individual employees can be negotiated with one voice.
  • Free for employees to participate
  • Employees do not have to worry about paying any membership fees to either become an elected member, or participate in elections.
  • Increased productivity
  • Companies that have a works council set up tend to create an atmosphere where employees feel like they are included in company decisions, and their opinions are being heard. This works in favour of the company as employees are more likely to be content with management, thus resulting in higher productivity.
  • Works council members have special protections against dismissal
  • As those serving on a company’s works council collaborates closely with management on many company decisions, sometimes conflicts can arise. To ensure objectivity, elected members have special protections against dismissal.

Cons of German Works Councils

While they have many benefits, it is clear that there are some perceived disadvantages to German Works Councils — whether from the employer or the employee’s perspective. 

The cons of German Works Councils arguably include: 

  • This cost is borne by the employer
  • Employers must cover all the costs involved to maintain a works council so the elected members can fulfill their purpose and operate effectively. For smaller companies, this can be a significant burden. 
  • It removes some employee freedoms
  • Some decisions that end up being agreed can impact upon all employees, even those who may not agree with the decision that was discussed. For example, decisions made about kurzarbeit, the short-term working scheme where an employer reduces working hours instead of laying off employees, can be applied to employees whether they like it or not. This can be quite impactful on those individuals who do not want reduced hours or salary if given the choice.
  • Decisions can take longer to finalize
  • As there are more people involved in the overall decision-making process on important matters, some decisions can take longer to finalize.

Video: The German Works Council in Action 

The head of the works council at German auto manufacturer, Daimler, Michael Brecht, explains how co-determination is part of the German Works Council model. 

Works Council vs Union: What’s the Difference?

As mentioned, a German Works Council is different from the national trade unions. Trade unions serve the industry-specific interests of employees outside of the company through collective bargaining agreements and the right to industrial action, while a works council serves the internal employee interests by monitoring compliance with employee protection laws and collective bargaining agreements. The decisions negotiated by trade unions can, however, trickle down to fall within the realm of works council matters.

Compliant Hiring in Germany with Horizons 

A Global PEO such as Horizons can help support your organisation to expand your operations into Germany. Horizons hold an AUG license, and has its European HQ in Berlin, which makes it an ideal entity to hire and onboard German contractors and employees for international companies.

Horizons are also experts in German labor laws, meaning your company can remain compliant with works council requirements, and other employment laws, while conducting business in Germany.

To find out more about hiring in Germany, get in touch with Horizons today. 

Frequently asked questions

The purpose of a German Works Council is to represent a company’s employees’ interests on a variety of internal matters. A works council helps bridge the gap between employer and employee by working in collaboration with the employer. To keep representation fair, a works council does not represent anyone in management positions.

A works council is a group consisting of elected employees who represent the interests of those employees to their employers. They are elected every four years and are mandatory in many companies.