There are no real promotions. It‘s about employment duration. In Bavaria you have like 12 salary groups. For white collar workers 9 is entry level, 10 is for some experience, 11 for experienced and 12 is the carrot to work harder for. Some companies do some downgrade to pay less. Group 8 for experienced folks job ads started appearing recently. The bonus is up to 28% depending on the performance. So basically you can slack all day, have +5% bonus on the base salary when someone doing overnighters will have +15%. The higher bonuses are reserved for oldtimers. This system is absolutely cringe. Btw most of these unionized companies offer 35 hours contracts. 40 hours must be negotiated as a bonus… Anyway union will take care of regular base salary increase, that’s really nice. +6% for doing nothing good is amazing!
This describes payment and promotion functions in one unionized job sector in Bavaria.
Many German companies are not, in fact, unionized, and tend to pay 'übertariflich / außertariflich' - instead of union protection, they just pay you significantly more than you'd get with an union job. Which is a good thing 9 out of 10 times.
I heard during two decades only single time about small company paying significantly more. The guy is specialist. There are handful of them worldwide. He was absolutely perfect fit and super desired candidate. Never ever heard more about small companies with serious salaries. It was always -20% or -30% from union tables be it in Bavaria or Baden-Württemberg. Special case might be small establishments of American companies with great salaries, but this is different topics. And some statistics at the end: https://karriere.de/mein-geld/gehaltsstudie-diese-20-unterne...
So no, not unionized smaller companies pay less with possible exemptions for key employees.
Truth probably is somewhere between my extreme and your extreme ... but I have - in 20 years of working in the country - not once encountered a situation in which an AT-contract I saw was not significantly better than an union contract when it came to compensation - both from some of the largest - and 100% pure German - conglomerates, and in the KMU sector.
Which - incidentally - is why such companies advertise paying 'außertariflich' in their job adverts.
Situation might be different for low- and non-skilled workers.
Why is it only falling apart now? Why was a system like that able to dominate the global manufacturing economy for half a century?
The answer probably isn't American work ethics inspired by American compensation schemes, but rather Chinese ingenuity and grit. But seriously, why can you build so much on 35 hours per week and a mid-five-figure salary?
Not that hard, but also why would you want to promote based on metrics? That will get you people gaming the system, and I can't imagine a single software dev metric that actually captures the full gamut of value a dev can provide. You will surely miss very valuable devs in your metrics.
I didn't realize "performance tracking" actually just meant "blind metric tracking". Are there lots of rules to differentiate the good kinds of metrics (like actual outcomes for customers and co-workers) from the bad kinds of metrics (like time spent using an LLM)? Sounds like this is all about treating a symptom (poor business leadership) rather than a root cause (noncompetitive markets).
As companies grow, they tend to move away from subjective performance reviews like that and toward more objective metrics. Otherwise, it's too easy for personal politics to contaminate the promotion process. Employees are incentivized to find whichever manager will give them 5 star reviews no matter what, and managers are incentivized to be that guy, because then they have access to the best employees. When a company is small, and everyone knows everyone, this is not an issue. But when 90% of the company is a stranger to you, you need more objective metrics to rely on.
