Explore our EOR & PEO services in GERMANY

As your EOR in Germany, we’d help you expand by hiring employees and running their payroll without establishing a local branch office or subsidiary.

Your candidate is hired by a PEO in Germany provider in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. Shortly after, your new employee will be working for you, just like any other member of your team.

Economic Heart of Europe

Country Overview

With a population of over 83 million people, Germany is the most populous member state of the European Union. Germany is known for its rich history, cultural diversity, and strong economy. The country has a parliamentary democracy and a federal system, with 16 states each having their own constitution and legislative body. The capital and largest city is Berlin, which is a center of culture, arts, and politics.

Germany has a highly developed economy, with a strong emphasis on technology and innovation. The country is home to many large multinational corporations, as well as a thriving small and medium-sized business sector. The automotive, engineering, and chemical industries are particularly strong, and Germany is also a leader in renewable energy technologies.

General Information

Population: ~83.000.000

Capital City:Â Berlin (population: ~4.000.000)

GDP:Â ~$4.3 trillions

GDP per capita:Â ~$52.000

Currency: Euro (EUR)

Unemployment:Â ~3%

Employer Taxes: ~20.6%

Employee Taxes:Â 0% – 45%

GERMANY EOR SPECIFICS

Employment Contracts in Germany

Employment contracts in Germany can be either fixed-term or open-ended. Fixed-term contracts have a set end date, while open-ended agreements do not.

For open-ended contracts, it’s essential to include the job title, salary, working hours, and vacation time. You’ll also need to specify the notice period required for terminating the contract.

In terms of probation periods, German labor law allows for a maximum probation period of six months. During this time, the employer or the employee can terminate the contract with very little notice.

It’s important to note that there are also certain protections for employees built into German employment law. For example, employees cannot waive their minimum rights or agree to lower pay than specified in a collective bargaining agreement.

There are also rules around part-time and temporary work contracts. Part-time employees are entitled to the same rights and protections as full-time employees, and temporary work contracts are subject to specific regulations.

Overall, it’s vital to ensure that your employment contracts are fair and legally compliant and clearly outline the expectations and rights of both the employer and employee. If you need clarification on any aspects of employment contracts via Germany EOR, it’s always a good idea to seek legal advice or consult a human resources professional.

Probation Period in Germany

The probation period can last for a maximum of six months. During this time, the employer or the employee can terminate the employment relationship immediately without giving the actual reason.

The length of the probation period should be agreed upon in writing before the employment begins. It cannot exceed six months, so it’s essential to make sure you have a good sense of your employee’s capabilities within that timeframe.

During the probation period – one has to understand that the employee is entitled to the same rights and benefits as any other employee, including social security contributions, paid vacation days, and sick leave. However, the notice period for termination during the probation period is shorter than after the probation period. The notice period for termination during the probation period is only two weeks, whereas the notice period after the probation period depends on the length of the employment.

Probation time is not mandatory in Germany, but is standard practice. They allow both the employer and the employee to understand whether the employment relationship is a good fit and provide a way to end the relationship without any long-term commitments.

Working Hours in Germany

In Germany, the standard working week is 40 hours, and the maximum daily working time is eight hours. Employees are entitled to at least 11 hours of rest between shifts, and a minimum of 24 consecutive hours of rest each week. These rest periods are crucial for maintaining the health and safety of your employees.

Overtime is regulated in Germany; thus, employees are generally not allowed to work more than ten hours daily, and the maximum weekly working time is 48 hours. If your employees work more than eight hours a day – you are required to provide them with a minimum of 30 minutes of break time.

Furthermore, in Germany, Sundays are generally considered days of rest, and employees are not allowed to work on Sundays except in certain circumstances. Employees who are required to work on a Sunday are entitled to additional compensation, such as a higher wage or time off in lieu.

It’s vital to keep in mind that there are exceptions to these rules, such as for shift workers and those in certain industries. As an employer, it’s your responsibility to ensure that your employees work within the legal limits and are properly compensated for their time and effort.

Vacation Days in Germany

Employees are entitled to a minimum of 24 paid vacation days per year, based on a five-day work week. This means that if your employee works six days a week, they would be entitled to a minimum of: 30 vacation days.

Vacation days are earned on a pro-rata basis, meaning that employees earn vacation time based on how long they have been with the company. For example if an employee has been with your company for six months, they would be entitled to half their annual vacation days.

Additionally, employees are required to take their vacation days within a certain period. In Germany, employees must take their vacation days within 15 months after the end of the calendar year in which they were earned. If your employee made vacation days in 2021 they must take those days before March 31, 2023.

Ensure that your employees take their vacation time, which is crucial for their health and well-being. If your employees don’t take their vacation time, it could lead to burnout and decreased productivity.

Sick Leave in Germany

During the first six weeks of an employee’s illness, employers must continue paying their regular salary, minus any sick pay that the employee may receive from their health insurance.

After the first six weeks of an employee’s illness, the health insurance will take over the payment of sick pay. In Germany – sick pay is generally paid at 70% of the employee’s average earnings, up to 90% for employees with children.

Note that certain requirements exist for employees to qualify for sick leave. For example, employees must provide their employer with a doctor’s note certifying their illness and notify them of their illness within a certain period.

In addition to sick leave, remember – employees in Germany are also entitled to “preventative care leave,” which allows them to take time off work to attend medical appointments or to receive medical treatment. Preventative care leave is typically limited to a few days per year.

Wages and Salary Payment in Germany

Employees must be paid at least once a month in Germany. The employment contract or collective bargaining agreement usually determines the exact date of payment. Typically, salaries are paid on the last working day of the month.

It’s essential to ensure that your employees are being paid accurately and following the law. In Germany, the minimum wage is currently set at â‚¬10.45 per hour, which means you must pay your employees at least this amount per hour worked.

In addition to the minimum wage other factors can affect an employee’s salary, such as bonuses, commissions, and overtime pay. These have to be calculated and paid correctly.

Keeping accurate records of your employees’ salaries and payments is also important. In Germany, employers must keep records of their employee’s wages and working hours for at least two years.

As a Germany EOR: it’s essential to communicate clearly with your employees about their salary and any changes that may occur. This includes providing them with a payslip outlining their gross salary, deductions (such as taxes or social security contributions), and net pay.

Public Holidays in Germany

Nine public holidays throughout the year are recognized by the government and observed by most employers. These holidays include: New Year’s Day, Good Friday, Easter Monday, Labor Day, Ascension Day, Whit Monday, German Unity Day, Christmas Day, and Boxing Day.

Note that the federal states determine public holidays in Germany, so the exact dates may vary depending on where your business is located. Not all employees are entitled to paid time off on public holidays, and this depends on their employment contract and collective bargaining agreement.

Employees entitled to paid time off on public holidays will usually receive their regular salary for the day, even though they are not working. If they are required to work on a public holiday, they may be entitled to additional compensation, such as overtime pay or a day off in lieu.

It’s also worth saying that some businesses may be allowed to open on public holidays, depending on the industry and location. For example, restaurants and shops in tourist areas may open on certain holidays.

Employer Taxes in Germany

Employer taxes in Germany are made up of various contributions employers must pay to support social security programs such as health insurance, unemployment insurance, and pension programs. These taxes are typically a percentage of an employee’s gross salary, and the specific rates can vary depending on the type of tax and the employee’s salary.

For example, as an employer, you are typically required to pay 50% of your employee’s social security contributions, while your employees are responsible for paying the other 50%. The employer’s share of these contributions is deducted from the employee’s gross salary.

Employment taxes can be pretty complex, and the specific rules and rates can vary depending on the industry and the type of work. For this reason, many businesses work with professional tax advisors or accounting firms to help them navigate these issues.

Overall, understanding employer taxes is an integral part of running a business in Germany. By staying informed and working with knowledgeable professionals, you can ensure that you meet your tax obligations while also taking care of your employees. If you have any questions or concerns, don’t hesitate to reach out for help.

Employee Taxes in Germany

First things first – employee taxes are made up of income tax and social security contributions. Income tax rates range from 14% to 45% depending on how much your employees earn, with higher earners paying more tax. On the other hand, social security contributions are split between employers and employees, with employers contributing 50% and employees contributing 50%.

When paying your employees, you’ll need to calculate and withhold the correct monthly tax and social security contributions from their paychecks. Getting this right is essential, as mistakes can lead to penalties and legal trouble. At the end of the year, you’ll also need to provide your employees with an annual statement of their earnings and tax contributions.

If all this sounds confusing, don’t worry – you’re not alone! Many business owners in Germany work with tax professionals or accountants to ensure they’re following the rules and keeping their employees’ taxes up-to-date.

By taking care of your employees’ tax obligations, you’re not only following the law but also contributing to important social programs like healthcare and pensions.

Notice Period in Germany

In general, notice periods in Germany depend on how long your employee has been working for your company. For example, if your employee has worked for you for less than two years, the notice period is four weeks, and if they’ve been with you for more than two years, the notice period increases to eight weeks.

For employees in higher-level positions, such as managers or executives, the notice period can be longer – up to seven months in some cases.

It’s essential to keep in mind that these notice periods work both ways. If you want to terminate your employee’s contract, you’ll need to give them the appropriate notice period. If your employee wants to resign, they’ll also need to provide you with notice.

Sometimes, it’s possible to agree on a shorter notice period in the employment contract. However, this should be negotiated carefully, as it can impact both the employer and the employee.

By following the rules and communicating clearly with your employees as Germany EOR, you can help ensure a positive and productive work environment for everyone.

Termination / Severance in Germany

There are two types of employment termination in Germany: termination with notice and termination without notice. Termination with notice means that you terminate the employment contract, but you give the employee a certain amount of information beforehand. As mentioned, notice periods depend on how long the employee has been with your company.

Termination without notice, on the other hand, is only possible in certain circumstances, such as when the employee has committed a severe violation or is unable to perform their duties.

When it comes to severance pay, employers have no legal requirement to offer it in Germany. However, if an employer wants to provide severance pay as part of a termination agreement, it can be a maximum of half a month’s salary per year.

It’s important to note that you may be required to pay compensation if you terminate an employee without notice and a valid reason. This can include up to three months’ salary or reinstating the employee’s position.

Termination and severance can be difficult and emotional topics for both the employer and the employee, and that’s why handling these situations with sensitivity and empathy is essential. If you need help with how to proceed with a termination or severance agreement, it’s always a good idea to seek legal advice or consult with a human resources professional.

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