Employer of Record in Germany

Businesses can only operate smoothly in Germany if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Germany below, to avoid any compliance issues.

Employment Contract Requirements

Employers in Germany are required to provide employees with a written statement outlining the employment terms within the initial month of commencing work. Key elements necessary for an employment contract are:

• Full names and addresses of both employer and employee
• Employment start date
• Regular work location
• Concise job description
• Details regarding salary and additional remuneration components, as well as additional benefits or training offered by the employer
• Agreed-upon working hours, details around overtime- whether, and at what rate, it will be remunerated

Onboarding Process

We can help you get a new employee started in Germany quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Germany

In Germany, the regular workweek consists of 40 hours, spread across 8 hours per day. However, if the average daily working time does not exceed eight hours within six months or 24 weeks, the workweek can extend to 48 hours or 10 hours per day.

Overtime in Germany

Overtime work in Germany must adhere to the maximum working hours outlined in the employee's contract or collective agreement. There are two main types of overtime in Germany which include:

• "Mehrarbeit," exceeding the 48-hour weekly limit, extendable to 10 hours daily if the average daily work hours remain at 8 over six months. This is usually compensated with time off.
• "Ãœberstunden," representing extra hours beyond agreed contractual terms, usually requiring compensation.

Probation Period in Germany

In Germany, probation or trial periods, typically lasting up to six months, are commonly established within collective agreements, although not mandated by law.

Fiscal Year in Germany

1 January - 31 December is the 12-month accounting period that businesses in Germany use for financial and tax reporting purposes.

Payroll Cycle in Germany

The payroll cycle in Germany is usually Monthly, with employees being paid by the 25th of the month.

Minimum Wage in Germany

The minimum wage for employees in Germany is typically 12.41 EUR per hour, amounting to ~2,151 EUR per month for a typical 40 hour work week.

Bonus Payments in Germany

In Germany, it's a common practice to receive a 13th-month salary paid out during the December payroll.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 20.8% on top of the employee salary in Germany.

Employee Payroll Tax Contributions

In Germany , the typical estimation for employee payroll contributions cost is around 21.225% - 31.825%%.

Individual Income Tax Contributions

Individual Income Tax in Germany varies from 14% to 45%, calculated based on progressive rates. The applicable rate is determined by factors such as the employee's tax class (marital status, multiple income sources, etc.)

Pension in Germany

Germany's statutory old-age insurance is designed to support employees in maintaining a suitable standard of living during retirement. Payments usually begin at age 67, with a maximum payout currently set at 67% of the average net income earned throughout the insured employees working life.

In Germany, work permits and visas are essential for hiring foreign employees or relocating international talent. The process typically involves obtaining a residence permit in addition to the appropriate visa. The key permits and visas include the Job Seeker Visa for job hunting, the Work Visa for Qualified Professionals, the EU Blue Card for highly skilled workers, and the Permanent Residence Permit for long-term employment. Employers must comply with labor regulations and support their employees through the application process.

Mandatory Leave Entitlement in Germany

The annual leave entitlement in Germany is 20 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Germany

Germany observes 13 public holidays, not included in the minimum paid leave entitlement, but employers typically grant these holidays as days off for their employees. The 13 national holidays in Germany include:

Paid Time Off in Germany

Employees in Germany are entitled to a minimum of 20 working days per year for a regular 5-day week or 24 working days for a regular 6-day week. Generally, leave must be used in the year it is due. Certain exceptions may apply, where leave may be carried over into the following year (such as illness or special circumstances preventing the employee from taking leave).

Maternity Leave In Germany

Pregnant employees in Germany are entitled to 14 weeks of paid leave. This leave is subject to the following details:

• Pregnant employees may receive 6 weeks of leave pre-birth and eight weeks post-birth.
• The amount paid during this period is 100% of their last cleared salary in the 3 calendar months prior the maternity period.
• The maternity allowance is a maximum of 13 EUR per day. The employer covers the difference between the maternity allowance and the previous salary.
• Special maternity protection for up to 12 weeks applies in cases of premature or multiple births or if the child has disabilities.

Paternity Leave In Germany

In Germany, there is no specific law for paternity leave, but employees have the right to parental leave.

Sick Leave In Germany

Paid sick leave in Germany has no specified limit. During sick leave, the employee receives full salary coverage, initially paid by the employer for the first 6 weeks (42 days) and subsequently covered by the health insurance company. Sick leave entitlements are subject to the following details:

• The employee must work for at least four weeks to receive sick pay from the employer.
• If illness occurs before the initial four week period, health insurance covers the leave, requiring the employee to submit a sick note to claim insurance benefits.
• Employees are also entitled to receive 30 days of paid leave per parent when their child is ill, facilitated by the health insurance company. To access this benefit, the employee needs to submit a sick note for the child and apply for it through the health insurance provider.

Parental Leave In Germany

Employees can take up to 3 years of parental leave per child until the child turns three years old, subject to the following:

• During parental leave, employees can receive an allowance ranging between 300 EUR and 1800 EUR per month.
• The amount paid is calculated by the state parental allowance fund based on their previous 12 months' gross salary.

Termination Process in Germany

Terminations in Germany are complex. Beyond the probation period, employers must justify terminations, and the process varies based on agreements, contract type, and reasons, with employees protected by the German Termination Protection Act after six months. An employee may be terminated compliantly for one of the following reasons:

• Voluntarily by the employee
• By mutual agreement
• "Termination for good cause"- Conduct-related dismissal/breach of employment terms
• By the expiration of the contract

Notice Period in Germany

Employees in Germany are entitled to a minimum statutory notice period of four weeks before the 15th or the last day of the following month, contingent upon the duration of their tenure with the company:

• Up to 2 years: 4 weeks (per the 15th or last day of the month)
• 2 - 4 years: 1 month
• 5 - 7 years: 2 months
• 8 - 9 years: 3 months
• 10 - 11 years: 4 months
• 12 - 14 years: 5 months

Severance in Germany

In Germany, severance pay is provided when an employer terminates an employment agreement without notice. It is often customary, though not legally required, to offer severance after an employee has been with the company for 6 months to mitigate litigation risk.