Since Germany has both high standards, and high costs, of living, overall
employment costs are high and protection of employees against wrongful
dismissal is extensive.
There is therefore a disincentive for employers to recruit
new staff, while at the same time there is some reluctance on the part of
employees to accept new employment at the first opportunity, since they do not
wish to lose existing long service rights. The German labour market is therefore
often seen as being too rigid in both directions, and the situation is exacerbated
by the high level of compulsory deductions from an employee’s wages and by
the extensive rights of employees to holiday and other benefits.
Almost invariably, there is a wide disparity between the take-home pay of an employee
and the corresponding wage costs in the profit and loss account of the