What you'll learn
- Country Introduction
- Tax Breakdown for Employers
- Statutory Leave Laws
- Minimum Wage and Working Hours
- Termination Process
- Additional Information
Germany is a country in central Europe bordered by France, Denmark, Poland, the Czech Republic, Austria, Switzerland, Luxembourg, Belgium, and the Netherlands. It’s the 2nd-most populous country in Europe (after Russia) and has the largest economy on the continent. Germany is a developed country with social security, a universal healthcare system, environmental protections, and a tuition-free university education.
Paid Leave and Statutory Leave
Parental Leave
Pregnant mothers in Germany are entitled to 6 weeks of paid leave before their due date, and at least 8 weeks of leave after the child is born. While there is no statutory paternity leave, parents can take extended parental leave of up to 36 weeks before their child turns 3 years old. Employees can also take adoption leave.
Sick Leave
Employees who have worked at least 4 weeks at their company are entitled to 6 weeks of sick leave paid at their full salary. After 6 weeks, the health insurance fund pays 70-90% of the salary for up to 78 weeks within a period of 3 years.
Paid Leave
Germany has 9 national holidays and regional holidays based on the employee’s location. Employees are also entitled to at least 20 days of paid time off each year.
Wage Requirements and Working Hours
The minimum wage in Germany is €12, though a higher minimum wage is often set via collective bargaining agreements. The standard workweek can be no longer than 40 hours per week at 8 hours per day. Some days can be extended to 10 hours per day as long as the average working day over 6 months does not exceed 8 hours/day. Overtime work must conform to the stipulations in the employment contract.
Termination Process
Process
The termination process in Germany depends on the collective agreements in place, the type of contract, and the reason for termination. After 6 months at a company, workers are protected by the German Termination Protection Act.
Notice Period
Notice periods are usually stipulated in the employment contract and are linked to the employee’s length of time at the company:
- 0-2 years = 1 month notice
- 2-5 years = 2 months notice
- 5-8 years = 3 months notice
- 8-10 years = 4 months notice
- 10-12 years = 5 months notice
- 12-15 years = 6 months notice
- 15+ years = 7 months notice
Severance Pay
Severance pay applies if an employer terminates the employment agreement without notice, in which case the severance pay would be for the same amount the employee would have earned if given notice. If the termination is due to operational changes, the employer must pay out a severance generally equal to 2 weeks of salary for each year at the company.
Additional Information
While not legally mandated, 13th-month salary bonuses are customary in Germany and paid out in December. As of February 2023, employers are required to record the actual working hours of their employees’ days. While the employee is the one who needs to record the hours, the employer has to provide the necessary system and verify that the employees are recording their times. Companies hiring in Germany should also be mindful of the AUG License which is a labor leasing license.
★ 9.3% - Pension
★ 7.3% - Health Insurance
★ 1.53% - Long term Insurance
★ 1.25% - Unemployment Insurance
★ 1.18% - Accident Insurance
★ 2.5% - Sickness/Maternity
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It can be prohibitively expensive to establish an entity in every country you want to hire talent in, so Remofirst will hire and pay your employee on your behalf while you manage their daily duties. Remofirst will handle formal HR procedures and employment contracts that adhere to local laws, so that you can simply approve invoices via our platform. When you work with an Employer of Record (EOR) you can compliantly hire the best employees around the world.
Unlike full-time employees, contractors work on projects with multiple companies at a given time and are technically self-employed. Full-time employees are solely focused on their employer and usually receive benefits (such as health insurance, equity or stock options, and time off) as an additional form of compensation. While it can be cheaper to work with international contractors instead of paying benefits to a full-time employee, you run the risk of misclassification. It's recommended to work with an EOR for contractor onboarding and payments, so you can know that your international contractors are paid compliantly and on time.
