Fixed-term employment contract: What employees need to know!

Fixed-term employment contracts are common in Germany and can be useful, but they also come with legal risks and weaker job security. They end automatically, offer limited protection against dismissal, and are only valid if they meet strict legal rules. This article explains the different types of fixed-term contracts, when they are allowed, and what employees should watch out for – including chances to challenge an invalid fixed term and convert it into a permanent job.

What is a fixed-term employment contract?

A fixed-term employment contract is a job agreement limited to a specific period or purpose. When the agreed end date is reached, or the defined purpose is fulfilled, the contract ends automatically – no dismissal is needed. This also means employees do not benefit from the usual dismissal protection. A fixed term is only valid if it is put in writing and signed by both parties before the work begins.

Fixed-term contracts are widespread in Germany: in 2023, around 7.5% of employees over 25 worked under a fixed-term agreement, with an even higher share among younger workers.

Types of fixed-term contracts

There are three main forms:

• Time limit: The contract runs for a set period (e.g., 6 months, 1 year, 2 years) and ends at the agreed date.
• Purpose limit: The contract ends once a specific task is completed, such as covering parental leave or finishing a project. The end date is uncertain but linked to the purpose.
• Nature of the role: Some roles are fixed-term by definition, such as apprenticeships, internships, or voluntary service.

When is a fixed term legally valid?

Fixed terms are allowed but tied to the strict requirements of the Part-Time and Fixed-Term Employment Act (TzBfG). The key distinction is:

• Fixed term with objective reason
• Fixed term without objective reason

Fixed term with objective reason

A fixed term is valid if there is a legally accepted reason under Section 14(1) TzBfG. The law recognises eight such reasons, including:

• Temporary need for staff (e.g., seasonal work)
• Transition after training or studies
• Replacement (parental leave, sickness, sabbatical)
• Project work tied to a defined goal
• Trial period if the employer is unsure about long-term suitability
• Personal reasons, such as limited residence permit or employee’s own wish
• Budget-based roles (very common in the public sector)
• Court settlement defining an end date

Fixed term without objective reason

A fixed term without reason is allowed only in narrow circumstances:

• Max. 2 years total duration
• Max. 3 extensions
• Only if the employee has not worked for the company before

Courts accept exceptions only in rare cases – e.g., if a previous employment was many years ago, very short, or completely different in nature. Because this is legally sensitive, employees should seek legal advice before signing.

There are special rules for:

• Start-ups: up to 4 years of fixed terms without reason
• Older employees (52+) after unemployment of at least 4 months: up to 5 years possible

Other types of fixed term contracts

Some lawful fixed terms do not fall under the TzBfG, for example:

• Phased retirement ending automatically at pension age (Section 8 AltTZG)
• Contract ending at statutory retirement age (Section 41 SGB VI)
• End of contract upon full permanent disability

How fixed-term contracts end

A fixed-term employment contract can end in the following ways:

• Automatic end by time limit
• Automatic end by purpose fulfilment
• Ordinary dismissal is normally excluded unless expressly agreed in the contract or collective agreement (Section 15(4) TzBfG)
• Extraordinary dismissal for serious misconduct remains possible (Section 626 BGB)
• If the fixed term exceeds 5 years or is tied to a person’s lifetime, the employee may terminate with 6 months’ notice after 5 years

Pros and cons for employees

A fixed-term contract can offer an entry into the job market, a chance to gain experience, or a flexible option when returning from a break. If performance is strong, many employers convert the job into a permanent role later.

However, there are aome major disadvantages: The contract ends automatically unless renewed – unemployment is a real risk. There is no right to file a dismissal protection claim, and planning for the future is harder. Fixed-term roles often come with lower pay, fewer benefits, and exclusion from social plans. Protection during maternity or parental leave is limited to the contract’s end date.

Legal protection against invalid fixed terms

If the fixed term is invalid, the contract automatically becomes permanent. The employer may then only dismiss at the earliest on the agreed end date, unless other contract terms allow earlier notice.

Employees can challenge an invalid fixed term with an “unfixed-term claim” (Entfristungsklage). This must be filed within 3 weeks after the contract ends (Section 17 TzBfG). Missing the deadline makes the fixed term legally binding – even if it was unlawful.

Frequently asked questions (FAQ)