Wrong Hire in Germany? Here’s What Your Company Should Do

Hiring the wrong employee in Germany can have serious financial and legal consequences, especially given the country's employee-friendly labor laws. Whether due to poor performance, cultural misalignment, or unmet expectations, international companies must act quickly — and within the legal framework — to minimize risks. This article outlines practical steps to manage a bad hire in Germany, including examples, real figures, and best practices.

Recognizing a bad hire early is crucial for minimizing legal risks and financial losses in Germany. According to a survey by Robert Half, more than 58% of German companies admitted they made at least one wrong hiring decision in 2024. The cost of a bad hire is significant: StepStone estimates it ranges between €45,000 and €60,000 per employee, including recruitment, onboarding, training, and productivity losses.

Concrete examples help to understand how early issues manifest:

• A Berlin-based tech startup hires a senior developer who, within the first month, consistently fails to meet sprint deadlines and struggles to adapt to tools like Jira.
• A Munich sales office recruits a key account manager who, despite strong claims during interviews, shows an inability to close deals or manage client relationships after onboarding.
• A French multinational’s new HR manager in Frankfurt insists on rigid hierarchical practices, clashing with the company's flat management style valued in Germany, as discussed in Connexion-Emploi's analysis of Franco-German leadership differences.

To spot these signs early, international companies operating in Germany should:

• Establish structured onboarding processes with clear 30, 60, and 90-day goals,
• Use HR monitoring platforms like Personio or BambooHR,
• Schedule regular feedback sessions and collect input from multiple team members (peer reviews).

The earlier these issues are diagnosed, the more flexible the employer's options are — especially if the employee is still within the probationary period. Delayed recognition often leads to complex legal disputes in German labor courts (Arbeitsgerichte), resulting in costly settlements.

"In Germany, the probation period (Probezeit) offers a unique window for international companies to correct hiring mistakes quickly and with limited legal complexity."

Lea Orellana-Negrin
Recruiter
Eurojob-Consulting

Typically, the probation period lasts up to six months, during which the employment relationship can be terminated with just two weeks’ notice, as stipulated by §622 of the German Civil Code (BGB).

A 2024 study by StepStone found that 65% of German employers identify fit issues within the probationary period, yet many hesitate to act for fear of damaging their employer brand or facing administrative hurdles.

Example:

A Paris-based company hires a marketing specialist in Hamburg to expand its German market. After two months, KPIs like lead generation and campaign conversion rates fall significantly short of expectations, even after extra onboarding support. Acting within the probation period, the company can terminate the employment by providing two weeks' written notice, avoiding the more complicated requirements that apply after six months.

To fully leverage the probation period, best practices include:

• Setting specific, measurable performance goals from day one,
• Conducting bi-weekly progress reviews,
• Using formal assessment templates via tools like Personio or HiBob.

Important legal note:

Even during probation, terminations must comply with the General Equal Treatment Act (AGG), which prohibits dismissals based on race, gender, religion, disability, age, or sexual orientation. You can learn more about compliance requirements on the Federal Anti-Discrimination Agency website.

Failing to act during probation means the employee gains stronger legal protections under the Dismissal Protection Act (KSchG), making future termination slower, riskier, and costlier.

If concerns persist beyond the probation period, international companies must manage underperformance carefully through a Performance Improvement Plan (PIP).

A PIP serves two key functions:

• It gives the employee a fair chance to improve,
• It provides the employer with critical legal protection should termination become necessary later.

According to a Haufe Group report, 70% of German employers now implement formal PIPs as part of their HR strategy.

Key components of a PIP include:

• Clear objectives (e.g., achieving 90% ticket closure within SLA times),
• Specific timelines (usually 30 to 90 days),
• Defined support mechanisms (such as coaching or further technical training),
• Formal documentation of all feedback sessions and progress evaluations.

Example:

An international fintech company hires a compliance officer in Frankfurt. Within months, they notice repeated delays in regulatory reporting, risking fines from BaFin (Germany’s financial regulator). Instead of immediate dismissal, the company initiates a 60-day PIP focused on report accuracy and deadlines, combined with weekly coaching from an internal mentor. Progress is tracked through Personio and documented after each review meeting.

If performance improves substantially, the employment can continue. If not, the company has solid evidence that reasonable opportunities for improvement were offered — a crucial defense in any potential litigation before a German Arbeitsgericht (labor court).

Important tip:

Employers should always communicate PIPs formally and clearly, avoiding informal "verbal warnings" alone, which German courts may consider insufficient to justify later termination.

After six months of employment, German labor law offers employees significantly stronger protections under the Dismissal Protection Act (Kündigungsschutzgesetz - KSchG).

This means that terminating an employee requires a legally valid reason and strict procedural compliance.

Acceptable grounds for dismissal include:

• Behavioral reasons (e.g., insubordination, repeated violations despite warnings),
• Personal reasons (e.g., chronic illness affecting performance),
• Operational reasons (e.g., redundancy due to economic restructuring).

Example:

A UK-based logistics company operating in Hamburg needs to downsize due to a major contract loss. They must demonstrate that the dismissed employee's role is genuinely redundant, and that social selection criteria (Sozialauswahl) — age, seniority, disabilities, dependents — have been considered, as outlined by IHK Frankfurt.

Mandatory steps before termination include:

• Consulting the works council (Betriebsrat) if one exists,
• Issuing a written termination letter, delivered physically,
• Adhering to notice periods, which vary by seniority (minimum 4 weeks, longer for long-term employees under §622 BGB).

Important:

• Mistakes in process, such as improper notification of the Betriebsrat or unclear reasoning in the dismissal letter, often lead German labor courts to declare the termination invalid.
  
• According to legal data from Statistisches Bundesamt, over 50% of dismissed employees who sue their employers either win reinstatement or receive a settlement of 3 to 12 months' salary.

To mitigate risks, many international employers prefer to negotiate a termination agreement (Aufhebungsvertrag).

This allows a consensual separation, though it must clearly inform the employee of all consequences (such as impacts on unemployment benefits).

For sensitive cases, it’s highly recommended to work closely with German labor lawyers from networks like Noerr LLP or CMS Hasche Sigle to ensure compliance.

Preventing a bad hire is far more cost-effective than managing one. In Germany, failed recruitments cost businesses an average of €45,000 to €60,000 per incident, according to StepStone.

For international companies, fine-tuning hiring processes is crucial to avoid legal and operational setbacks.

Effective prevention strategies include:

• Structured interviews: Move beyond informal conversations. Use competency-based frameworks and standardized evaluation criteria, as suggested by Personio.

• Thorough reference checks: Despite being less common in Germany than in some other countries, checking previous employers can reveal critical insights. Platforms like HiPeople offer automated reference checking services tailored for European markets.

• Technical and cultural assessments: Go beyond resumes with skills tests (e.g., via CodinGame for tech roles) and cultural fit assessments like Talentcube.

• Trial work projects: Before offering a permanent contract, some companies introduce a test project or temporary freelance engagement through platforms like Malt, allowing candidates to prove themselves in real conditions.

• Local HR training: German labor law nuances matter. Train recruiters and managers using programs from IHK Akademie or similar organizations specializing in employment law for international businesses.

Example:

An American SaaS company expanding to Berlin implemented a three-step hiring process: an initial skills test, a cultural fit interview, and a paid trial project. After launching this approach, they reduced their first-year turnover among new hires by 38%, according to internal HR reports.

By investing upfront in more rigorous selection processes and proper onboarding, international companies can dramatically lower the risk of mis-hires in the challenging but opportunity-rich German market.

For more great tips :

• Which Employment Contract to Choose When Hiring in Germany?
• Hiring Executives in Germany: Key Factors for a Successful Recruitment
• Hiring in Germany: Strategies for Foreign Companies to Outperform Local Competitors

Jérôme Lecot