Guide to employment, payroll and benefits in

Germany

Rivermate offers complete payroll, benefits and compliance services for

Germany

01. Overview

Last updated: 

August 19, 2021

Currency
Euro
Capital
Berlin
Ease of doing business
79.7
Language
German
Population
83783942
GDP growth
2.22%

02. Grow your team in

Germany

with Rivermate

Payroll, benefits, taxes, and compliance can be difficult to manage in

Germany

, particularly if you don't have established local relationships. You can hire employees in

Germany

effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global employment solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

03. Summary

Germany is a country in Central Europe that is officially known as the Federal Republic of Germany. It is Europe's second-most populous country, after Russia, and the European Union's most populous member state. Germany is located between the Baltic and North Seas to the north and the Alps to the south, occupying 357,022 square kilometers and home to over 83 million people in its 16 constituent states. It is bordered on the north by Denmark, on the east by Poland and the Czech Republic, on the south by Austria and Switzerland, and on the west by France, Luxembourg, Belgium, and the Netherlands. Berlin is the nation's capital and largest city, and Frankfurt is its financial center; the Ruhr is the country's largest urban area. Since classical antiquity, various Germanic tribes have lived in the northern parts of modern-day Germany. Before the year 100, there was a area known as Germania. German territories were an important part of the Holy Roman Empire in the 10th century. Northern German regions became the epicenter of the Protestant Reformation in the 16th century. In 1815, the German Confederation was established following the Napoleonic Wars and the fall of the Holy Roman Empire in 1806, respectively. When most German states merged into the Prussian-dominated German Empire in 1871, Germany became a nation-state. The Empire was replaced by the semi-presidential Weimar Republic after World War I and the German Revolution of 1918–1919. The formation of a dictatorship, World War II, and the Holocaust followed the Nazi takeover of power in 1933. Germany was split into the Federal Republic of Germany (West Germany) and the German Democratic Republic (East Germany) following the end of World War II in Europe and a time of Allied occupation. The German Democratic Republic was a communist Eastern Bloc state and a member of the Warsaw Pact, while the Federal Republic of Germany was a founding member of the European Economic Community and the European Union. Following the collapse of communism, the former East German states joined the Federal Republic of Germany on 3 October 1990, transforming the country into a federal parliamentary republic headed by a chancellor. Germany is a great power with a powerful economy; it is Europe's largest economy, the world's fourth-largest economy by nominal GDP, and the world's fifth-largest economy by PPP. It is both the world's third-largest exporter and importer of products, as a global pioneer in many manufacturing, science, and technical sectors. As a developed nation with a high Human Development Index, it provides social security and a universal health-care system, as well as environmental safeguards and tuition-free higher education. Germany is a member of the United Nations, NATO, the G7, the G20, and the Organization for Economic Cooperation and Development (OECD). It is home to the fourth-most UNESCO World Heritage Sites.

04. Public holidays

05. Types of leave

Paid time off

At least 20 working days are needed (with respect to a 5-day working week). The majority of employees have 25-30 days a year. In most cases, the person is required to use his or her sick days during the fiscal year. Vacation days may be rolled forward to March 31st of the next calendar year unless the contractor specifies otherwise. If an employee has any accrued sick days at the time of retirement, the company will pay the employee for those days.

Public holidays

The holidays in Germany vary by province. There are, however, nine national holidays observed by all nations.

Sick days

The first six weeks of sick leave are provided by the company and are paid at 100% of the normal wage. Any extra payments will be covered by the health insurer after 6 weeks (the amount will not be the full salary and will be determined according to personal criteria). When an employee takes sick leave, they must contact their boss and send a doctor's statement if the leave is more than three days.

Maternity leave

Mothers are entitled to 6 weeks of paid leave due to the birth of their child and 8 weeks of paid leave following the birth of their child. With the birth of a premature or multiple child, the employee is entitled to 12 weeks of paid leave.The employer will have to pay the employee's wages after the maternity leave, and the health care provider will repay the employer in full.

Paternity leave

Parental leave encloses paternity leave.

Parental leave

Parental leave is 36 months long and should be shared equally with the parents. This leave includes the eight weeks of maternity leave (following delivery). When it comes to mothers, maternal leave begins after maternity leave ends. Parents will work part-time for up to 30 hours a week while on parental leave.In the first three years of birth, at least 12 months of parental leave must be taken; the remaining 24 months will be taken before the infant hits the age of eight. Parental leave does not begin automatically; it must be demanded in writing or forwarded to the employer at least seven weeks ahead of time.

Other leave

06. Employment termination

Termination process

After the first six months of employment, all employees are protected by the German Termination Protection Act. Employers must have a specific basis for dismissing an employee, and there are several types of reasons (connected to the employee's personal condition, to the employee's behavior, or to the employer's business).


A written notice of dismissal must be signed by the employer's authorized representative. In general, ending employment without the employee's consent is a complicated process in Germany, which is why many terminations occur through mutual agreement.

Notice period

The notice period shall be at least 4 weeks long, with the length of service increasing as follows. There will be a month's notice after at least two years of employment. A two-month notice period is given after two to five years of work. A three-month notice period is granted for employees who have worked for 5-8 years. There will be a four-month notice period after eight to ten years of employment. The notice period is 5 months for employees who have worked for 10-12 years. The notice period is 6 months for employees with 12-15 years of experience. Finally, there will be a 7-month notice period after 15-20 years of employment.

Severance pay

Severance pay is not required if the termination is justified and adequate notice is given. However, if a position is terminated due to operational changes, severance pay must be provided. When severance is paid, it is calculated as half a month's pay for each year of employment.

Probation period

The probation period is up to 6 months and is subject to mutual agreement between both parties.

07. Working hours

General

Although a six-day workweek is possible, the standard workweek is five days, eight hours per day. Employees are not permitted to work more than 48 hours per week. Daily hours may be increased to ten hours per day if the employee does not work more than 40 hours per week on average over a 24-week period.


Workers in industries that require continuous operation (e.g., hospitality, hospital services, and power generation) may be scheduled to work Sundays and holidays, but most other workers do not. Employees who work on a Sunday or holiday when they normally do not are typically compensated with a paid day off within two weeks.


Night work (between 11 p.m. and 6 a.m.) is typically compensated by a higher rate of pay or compensatory time off. A collective bargaining agreement or contract may specify how night work is compensated precisely.

Overtime

Overtime is typically compensated through paid time off or a higher hourly rate, but the specific rules for a particular employer are typically determined by contract or collective bargaining agreement. Frequently, board members and certain management level employees are not compensated for overtime.

08. Minimum wage

General

The minimum wage in Germany is currently at 9.60 EUR per hour. On January 1, 2022, the statutory minimum wage is set to increase to 9.82 euros. On July 1, 2022, the statutory minimum wage is set to increase to 10.45 euros.

09. Employee benefits

General

Pension insurance, health insurance, unemployment insurance, nursing care insurance, accident insurance, maternity insurance, and insolvency insurance are the seven components of the German Social Security System. Except for accident, maternity, and insolvency insurance, which are covered solely by the employer, contributions to those insurances are split equally between the employer and the employee. In total, the employer can expect to contribute approximately 20.7 percent of the employee's salary to social security.

Social security contributions, on the other hand, are only deducted up to a certain amount. In 2021, the maximum amount for statutory pension and unemployment insurance is 7,083 € (West) and 6,667 € (East) per month, and the maximum amount for statutory health insurance is 4,837 €.

Furthermore, employers frequently provide additional supplementary insurance benefits. Companies provide supplemental benefits based on collective bargaining agreements, corporate culture, and the nature of the professions.

10. Why Rivermate as your Employer of Record / PEO?

Establishing an entity in

Germany

to hire a team takes time, money, and effort. The labor law in

Germany

has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into

Germany

simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in

Germany

give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in

Germany

via our Employer of Record / PEO solution.

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