Europe

Germany

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Employer of Record (EOR) in Germany

What you'll learn

  • Country Introduction
  • Employment Terms
  • Minimum Wage and Working Hours
  • Statutory Leave Laws
  • Termination Process
  • Additional Information
Germany Introduction

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. The country is very friendly to English-speakers, and, like many European countries, there is a large population of digital nomads in Germany.

Employment Terms

Types of Contracts

Fixed Term Contract with a minimum duration of 6 months and a maximum duration of 18 months, under the AUG labour leasing model.

Working Hours

Germany's legal working days are from Monday to Saturday, however for the majority of employees, a typical workweek is from 8 or 9 AM to 5 PM, Monday through Friday.

Working days may not exceed 12 hours per day or 48 hours per week. If the employee exceeds 12 hours in a given day, they must have a minimum of 12 hours rest following this. Overtime pay is arranged between the employee and employer; it is not required.

Minimum Wage

In 2023, the national minimum wage in Germany remained fixed at EUR 1,987 per month, which is EUR 23,844 per year, considering 12 payments per year.

Probation Period

Probation period is not mandatory in Germany. The maximum is 6 months.

Additional Payments

Although German compensation laws do not require a 13th-month bonus, many employers choose to give employees an extra month's wage at the end of the year.

Taxes & Local Employment Costs

Employee Taxes

Germany has a progressive income tax, ranging from 0% to 45% depending on the income bracket.

In addition, employees should make the following social security contributions:

  • Health insurance: 7.3%, up to an income ceiling of EUR 58,050 annually.
  • Pension insurance: 9.3%, up to an income ceiling of EUR 84,600 annually (EUR 81,000 in the new federal states*)
  • Unemployment insurance: 1.3%, up to an income ceiling of EUR 84,600 annually (EUR 81,000 in the new federal states*)
  • Long-term care insurance: 1.525% (1.875% for childless individuals aged 23 and above), up to an income ceiling of EUR 58,050 annually.

Self-employed individuals generally do not have to pay mandatory social security contributions.

Employer Taxes & Contributions

The following social security contributions are levied on employment income. Employer contributions are generally tax-free.

  • Health insurance: 7.3%, up to an income ceiling of EUR 58,050 annually.
  • Pension insurance: 9.3%, up to an income ceiling of EUR 84,600 annually (EUR 81,000 in the new federal states*)
  • Unemployment insurance: 1.3%, up to an income ceiling of EUR 84,600 annually (EUR 81,000 in the new federal states*)
  • Long-term care insurance: 1.525%, up to an income ceiling of EUR 58,050 annually
  • Work accident scheme: depends on the industrial sector and the accident risk; the employer bears these contributions.
  • Sickness Insurance: from 2.7% to 5.1% depending on the employment model
  • Maternity Leave: 0.65%
  • Insolvency contribution: 0.09%, up to an income ceiling of EUR 84,600 annually (EUR 81,000 in the new federal states*).

*Brandenburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt, and Thuringia are new federal states.

Types of Leave

Annual Leave

A minimum of 20 days of annual paid leave are required by law for employees who work a 5-day week (allocated for the employee's entry and departure years). Read more about paid leave in Germany.

Sick Leave

In Germany, there is unlimited sick leave for workers. For the first 6 weeks, the employer must pay for this leave; after this, the employee’s health insurance pays their salary.

Maternity Leave

Maternity allowance is paid for 6 weeks before the birth and 8 weeks after, as well as the day of childbirth. The allowance is paid for 12 weeks after the birth for premature and multiple births, as well as in cases where a doctor declares the child to be disabled within 8 weeks of childbirth, the woman applies for a longer term of protection.

The maternity allowance amount is always determined by the salary of the last 3 cleared calendar months before the beginning of the maternity period. It is a maximum of EUR 13 per day. The employer pays the difference between the maternity allowance amount and the employee’s previous salary.

Employees are entitled to maternity benefits if they are entitled to sick pay due to their inability to work, or if they are not being paid any wage or salary because of the maternity protection periods.

Additional maternity benefits

Employees who are not a member of state health insurance (e.g., privately insured or women with family insurance under the state health insurance system) receive a one-off maternity benefit payment up to a maximum of EUR 210.

Self-employed women who have taken out a private sickness cash benefit insurance are entitled to the contractually agreed daily benefits during the maternity protection periods.

Pregnant women and new mothers also receive:

  • Care from a doctor and assistance from a midwife during the pregnancy and after the delivery (birth);
  • Assistance from a midwife during the delivery and, if necessary, from a doctor as well;
  • Provision of medicines, bandages, treatments and equipment;
  • Cover for the costs for an inpatient delivery in a hospital;
  • Home care;
  • Domestic help.

Paternity Leave

New fathers in Germany are entitled to 10 days of paid paternity leave when their child is born.

Parental Leave

After the birth of a child, mothers and fathers have the right to take a break from work to care for their child and spend time with their family, for up to 3 years per child.

During this time, the employer may only terminate the employment relationship in exceptional circumstances (e.g. insolvency, shutdown of the business). The employer is not expected to pay salary during this time off, but parents can apply for the parental allowance (”Elterngeld”) during this time.

After parental leave, parents have the right to return and work at the same level as they did before.

Public Holidays

There are 9 public holidays that are observed in all 16 federal states in Germany, including New Year's Day, German Unity Day and Christmas Day.

Although the federal government has the power to declare national holidays, control over public holidays rests primarily with the individual states. For this reason, some federal states observe holidays that are not recognized elsewhere. The state with the most public holidays is Bavaria, where an employee is entitled to 13 rest days per year. The other federal states have between 10 and 12 days per year.

In addition to officially-recognized public holidays, there are several unofficial holidays, such as St Nicholas’ Day (Nikolaus) on December 5th, Carnival Monday (Rosenmontag) and Christmas Eve.

Benefits

Summary

The statutory employee benefits in Germany, required by the German government, include retirement, unemployment insurance, healthcare, long-term nursing care, and workers' compensation (as covered under “Taxes and Contributions”).

In addition to this, some employers (especially those in competitive industries), offer supplemental allowances such as a transportation season ticket allowance or a meal allowance.

Medical Insurance

Employees are obliged to have health insurance; there are two models, one is statutory and the other is private.

For both of these, the employer pays half and the employee pays half; these deductions are made every payroll and are part of the social security contributions.

Termination Process

Notice Period

Without cause: The employee is subject to a statutory notice period of 4 weeks (starting from the 15th of the month or the 30th of the month)

With cause: In the case of a severe breach of the employment agreement the employer can give a dismissal and terminate the employment with immediate effect. This notice of termination must be served within two weeks of the employer gaining knowledge of the underlying facts causing the dismissal. There also needs to be proof of the severe breach of the employment agreement.

For individual dismissals, the Civil Code specifies the period of minimum notice to be given by the employer. The minimum notice given to all employees is:

  • 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

Longer notice periods can be negotiated between employee and employer. The notice period (for employee resignation or employer termination) is 2 weeks during probation.

Statutory Payments

Any accrued and unused leave is paid at the end of employment. Any rules around severance etc. should be negotiated between the employee and employer.

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. Read more about how to stay compliant in Germany.

OVERVIEW
Language(s):
German
Currency:
Euro (EUR)
Capital City:
Berlin
Population:
84.3 Million
Cost of Living Rank:
32nd
VAT (Valued Added Tax):
19%
Employer TaxES
22.22-25.22%
(estimated)

★  9.3% - Pension

★  7.3% - Health Insurance

★  1.3% - Unemployment Insurance

★  1.53% - Long term Insurance

★  0.09% - Insolvency Contribution

★  2.7%-5.7% - Sickness/Maternity

Get Started in 3 Steps

1

Remote candidate

You've sourced a full-time employee or contractor located in a country where your company is not incorporated.

2

Cost Calculation

Pass us the details of your candidate and we will let you know exactly what it costs to employ your candidate in that country.

3

Onboarding & Admin

Sit back and relax as we onboard your new team member and take care of all the local compliances and admin work.

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How Remofirst employs in Germany

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.

How employees in Germany get paid
Your employee's hours, time off, holidays, bonuses, and commissions are automatically calculated into payroll. Remofirst will invoice you in either US Dollars (USD), Euros (EUR), British Pounds (GBP), Canadian Dollars (CAD), Australian Dollars (AUD), or Singapore Dollars (SGD) around the 15th of each month to make sure your employees in Germany are paid on time in Euro (EUR). To make it even easier, you can summarize your entire global team's salaries to aggregate them into one payment (instead of many individual payments).
Full-time Employees vs Global Contractors

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.

Dependable support for employees
Whenever the employee or employer has a question about benefits, Visas, or anything else related to international employment in Germany, they can speak with our customer support team to get answers from our team of experts.