Unjustified fixed-term contracts reached a record high in 2025: Around 790,000 social security-covered new hires were on unjustified fixed-term contracts – equivalent to 18.5% of all new hires. This figure comes from a response by the federal government to a small inquiry from the Greens, based on the IAB Employment Panel. For employees, this means: Contracts are increasingly being fixed-term without a valid reason, with employers not needing to specify a particular reason such as a replacement or a project. But what lies behind this trend, and what rights do you have if you are affected yourself?
What Does ‘Unjustified Fixed-Term Contract’ Mean?
In a fixed-term employment contract, the employment relationship ends automatically upon expiration of the agreed period, without the need for termination. An unjustified fixed-term contract exists when the employer does not need to specify a particular reason for the fixed term. In contrast, there are fixed-term contracts with a valid reason, such as temporary replacement during parental leave, seasonal fluctuations, or a time-limited project.
Unjustified fixed-term contracts are thus a kind of “flexibility tool” for employers. This allows them to hire staff without committing long-term. For employees, however, this often means uncertainty: They don’t know if the contract will be extended or if they will be unemployed after the term ends. The high figure of 18.5% shows how widespread this practice has become.
The Legal Situation: When Is an Unjustified Fixed-Term Contract Permitted?
Not all unjustified fixed-term contracts are legally valid. The Fixed-Term Work Act (TzBfG) sets strict limits. A fixed-term contract is only valid if the employee has not previously worked in an indefinite employment relationship with the same employer. So, if someone is rehired on a fixed-term contract after working in an indefinite role at the same company, they can challenge the fixed term.
There is also a legal maximum duration for unjustified fixed-term contracts. If this is exceeded, the fixed term is invalid – the employment contract is then considered to be open-ended. The number of extensions is also limited. If the employer extends a fixed-term contract multiple times without a valid reason, the fixed term may violate the law.
The federal government notes in its response that, from an empirical perspective, unjustified fixed-term contracts are often used as an “extended probation period” and can serve as a bridge to indefinite employment. While this may be true in some cases, for many employees, uncertainty remains a constant companion.
Why Employers Use Fixed-Term Contracts
The reasons for the widespread use of unjustified fixed-term contracts are obvious: Employers value the flexibility to adapt their workforce to fluctuating orders without immediately taking on the full responsibility of an indefinite employment relationship. Additionally, with fixed-term contracts, employment protection only applies once the contract has been in place for a certain period – as long as the contract is running, there is usually no formal termination, but also no right to continuation.
Unjustified fixed-term contracts are particularly common in sectors such as retail trade services, healthcare and social work, retail, hospitality, and transportation and logistics. This shows that areas with high staffing needs and often uncertain orders rely heavily on this type of contract. For many employees in these sectors, fixed-term contracts are the norm.
Your Rights as a Fixed-Term Employee
Even with a fixed-term contract, you as an employee have comprehensive rights. You are entitled to the same pay as permanent employees, unless valid reasons justify different treatment. This also applies to vacation entitlements, continuation of pay during illness, and protection against discrimination.
It is important to know: A fixed-term contract ends automatically upon expiration – no termination is required. However, the employer can only terminate before the end of the term if this is agreed in the contract and a valid reason exists. Otherwise, the employment relationship will continue until the end of the term. After expiration, you are entitled to a qualified employment reference that documents your activities and performance.
How to Fight Against an Unlawful Fixed-Term Contract
If you believe your unjustified fixed-term contract is invalid, you should act quickly. There are strict time limits for filing a so-called claim for extension at the labor court. This period usually begins with the end of the fixed-term employment relationship. If you miss this deadline, the fixed term is considered valid – even if it was unlawful.
Before filing a lawsuit, you should consult a specialist labor lawyer who can assess the chances of success. A lawsuit is likely to be successful if, for example, the legal maximum duration was exceeded, a previous indefinite employment relationship existed, or the fixed term is invalid for other reasons. In such cases, the court may rule that the employment relationship should continue indefinitely – which often gives you strong bargaining power against the employer.
As a litigation funder, RechtStark can assess the financing of a lawsuit in such cases – however, legal representation is always provided by an independent lawyer. So if you are considering a claim for extension, you can also find out about litigation funding to limit the financial risk.
Severance Pay and Employment Protection for Fixed-Term Contracts
In a fixed-term contract that simply expires, there is usually no severance pay because the employment relationship ends due to the term expiring, not because of termination. Severance pay only comes into play if the employer terminates the contract before the end of the term and you file a claim for protection against termination. In a court settlement, severance pay is often agreed – the amount depends on many factors, such as seniority, age, and the chances of success in the lawsuit.
If you are negotiating severance pay, it is important to know that the legal regulations regarding the notice period for fixed-term contracts may differ from those for indefinite-term contracts. That’s why it’s worth familiarizing yourself with the rules on notice periods in employment contracts. And if you are promised severance pay, it’s important to insist on immediate payment to avoid future payment problems.
Conclusion: What the 18.5% Means for Your Job Search
The high rate of unjustified fixed-term contracts is a warning sign for the job market. It shows that many employers rely on flexible contracts to minimize risks. For employees, this means: You need to be more alert when signing a fixed-term contract. Carefully check if the fixed term is legally valid, and don’t hesitate to take legal action if you have doubts. An unjustified fixed-term contract is not a fate you are doomed to. With knowledge of your rights and possibly a lawsuit, you can fight back and, in the best case, secure a permanent position. Seek legal advice early – and remember that litigation funding, like that offered by RechtStark, can help you take on the risk of a lawsuit without having to forgo an experienced lawyer.
Note: This article is for general information purposes only and does not replace individual legal advice. For a free initial assessment of whether litigation funding may be an option for your case, you can contact RechtStark.