Why the number of employees is decisive in German labor law
Growth is a good indicator for businesses – more orders, more responsibility, greater success.
In Germany, however, growth also equates to more legal obligations. This is because German labor law links a multitude of requirements directly to the company’s number of employees
The larger a company or business establishment is, the more extensive the legal obligations become—from protection against dismissal and co-determination to data protection, occupational safety, and compliance requirements.
This density of regulations is exceptional by international standards. Many foreign companies underestimate the fact that in Germany, even a small number of new employees is sufficient to trigger additional legislative obligations.
The respective employee limit does not always refer to the entire company—some regulations apply to individual operations (i.e., for each separate location), while others apply to the company as a whole (to the entire organization).
Overview of all relevant thresholds
The following overview indicates which labor law obligations apply depending on the number of employees and aims to assist international employers in particular, to structure their personnel in Germany in a secure and compliant manner.
Starting with the first employee
- Maternity leave (company-specific): Prohibition of work for pregnant women six weeks before and eight weeks after childbirth (§ 3 (1), (2) MuSchG).
- Occupational health and safety support (company-specific): Obligation to appoint company doctors and occupational safety specialists (§§ 2, 5 ASiG).
- Data protection officer (company-specific): Appointment required if processing activities are carried out that are subject to a data protection impact assessment pursuant to Art. 35 GDPR (§ 38 BDSG).
Note: Occupational health and safety and maternity protection obligations apply from the first employee onwards – a fact that many smaller companies often overlook.
From 5 employees
- Works Council (company-specific): Election of a Works Council permitted (§ 1, 9 BetrVG).
- Youth and apprenticeship/trainee representative (company-specific): Election is possible if at least five young employees or apprentices under the age of 25 are employed. (§ 60 BetrVG).
- Representation for severely disabled persons (company-specific): Election is possible if at least five severely disabled persons are employed (§ 177 SGB IX).
Even if these rights initially appear to be voluntary, employers should check at an early stage whether they need to support the corresponding co-determination mechanisms.
From 10 employees
- Unfair Dismissal Protection Act (KSchG) (company-specific): Applies within companies with more than ten employees (§ 23 KSchG).
Above this threshold, increased protection against dismissal applies. Employers must justify dismissals on social grounds (related to operational, behavioral, or personal reasons) while complying with formal requirements.
From 15 employees
- Part-time entitlement (company-specific): Employees may request a reduction in working hours (§ 8 TzBfG).
- Parental leave – part-time work during parental leave (company-specific): Entitlement to part-time work for up to 30 hours per week (§ 15 BEEG).
- Care leave (company-specific): Entitlement to up to six months of care leave (§ 3 PflegeZG).
These regulations have a direct impact on personnel planning, team organization, and cover arrangements.
From 20 employees
Quota for severely disabled persons (company-specific): Obligation to employ at least 5% of severely disabled people or pay a compensatory levy (§ 154 SGB IX).
Safety Officer (company-specific): Appointment of a Safety Officer required (§ 22 SGB VII).
For small and medium-sized enterprises in particular, these obligations often represent their first encounter with formal compliance. In addition to reporting obligations, documentation requirements and internal audit duties arise.
From 21 employees
- Co-determination rights of the Works Council (company-specific): Extended participation rights in individual personnel related matters (§ 99 BetrVG).
- Social plan obligation (company-specific): Obligation to negotiate a social plan in the event of business operational changes (§ 112a BetrVG).
Operational changes include, for example, closures, mergers, relocations or significant changes in the organization.
Once a company reaches this size, it is almost impossible to bypass the issue of employee representation.
From 50 employees
- Whistleblower Protection Act (company-specific): Obligation to set up an internal reporting mechanism for whistleblowers (§ 12 HinSchG).
- Spokesperson committee (for senior executives): The option to form a spokesperson committee (§ 1 SprAuG).
Whistleblower systems are particularly relevant for companies operating internationally: It is not sufficient to simply set up a system on paper – it must be managed, documented and operated in compliance with data protection regulations.
From 100 employees
- Economic Affairs Committee (company-specific): Obligation to establish an Economic Affairs Committee to advise on economic matters (§ 106 BetrVG).
The Economic Affairs Committee serves to promote the exchange of information on economic developments. For HR and company management, this entails regular reporting obligations to the Works Council.
From 200 employees
- Exemption of Works Council members (company-specific): At least one Works Council member must be completely relieved of their work duties (§ 38 BetrVG).
From 500 employees
- The One-Third Participation Act (company-specific): One-third of the seats on the Supervisory Board must be filled by employee representatives ((§ 1 DrittelbG).
This rule applies to incorporated companies such as limited liability companies (GmbHs) or public limited companies (AGs) and significantly changes the composition and decision-making structure of corporate management.
From 2,000 employees
- Co-Determination Act (company-specific): Equal co-determination on the Supervisory Board – employees and shareholders each appoint 50% of the members (§ 7 MitbestG).
What are the potential consequences if companies choose to ignore these thresholds?
Those who disregard the statutory thresholds under labor law are at risk of incurring more than mere formal grievances.
In Germany, violations of labor law obligations can quickly lead to legal implications, whether via employee claims, audits by authorities, or disputes with works councils.
The most common consequences are:
- Fines and administrative sanctions: For example, violations of occupational health and safety, maternity protection, or safety regulations. Failure to set up a reporting mechanism in accordance with the Whistleblower Protection Act can also lead to substantial fines.
- Legal disadvantages in dismissal proceedings: If the threshold value of the Unfair Dismissal Protection Act is exceeded but ignored, dismissals are often deemed invalid – with the result that back pay, and legal costs must be compensated.
- Damage to reputation and trust: Particularly for international companies, a lack of compliance has a negative impact on employer reputation and employee engagement and retention. In industries such as the technology sector, life sciences, and finance, this can have a direct impact on an organization’s desirability as an employer.
- Additional claims and liability risks: If, for example, mandatory contributions to social security or for the employment of severely disabled persons are not remitted correctly, substantial additional payments may be incurred.
Conclusion: Compliance starts with counting
International companies, especially those from the USA or the UK, are often unaccustomed to this density of regulation.
In Germany, growth means not only more employees, but also greater responsibility, co-determination, and monitoring obligations.
Even companies with just a few employees are subject to regulations that only apply to significantly larger companies in other countries.
Those who are aware of these thresholds early on can implement structures in good time to avoid risks and ensure compliance.
For over 25 years, Profion has been supporting international employers in designing their HR structures in Germany in a legally compliant and efficient manner – ranging from the introduction of new benefits to the implementation of legislative requirements in human resources.
