Dismissal protection in small businesses with up to 10 employees in Germany

Many employees assume that there is no protection against dismissal in small businesses with up to 10 employees. That is only partly true. If your company truly employs no more than 10 people, the strict protection under the Dismissal Protection Act (Kündigungsschutzgesetz, KSchG) does not apply. However, several other legal provisions still safeguard your employment, even in such small businesses. In this article, you’ll learn which legal rules protect you even when you work in a so-called “small business.”

Key facts at a glance

• The General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz, AGG) protects all employees, trainees, applicants, and former employees.
• The AGG prohibits discrimination by employers or colleagues based on race, ethnic origin, gender, religion or belief, disability, age, or sexual identity. Discrimination for other reasons is not covered.
• The AGG applies to almost all employment actions, from recruitment to termination, except for dismissals already covered by the KSchG.
• The AGG only protects against unlawful discrimination. Certain exceptions exist where unequal treatment may be justified.
• Any agreements or measures based on unlawful discrimination are invalid. Employees may claim compensation and damages, but must observe specific time limits when doing so.

Background: dismissal protection in small businesses

The Dismissal Protection Act (KSchG) applies only if the employee has been employed for at least six months and the company is not a small business. According to the Act, a small business is one that regularly employs fewer than ten employees. In such businesses, the KSchG does not apply, which means employers do not need to justify a dismissal with social reasons. Dismissals are therefore more flexible. For example, the employer does not have to conduct a social selection process.

In contrast, in businesses with more than ten employees, dismissals are only allowed for socially justified reasons. So if you are dismissed by a small business, the first question you should ask is: Am I really working in a small business within the meaning of the law?

When is it a “small business”?

You work in a small business if your employer regularly has ten or fewer employees. Determining this number can be tricky in practice.

Relevant date

The relevant date is the date on which the dismissal occurs. Only the headcount at that time counts.

Who counts as an employee?

To determine this, it’s first important to define what constitutes the “business.” Sometimes a business is larger than it appears. The following are included:

• Employees who work outside the company premises (e.g., home office, field service, installations).
• Only regular staff count. What matters is the usual average workforce size, not temporary fluctuations.
  • Temporary agency workers count if they work regularly in the company.
  • If the business currently employs fewer people due to reduced activity, you still count the usual workforce.
  • Conversely, if more people are employed temporarily due to seasonal peaks, these are not counted.
• Special cases include family members or managing directors; here, legal advice is recommended.

Part-time employees are weighted:

• Full-time and part-timers working more than 30 hours per week count as 1.0.
• Part-timers working up to 30 hours per week count as 0.75.
• Part-timers working up to 20 hours per week count as 0.5.
• Trainees are not counted.

Important exception:

If your employment started before 31 December 2003, you may still have protection under the old rules for businesses with more than five employees—provided the business employed between five and ten people back then. In such cases, legal advice is essential.

Legal consequences of the employee count

If the count results in more than 10 employees, the stronger dismissal protection under the KSchG applies – assuming you have completed six months of service.

If the count results in 10 or fewer employees, the KSchG does not apply. This means:

• Your employer may terminate without proving personal, conduct-related, or operational reasons.
• The statutory notice period must still be observed. These periods increase with the duration of employment (see our article on notice periods for employees and employers).
• Several other protective rules still apply, which are explained below.

(Limited) dismissal protection in small businesses

Even in small businesses, there are important protections, such as:

Extraordinary dismissal (§ 626 BGB)

Even in small businesses, an employer may only terminate without notice for good cause and after balancing interests. Continuing the employment must be unreasonable until the regular notice period expires. The employer must act within two weeks of learning the reason. The standards are very strict—many immediate dismissals are therefore invalid. In some cases, they can be converted into ordinary dismissals (see our article Termination without notice).

Dismissal protection for works council members

Works councils can exist in small businesses if there are at least five employees, three of whom are eligible. If your workplace has a works council, it must be consulted before any dismissal. If this doesn’t happen, the termination is invalid (§ 102 Works Constitution Act – BetrVG).

Business transfers

If your employer sells the business, you cannot be dismissed solely because of the transfer. Such a termination is void.

Special protection for specific employee groups

Even in small businesses, special protection applies to certain groups:

• Pregnant employees (§ 17 Maternity Protection Act – MuSchG): A dismissal during pregnancy, within certain periods after a miscarriage, or up to four months after childbirth is invalid if the employer is informed in time.
• Parents on parental leave (§ 18 Parental Allowance and Parental Leave Act – BEEG): Employers may not terminate employment from the date parental leave is requested until it ends, except with official approval (e.g., business closure).
• Severely disabled employees (requiring consent from the Integration Office): The employer must obtain prior consent from the Integration Office before dismissing a severely disabled employee, even in small businesses.
• Works council members or similar office holders: If you serve on the works council, you are protected from ordinary dismissal. Extraordinary dismissal is only possible for serious cause and with the council’s consent.
• Protection under the General Equal Treatment Act (AGG): Any dismissal based on race, origin, gender, religion, belief, disability, age, or sexual identity is void under § 134 BGB and § 7 AGG.
• Protection when exercising lawful employee rights (§ 612a BGB): Employers may not terminate employees for exercising their rights (e.g., requesting sick leave for a child or disputing an unjust warning). Dismissals for such reasons are invalid under § 612a BGB.

Written form requirement

All dismissals must be in writing (§ 623 BGB). Oral or email terminations are invalid.

Frequently asked questions (FAQ)