"Headhunter" costs are part of the entrepreneurial risk - a reimbursement clause in the employment contract is not a legally permissible means of employee retention
Companies in Germany are finding it increasingly difficult to find and retain qualified staff. However, not every measure designed to counteract staff turnover fulfils the legal requirements.
In the recruitment process, it is not uncommon for costs to be incurred for recruitment service providers. Just as often, companies try to agree a retention period and, with the aim of reducing staff turnover, involve newly hired employees in these costs if they leave too early in their view. On 20 June 2023, the Federal Labour Court (BAG) also had to deal with the question of how far "retention management" can actually go. In this context, the Federal Labour Court ruled that an employment contract clause was invalid according to which an employee is obliged to reimburse the employer for a placement commission paid to a third party - e.g. a headhunter - for the conclusion of their employment contract if the employee terminates the employment relationship before the end of an agreed retention period by resigning.
The decision
The employer incurred almost EUR 6,700.00 in costs for the headhunter for the placement of the employee, two thirds of which it demanded to be reimbursed by the employee after the employee had resigned. The BAG ruled that the employer could not pass on the commission paid to the headhunter to the employee. This applies even if the employee cancels within a short period of time after the contract is concluded. Such a contractual agreement would unreasonably disadvantage the employee contrary to the requirements of good faith within the meaning of Section 307 (1) of the German Civil Code.
From Dr. Nicole Elert
The HR function itself will (have to) reinvent itself - one of the decisive transformations in German companies today
A lack of employee engagement costs companies worldwide 7.8 trillion dollars. The HR function is one of the functions in the organisation that can help change this and contribute to a paradigm shift. From an inward-looking service organisation to a developer and driver of the employee experience throughout the company, HR can actively have a positive influence on value creation and productivity within the company.
Today's prevailing structures of the HR function, which are often rigid and focussed on traditional HR products, are no longer suitable for this. Too often, the focus is "inwards" on the company's own day-to-day business. Looking "outwards" to the company's own "customers" - the employees - and their experiences with the HR function too often takes a back seat.
Over the years, the working environment and interaction with HR has also become increasingly complex and sometimes even unmanageable for many employees due to the large number of systems, applications, information sources and self-service offerings that have been introduced. Even accessing HR information and services can be a real challenge.
From Dr. Nicole Elert and Sebastian Gemeinhardt
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