Collective Bargaining Agreements in Germany

How collective bargaining agreements work in Germany

Collective bargaining agreements (Tarifverträge) set wages, working time, holidays, bonuses and many other conditions for a large part of the German workforce. They are concluded between trade unions and either individual employers (company agreements, Haustarifverträge) or employers' associations (sector agreements, Flächentarifverträge). Freedom of association and the autonomy of the social partners are protected by Article 9(3) of the Basic Law. For employers entering the German market, acquiring a German business or restructuring, it is essential to understand when collective bargaining agreements apply, how they can be avoided or ended and how they interact with works agreements and individual contracts.

The Collective Agreements Act (Tarifvertragsgesetz, TVG) provides the legal framework. Collective agreements contain a contractual part, which binds the parties, for example to keep the peace during the term, and a normative part, whose provisions on the content, conclusion and termination of employment relationships apply like statutory law to the employment relationships covered.

How agreements bind employers and employees

The normative provisions apply directly and mandatorily between parties who are both bound by the collective agreement and fall within its scope (§ 4(1) TVG). Bound are the members of the parties to the agreement, namely the members of the trade union and of the employers' association, and an employer that is itself a party to the agreement (§ 3(1) TVG). Provisions on establishment and works constitution matters apply in all establishments of an employer bound by the agreement, regardless of whether the employees are union members (§ 3(2) TVG).

Deviations from the normative provisions are only permitted if the agreement allows them or if they are more favourable to the employee (§ 4(3) TVG). Employees cannot waive accrued rights under the agreement except in a settlement approved by the parties to the agreement, and exclusion periods for asserting these rights can only be agreed in the collective agreement itself (§ 4(4) TVG). In practice, employers bound by an agreement usually apply it to all employees, whether or not they are union members, to avoid incentives to join the union and to keep pay structures uniform.

Reference clauses in employment contracts

Many employers that are not bound by membership apply collective bargaining agreements through reference clauses (Bezugnahmeklauseln) in employment contracts.

Such clauses can refer statically to a specific version of an agreement or dynamically to the agreement "as amended from time to time". A dynamic clause can bind the employer to future pay increases even if it later leaves the employers' association or transfers the business. Whether a clause is static, dynamic or a mere equal treatment clause is a frequent source of disputes, and the Federal Labour Court (Bundesarbeitsgericht, BAG) generally interprets clauses in standard contracts concluded since 2002 according to their wording rather than as a mere equal treatment of union members.

Reference clauses also matter in transactions. In a business transfer under § 613a BGB, contractual reference clauses transfer with the employment relationship, and dynamic clauses may continue to bind the acquirer to future agreements it has not negotiated. Acquirers should therefore review the reference clauses in all key contracts during due diligence; see our insight on business transfers under § 613a BGB.

Declarations of general applicability

The Federal Ministry of Labour and Social Affairs can declare a collective agreement generally applicable on the joint application of the parties to the agreement, in agreement with a committee of employer and employee representatives, if this appears to be in the public interest (§ 5 TVG). A generally applicable agreement then binds all employers and employees within its scope, even if they are not members. This is common in sectors such as construction and building cleaning, and it often concerns joint institutions such as holiday funds. Employers should check whether a generally applicable agreement applies to their business before relying on the absence of membership.

Leaving or ending collective bargaining agreements

Employers sometimes seek to escape the application of collective bargaining agreements, for example to restructure pay. Leaving the employers' association does not end the obligation immediately: the employer remains bound until the agreement ends (§ 3(3) TVG). After the agreement expires, its provisions continue to apply until they are replaced by another arrangement (§ 4(5) TVG), but in this after-effect phase they are no longer mandatory and can be replaced by individual agreements or a new collective agreement. Many associations also offer membership without being bound by agreements (OT-Mitgliedschaft), which must be properly structured to be effective.

Terminating a company agreement follows the termination provisions agreed in it, and ordinary notice periods are typically set out in the agreement itself. Extraordinary termination for cause is only possible in exceptional cases. Because agreements continue in after-effect, employers that want to change working conditions after leaving a collective agreement usually need to agree new terms with employees individually, offer new contracts to new hires or negotiate a replacement agreement. Changes to pay structures can also require the involvement of the works council under § 87(1) no. 10 BetrVG once the collective agreement no longer blocks co-determination.

Collective agreements also restrict what can be regulated by works agreements. Pay and other working conditions that are, or are usually, regulated by collective agreement cannot be the subject of a works agreement unless the collective agreement expressly allows supplementary works agreements (§ 77(3) BetrVG). This blocking effect applies even to employers that are not bound by the agreement, if they fall within its scope.

Peace obligation, company agreements and restructuring

During the term of a collective agreement, the parties are bound by a peace obligation: they may not take industrial action to change the matters regulated in the agreement. This obligation is part of the contractual part of the agreement and is the main reason why employers value collective bargaining agreements despite their cost. Once the agreement expires or is terminated, unions may call strikes to enforce a new agreement; see our insight on industrial action in Germany.

Employers that are not members of an employers' association can be called on by a union to conclude a company agreement, and the union may take industrial action to achieve one. In restructurings, company-level agreements are also used to deviate temporarily from sector agreements, for example through restructuring agreements (Sanierungstarifverträge) that reduce pay or extend working time in exchange for job security or investment commitments. Many sector agreements contain opening clauses that allow such deviations with the consent of the parties to the agreement.

Collective agreements and the statutory minimum wage

Collective bargaining agreements operate on top of the statutory minimum wage, which applies to all employers regardless of collective agreements. Under the Fifth Minimum Wage Adjustment Ordinance, the minimum wage is EUR 13.90 gross per hour from 1 January 2026 and EUR 14.60 from 1 January 2027 (§ 1 MiLoV5). Sector-specific minimum conditions can also be extended to all employers in a sector under the Posted Workers Act, which is relevant for foreign service providers sending staff to Germany. Collective agreements cannot undercut these statutory minimums, but they often provide significantly higher pay, along with additional benefits such as holiday pay, special payments and shorter working hours.

The Collective Bargaining Unity Act

Where an employer is bound by several collective agreements of different unions whose scopes overlap, the Collective Bargaining Unity Act (Tarifeinheitsgesetz) of 2015 resolves the conflict at establishment level. Only the agreement of the union with the most members in employment in the establishment at the time the last conflicting agreement was concluded applies (majority agreement) (§ 4a(2) TVG). If the majority union did not seriously and effectively take into account the interests of employee groups also covered by the displaced agreement, the provisions of that agreement remain applicable as well.

The second sentence was added after the Federal Constitutional Court (Bundesverfassungsgericht) held in 2017 that § 4a TVG was largely compatible with the Basic Law, but that safeguards were missing to ensure that the interests of occupational groups whose agreement is displaced are adequately taken into account (BVerfG, judgment of 11 July 2017, 1 BvR 1571/15 and others, decision text). In practice, the rule matters most in sectors with competing unions, such as rail transport, aviation and hospitals.

The Federal Tariff Compliance Act for public contracts

A new instrument applies to companies working for the federal government. The Federal Tariff Compliance Act (Bundestariftreuegesetz, BTTG), adopted by the Bundestag on 26 February 2026 and approved by the Bundesrat on 27 March 2026 (Bundesrat decision 115/26), applies to federal public works and services contracts and concessions with an estimated value of at least EUR 50,000 net of VAT (§ 1 BTTG).

Contracting authorities must require contractors, as a condition of performance, to grant employees working on the contract at least the working conditions set by a regulation based on a representative collective agreement, including pay, minimum paid annual leave and certain other conditions (§ 3 BTTG).

The regulations are issued by the Federal Ministry of Labour and Social Affairs on application of a union or employers' association (§ 5 BTTG). Contractors must ensure that subcontractors and temporary work agencies comply, and the Act provides for controls, evidence obligations, civil sanctions and subcontractor liability. Award procedures initiated before 1 May 2026 are not affected (§ 16 BTTG). Companies bidding for federal contracts should check which regulations apply to their sector and adapt their pay structures and subcontracting arrangements accordingly. For the wider context of German employment law, see our employment and pensions practice page.

How TRW & Co helps

We advise employers on the application and design of collective bargaining agreements in Germany. We analyse how agreements apply through membership, reference clauses and general applicability, advise on leaving employers' associations and on OT memberships, negotiate company agreements and restructuring agreements with trade unions, and review reference clauses in transactions. We also advise on compliance with the Federal Tariff Compliance Act for public contracts. This page is general information, not legal advice. To discuss a matter, please contact us.