To employ your workers in a compliant way locally in Germany, Boundless holds what is known as an AUG Licence. Such a licence is required by law for companies hiring people to work on behalf of other companies in Germany, as part of a global PEO solution. This is applicable regardless if the employees do traditional temporary work or not—what matters is that they are “seconded” to another company.
All AUG licence holders are tightly regulated by authorities, who want to make sure that leased employees have equal rights to comparable employees not hired through the AUG. This includes all protections from dismissal, extended by German employment law.
Working through an AUG licence for a company is possible for 18 consecutive months only. We would love to be in a position to employ people for longer periods of time in Germany but, unfortunately, that would put everyone in a position of non-compliance.
As the AUG licence holder, we establish and maintain the legal employment relationship with the worker. That starts by signing a fixed-term employment agreement with them which is for a maximum of 18 months. The company that the individual performs work for does not appear on that employment agreement.
Based on which statutory healthcare insurance (Krankenkasse) the employee chooses, we inform the insurance provider of the start and the end of employment.
Every month we calculate the payroll, deduct all mandatory contributions such as the insurance premium, and provide the worker with a payslip.
We file all necessary taxes and pay mandatory contributions to respective authorities.
You sign our standard commercial agreement that we use for most of the countries we are in, which you can end with one month's notice.
You then sign two additional agreements - a Framework Agreement and an Individual Agreement.
The Framework agreement is relatively straightforward, stating that you agree to let us lease workers to you. It just needs your company details and is signed only once regardless of how many employees you employ through us.
The Individual Agreement is based on the individual employment and is signed to prove that any comparable employee isn’t getting better rights, benefits or working conditions than the leased one. This is probably the most important document that may be audited by authorities and requires some more information in advance, such as remuneration, job characteristics, relevant professional qualifications and comparable conditionals and remuneration of employment. One of these agreements needs to be completed for each individual you employ through us.
An important thing to note is that all agreements require a wet ink signature or a Qualified Electronic Signature (QES). We send you all agreements through our e-signing software to sign with a Qualified Electronic Signature.
The employee signs an employment contract with Boundless with a Qualified Electronic Signature before the start of the employment. We then post a wet-ink signed copy of the employment agreement to the employee within 30 days of their start date, as it is a requirement that the essential working conditions have to be documented in writing and wet-ink signed at least by the employer.
If an employee wants to end their employment before the 18 months expire, they will need to send us the resignation letter with a wet ink signature by post, stating their resignation and last working day.
The German Employment Protection Act (Kündigungsschutzgesetz) monitors employment terminations and protects employees by ensuring dismissals are justified. Due to the high level of protection against dismissal, it is reasonably common for employment to be ended by a separation agreement.
There are two types of dismissal in Germany: ordinary and extraordinary.
Ordinary dismissal requires that the company observe the statutory minimum notice period, which varies according to the employment's length, or contractual notice period if this is longer. Extraordinary dismissal allows the employer to immediately end the employment contract and is used in situations such as gross misconduct.
All terminations require the following:
During the notice period, the employee gets paid their full salary and continues to work. If the employer has reasonable grounds to terminate the employment immediately, payment in lieu of notice can be applied - although the practice is not common in Germany.
The employer can also release the employee from the duty to work during the notice period with continued remuneration taking into account any remaining holiday entitlements.
Employees must receive their final pay within the regular payroll run. Any additional payments must be paid in line with the work contract, such as any withstanding annual leave.
Four weeks before the end of employment, the employer is responsible for notifying the health insurance company about the termination. After the employee is automatically de-registered through the payroll system, the employer must inform the registry office.
Companies with ten employees or less are not covered under dismissal protection, meaning it doesn't need to be justified. However, it should not be discriminatory or violate public policies.
There are unfair dismissal protections for employees employed for longer than six months in companies with more than ten employees and the employer must have a socially justified reason for the dismissal. A justifying reason can be
In the case of terminations based on behaviour, the employee must generally receive at least one prior warning for the dismissal to be valid.
The burden of proof for the legitimacy of the dismissal falls on the employer and employees can challenge a termination before the court. To be effective, the employee must file the complaint within three weeks of receiving the notice of termination. If the case cannot be settled, the court can only rule that the termination is either effective or not. If the termination is deemed effective, the employment ends after the notice period and the employee does not receive any severance. However, if the termination is not ruled effective, the employer must reinstate the employee in the previous position and offer them a back pay starting from the end of the notice period.
Employees who are on parental leave, disabled or pregnant can not be let go without government approval.
If a company intends to dismiss many employees in one month, they must obtain prior government approval. Moreover, if the company has more than 20 employees, the works council must be involved. The employer must inform the works council of the intention to reduce the employed staff well in advance and consult with them about the intended actions. During the consultation, they negotiate a reconciliation of interests and a social plan, agreeing on the compensation aspects. If the employer fails to comply, the employees have a statutory claim for compensation of any economic disadvantages against the employer.
In most cases, redundancy payments are half a month's wage for each year of employment with the company. But it can also be higher or lower as it is up to negotiations between the employer and the works council.
There's no statutory right of an employee to receive a redundancy payment. However, most termination cases are settled through a negotiated compensation.
To resign from their jobs, employees must first write a letter notifying their employer containing:
During the probation period, the employee is entitled to two weeks of notice of termination. Employers must notify employees past their probation period at least four weeks before termination with a written notice.
The notice period increases according to the employment length, as follows:
If the employer and employee have agreed to a more extended notice period on the employment contract or Collective Bargaining Agreements, the more favourable period must be respected. Any agreements on a shorter period than the statutory minimum are not valid. Most employment contracts give employees a three month notice period.
A severance payment is not mandatory if a justified reason and proper notice are given for the termination. However, the employer should provide a severance payment for terminations caused by operational changes if they have agreed to it in a social plan with the works council. There are no rules for the amount of severance. Typically, a half month of the employee's regular wage for every year they were in the company applies. However, the amounts can be up to 2 months of the salary for every employment year.
Even though severance payments are not mandatory, it is common that employers and employees agree on one.
Only for executive employees, the law provides a possibility to terminate the employment by court order against mandatory severance payment set by the court. In this case, the payment is capped at 12 months' salary, rising to 15 months' for employees aged 50 or older who have 15 years of continuous service to the company, and 18 months' salary for employees aged 55 with 20 years continuous service.
Both employers and employees contribute monthly to the employee's Social Security unemployment funds. The benefits received by the employee vary according to their last month of earnings.
If the unemployed person, aged between 15 and 65, does not manage to find work in time for the benefit to be over, they must apply for unemployment II.
Employees are entitled to a minimum of 24 days off for a 6-day work week and 20 days for a 5-day one. In reality, most employees receive 25-30 days of leave, even on a 5-day workweek. Employers may provide additional leave to employees who perform intense or dangerous work. Severely disabled employees are entitled to 5 additional days of paid time off.
Employers are not obliged to grant paid time off to employees during the first six months of their employment. Employees must request vacation time in advance and have it approved by the employer. Employers can reject holiday request based on operational reasons or if other employees have already requested the same time off.
If an employee has already taken their vacation entitlement for that year while working at a previous company, they are not entitled to more days off. The previous employer must certify how many days off the employee has already taken.
Holiday pay is based on the employee's average salary for the 13 weeks leading to the leave. Often companies will offer a small vacation bonus as a perk. Employees must take their annual leave within the calendar year, and any unused leave is in general lot.
A recent Federal Labour Court decision determined that employees can only lose holiday time if the employer requested them to take it and informed them that they would lose it otherwise. Therefore, the employers should remind employees in the second half of the year as well as in the last quarter to take time off.
If an employee didn't use their annual leave due to operational or personal reasons, they can carry them to the next calendar year but must take them by March 31st.
German public holidays differ based on the state. However, there are nine national public holidays that all states follow.
Most employees are not required to work during a bank holiday, and the ones that are must receive compensatory time off within eight weeks. Holidays falling on weekends do not typically transfer to the weekday.
|1/1/2022||Saturday||New Year's Day||National|
|6/1/2022||Thursday||Epiphany||Baden-Wuerttemberg, Bavaria, Saxony-Anhalt|
|8/3/2022||Tuesday||International Women's Day||Berlin|
|9/5/2022||Monday||Victory in Europe Day||Berlin|
|16/6/2022||Thursday||Corpus Christi||Baden-Württemberg, Bavaria, Hesse, North Rhine-Westphalia, Rhineland-Palatinate, Saarland, Saxony, Thuringia|
|15/8/2022||Monday||Assumption Day||Saarland, Bavaria|
|31/10/2022||Monday||Reformation Day||Brandenburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and parts of Thuringia|
|1/11/2022||Tuesday||All Saints Day||Baden-Württemberg, Bavaria, North Rhine-Westphalia, Rhineland-Palatinate, Saarland and parts of Thuringia.|
|26/12/2022||Monday||Second Day of Christmas||National|
Christmas Eve and New Years Eve are not statutory holidays. However, most companies treat these days as half or even full holidays.
The Continued Remuneration Act (Entgeltfortzahlungsgesetz) grants employees six weeks' statutory sick pay for anyone employed for a minimum of 4 weeks. Employees receive their full salary during the first six weeks. After that, the employee gets the benefit directly from the health insurance. The rate is 70% of the employee's gross salary (until the social security ceiling) but not more than 90% of the net salary.
If the employee falls ill again due to the same illness, the six week period will only recommence after six months from the last sick leave or if a year has passed since the start of the sick leave.
If the employee falls ill due to a new illness, the six week period automatically restarts. Following the end of the six weeks, employees are entitled to private insurance sickness benefits. This is not something that is usually mentioned in the employment agreement since it is a matter of law in Germany.
If an employee cannot perform their duties due to physical or mental illness, they can take time off from work as long as they inform their employer immediately. If the employee is absent from work for more than three consecutive days, they must submit a doctor's note to the employer.
Employers with 30 or fewer employees can recover up to 80% of any statutory sick pay paid out by claiming their costs sharing fund.
During the six weeks prior and the eight weeks following the child's birth (12 weeks in case of premature or multiple births), pregnant employees are entitled to maternity leave and pay. The pay is equivalent to their monthly salary three months before the start of maternity leave. Before the child is born, the mother may elect to continue working, which must be stated in writing. However, after the child is born, the mother is not allowed to work.
Maternity leave starts automatically and does not require any notice. If the pregnant woman has a medical certificate stating that employment may endanger her health or that of the unborn child, the employer will likely be prohibited from employing her even before the start of the six weeks.
It is illegal to terminate an employee during pregnancy and until four months after the child is born (also applies to miscarriage) unless approved by the government, which is extremely rare. The pregnant employee, on the other hand, has unrestricted right to terminate the employment.
The maternity payment is split between the employer and the Health Insurance Company. Employees that are insured by the statutory insurance company receive a daily net amount of €13 taxfree. The difference will be contributed by the employer but will be reimbursed by the authorities.
There's no statutory paternity leave in Germany. Therefore, most fathers use their parental leave and pay when their child is born.
Employees are entitled to a parental allowance from the state after birth or adoption. Parental leave can be taken by the parents together or separately, at once or can be divided up. The state parental payment is 67% of the employee's average income in the 12 months before the child's birth. The state allowance varies between €300 to €1,800, depending on the salary of the employee. It's paid for the first 12 months of the parental leave or 14 months if the father takes at least two months of parental leave.
Natural and adoptive parents are entitled to receive up to three years of unpaid leave from the moment the child is born until it reaches the age of three. They have the option of saving up to 12 months of parental leave to be used after the child turns three, but before they turn eight. Full-time, part-time, fixed-term, marginal and apprentice employees can all benefit from parental leave. They cannot be terminated while on parental leave, and are entitled to the same work hours upon return.
Employees have the legal right to work up to 30 hours part-time for at least two months. The employee must request parental leave at least seven weeks in advance for children under three years and 13 weeks in advance for children between 3 and 8. The employer can only deny the request within four weeks, stating in writing the grounds for denial.
An additional option was made available for parents of children born after July 1st 2015, giving them the right to receive the parental allowance leave for up to 24 months. If both parents take it together, it can be shared between parents for up to 28 months. However, the amount of parental Allowance Plus is half of the standard parental allowance.
Employees can take unpaid time off from work to care for their loved ones. The options are short or long term care leave.
In both cases, employees are protected against dismissal from the date they inform the employer about their impending leave. An employee can only take a carer's leave once for the same person in need of care.
Employees can take 3-5 days to deal with urgent family matters within a year while receiving their regular pay.
Two days is usually given for mourning and funeral for a close relative, but specifics should be written in the employment contract.
Work injuries are covered by statutory accident insurance as part of the national social security and contributions are made according to income and risk assessment. The eave is compensated for the first six weeks of the injury.
The national minimum wage is €9.35/hour, but some industries-specific wages are higher than the national wage.
Salaries are paid monthly.
The pay date in Germany is the end of the month, however, salaries are typically paid around the 25th.
Monday to Saturday are considered the legal working days, but most employees typically work from Monday to Friday.
Workdays usually start between 8-9 am and finish between 5-6 pm. Lunch breaks are 30 minutes to 1 hour.
Working hours should not exceed 8 hours daily. They can be extended to 10 hours daily as long as the weekly hours are not more than 48.
Germany does not have regulations on overtime compensation that entitles employees to overtime pay. If there are no other employment contract provisions, overtime has to be compensated with the regular salary.
The employment contract can state that a certain amount of overtime (up to 15% of the regular working time) is compensated with the regular monthly salary. In this case, employers only have to pay overtime above this amount. If the compensation exceeds the contribution ceiling in the pension insurance (2021: €7,100 (West) and €6,750 (East) per year), the entire overtime may be compensated by the regular monthly salary, which should be indicated n the contract.
Working on Sundays or public holidays is generally prohibited, with a few exceptions. If an employee does work, the employer must compensate the employee with corresponding time off within the following two weeks for working on Sunday or eight weeks for working during a public holiday.
The employer must guarantee an uninterrupted rest period of at least 11 hours between workdays.
Shifts that are between 6-9 hours come with one 30-minute break or two 15-minute breaks. There should be a minimum 45-minute break after the first six hours for shifts longer than nine hours.
The working hours of pregnant women or nursing mothers, as well as employees or trainees under 18 years of age, cannot be extended beyond eight hours.
Night work is only allowed for 8 hours per working day. It can be increased to 10 hours, provided the employee's average shift duration in the following month doesn't exceed eight hours. The employer must grant the night worker an appropriate number of paid days off for hours worked during the night time or a suitable supplement to their salary to which they are entitled.
Employers must record the working time that exceeds the maximum daily working time of 8 hours (hard-copy or digitally), get the employee to sign it and keep a record for two years.
On May 14 2019, the European Court of Justice (ECJ) created a law that requires employers in every EU member country to set up an objective, reliable and accessible system to time track employees' working hours. The implementation of such systems and the form they take is up to the member states to determine. The objective is to control how many employees work overtime and the state of their health, and to make sure they are paid accordingly, while not exceeding the maximum hours worked. This law does not apply to senior executives.
There is (still) no statute mandating that employers record all employee working time in Germany. However, a first instance labour court determined on February 20, 2020, that an employer is required to provide objective, reliable, and accessible records of an employee working time following the EU Working Time Directive. According to it, a failure to do so shifts the burden of proof to the employer on unpaid wages claims. While it is not clear whether other courts will reach similar decisions, this ruling puts the employer under some risk of liability if they cannot provide records that establish the actual working time in unpaid wage disputes.
The employer may leave the time-tracking to the employee. However, if they notice that this does not work, they must intervene. Many companies already have delegation models, but these often only exist on paper and might not be sufficient.
Employers may be fined up to €15,000 if they are not complying with working time documentation. However, such fines are very rare. German authorities rarely verify compliance.
As for the new ECJ ruling, it remains to be seen whether further and stricter sanctions will be imposed in the future if employers do not introduce a working time recording system.
As of January 2021, the government is creating a legal regulation called Mobile Work Act (Mobile-Arbeit-Gesetz) which, if approved, would give employees a legal right to work from home whenever possible. The law has been drafted and is now under review by individual federal ministries. The next step is approval by the cabinet and a decision from the Bundestag and the Bundesrat, whether it becomes law.
Mobile work is defined as work that uses information technology, carried out outside the business premises, such as a coworking space. Telework is defined as work that is exclusively and permanently carried out from the employee's home.
Currently, there is no legal regulation that employees need to follow to request mobile work. Therefore, employees can make such a request at any time, and it is at the discretion of the employer to grant it or not. In case the employer rejects the request, there is no formal procedure or deadlines they need to follow. They also do not need to justify the refusal. If there are changes to the employment location, they must be included in the employee's employment contract.
While many companies already offer employees some flexibility to work from home, Germany has a strong workplace culture. Commonly, if there is an agreement for remote work, an additional agreement is annexed to the employment contract clarifying the following questions:
Employers allowing workers to work remotely have the following obligations:
There are no regulations requiring employers to cover any home office costs other than the tools necessary to complete the work, such as a laptop and telephone. However, the government is currently negotiating a Home Office Allowance of €5 for every day working from home, for a maximum of €500 a year, claimed against employees' taxes (no additional cost to employers).
Employers bear the same responsibilities for employees' health and safety in the home office as they do in company premises. Companies must carry out risk assessments and prevention, and inform employees of risks they might be exposed to when working from home, both physically and mentally. Due to the employer's limited access to the employee's house, employees' cooperation in the WFH space is of increased importance and should be stipulated in any WFH agreement. In addition to the right to ask questions and make suggestions, employees are above all obliged to take precautions for self-protection and to report considerable dangers resulting from the workspace at home to their employer.
There's a particular focus on assessing health and safety regarding ergonomics of the workstation, adequate lighting, the work processes and working hours. The BMAS has plans to develop regulations focused on work performed in front of screens and display devices.
Currently, employees working from home are not covered under the work accident insurance, but this is being discussed on the Mobile Work Act.
There are no specific regulations about information security or privately used company technology for those working from home. However, employers are responsible for compliance with the provisions of GDPR and for implementing a secure manner to exchange personal data of employees and customers regardless of location. Employees also have to keep the company's secrets and personal data safe and away from others, such as family members and housemates.
Best practices include the use of antivirus and VPN, the connection to trusted networks and encrypted Wi-Fi connections and the avoidance of exchanging confidential data through messaging services and online file sharing.
Although not a law specifically for those working from home, employers should take all reasonable steps to ensure the employee's workstation is correctly set up, safe, comfortable and easy to use to reduce potential injuries as indicated in the health and safety measures. In turn, employees must care for their health and safety and follow any reasonable policies or directions their employer gives them.
An appropriate workstation will include the following:
Employees working from home have the same rights as other employees regarding the Working Hours Act. This means that employees have a right to breaks, maximum working hours, minimum rest periods, and protection on Sundays and public holidays. Employers should respect the employees' private life by contacting them during work hours only.
If the obligation to record the working hours is approved, employers will have to inform the employees about how they record the hours worked and share a copy of the timesheet with the employee if they request so.
Recommendations for employees working from home:
Probation periods must be expressly agreed, and must not exceed 6 months. During the probation period, the employment relationship can be terminated with 2 weeks notice of termination. Longer termination periods can be agreed.
While a written employment contract is not mandatory, employers have to provide employees with a signed document outlining the essential conditions of the employment no later than one month after the start of the employment relationship. In practice, a written employment contract that contains the terms of the employee's compensation, benefits, and termination requirements is standard. The salary and any compensation amounts should be stated in Euro rather than a foreign currency. An offer letter is not common in Germany and often causes difficulties in determining whether it is already binding.
The employer must provide employees with payslips containing information about tax deductions and social security contributions, along with total earnings for the pay period. Online payslips are also acceptable.
According to the Safety and Health at Work Act (Arbeitsschutzgesetz), employers must assess working conditions to figure out what health and safety measures they should take.
The aspects they should look into include:
The risk assessment must reflect all activities involved and include any potential physical or psychological stress. After the evaluation, the employer must take all necessary protective measures to avoid the risks. Employers are responsible for ensuring that occupational safety and health is integrated into workplace procedures. Employees can request that the employer inform them about the health risks involved in the job.
For companies over 20 people, a qualified officer should be assigned to ensure compliance with occupational safety and health throughout the organisation. Violations can result in fines, claims for damages, and criminal charges.
Employees can request a reduction in their working time, but a few conditions need to be met:
In addition, the employees should not have asked for a reduction of hours within the last two years and should give at least three months notice for their current request.
The government introduced "bridge part-time" legislation in 2019, which limits the reduction of working time to a set period (between one and five years).
According to the Equal Treatment Act (AGG), employment relationship discrimination is prohibited based on:
However, discrimination and harassment are forbidden regardless, even outside of those characteristics.
Discrimination is any form of unequal treatment, with a few distinct types recognised by German employment:
Not every instance of unequal treatment is seen as discrimination. Discriminatory treatment can be justified if the employer shows important and vital work-related requirements.
The German Termination Protection Act offers employees maximum protection against unfair dismissal. It restricts termination of employment if the employee has been with the company for more than six months.
Termination is only possible based on:
The employer must give a written, signed notice of termination (original is required with scan, telefax, photocopy or similar, not seen as sufficient) and observe the applicable notice period. The employer does not have to list the particular reason for termination in the termination letter. If a company lays off a lot of employees at once, prior approval by the employment office is required.
Superior protection against unlawful dismissal is extended to handicapped employees, as well as pregnant employees or employees on parental leave. In these cases, employers need to get prior approval from German authorities, which is usually very difficult to obtain. Another special protection is extended to the members of the works council (Betriebsrat) of the company.
The German Termination Protection Act doesn't apply to companies with ten employees or less.
The EU regulation GDPR applies in Germany, granting the right to privacy and the right to determine who is to receive personal data. The employer can process personal data for:
Employee personal data may be processed when investigating criminal offences only if there is a documented reason to believe the employee has committed a crime while employed, the processing of such data is necessary to investigate the crime, and it is not outweighed by the individual's legitimate interest in not processing it (in particular the type and extent are not disproportionate to the reason).
Even when consent has been given from an employee, it still needs to be assessed whether they gave that consent voluntarily. That assessment includes looking into the circumstances and dependencies that the employee has when it comes to having an employment relationship.
Consent is voluntary when the employee has a legal or commercial benefit or when the employer and the employee's interests are aligned. Employees should consent to the collection of their personal information in writing unless due to the circumstances, another form makes sense.
Employee personal data may also be collected based on collective bargaining agreements or council works agreements. The processing of special categories of personal data, such as health data, is subject to additional protection.
If a business transfer occurs, the employees are automatically transferred along with the business and their years of service are carried over as well. The new employer assumes all rights and duties for them.
Employees affected by the business transfer must be notified comprehensively about certain aspects of the transfer before it happens. The employees have the right to object to the transfer within one month of receipt of this information. If an employee objects to the transfer, their employment continues with the old employer. The new employer's right to terminate the employment is subject to the general termination protection laws.
A statutory right to severance exists only in particular cases, such as mass layoffs or a collective bargaining agreement. Before implementing a collective dismissal, the employer is obliged to inform and consult with the works council and to notify the Federal Employment Agency if:
In practice, to avoid lengthy court proceedings employers and employees often agree on severance pay. This severance is usually 50% of the monthly salary for each year of service. This, however, can vary depending on the strength of the case for dismissal and the previous practice of the employer. Severance payment is also often part of a settlement agreement in court if the employer and the employee couldn't come to a mutual agreement.
Employees have three weeks to bring action to the court.
To find out about all statutory benefits in Germany as well as how leading employers enhance them, download our benefits benchmark infographic.
If an employee cannot perform their contractual duties because of physical or mental incapacity, they are relieved from work. They need to inform the employer immediately and provide a medical certificate if their illness requires them to be absent for more than three consecutive days. The employer is obliged to continue paying the employee in full for six weeks. In case the employee develops a different illness, the six-week-period restarts even if it is within the same period.
All employees have the right to join a union or a works council. Unions negotiate collective labour agreements with the companies that feature aspects such as working time, wages, and work-related decisions. Trade union representatives support employees and works councils, but do not have participation rights within a company.
In companies that have more than five employees, the workers can elect a works council. It represents the employees and negotiates, cooperates and consults with the employer in situations such as new employee hiring, place of business changes, business closures, mass layoffs, and other. Employees have the right to be represented by a works council and gain access to information on the employer.
The welfare system in Germany covers a range of basic social security benefits. It is compulsory that employers insure every employee. Contributions are split evenly between employer and employee. Social insurance consists of:
*Only employers contribute to it.
Most common non-mandatory benefits in Germany.
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.
However, under certain collective agreements, employees who have worked all 12 months of the year may be entitled to receive a month's salary as a year-end bonus (or a pro-rated amount for less than a year's work). Many German employers also grant vacation bonus.
Although the statutory minimum leave is 20 days in a 5-day-week, it is common to grant 25-30 days of annual leave to full-time employees.
Many companies offer employees the option to work from home at least once a week.
During the summer, some companies allow employees to use flexible hours to make the most of the weather.
Depending on the nature of the job, some companies cover phone bills.
Some companies offer employees help with rent and child costs related to raising children, including transportation and meals.
Some companies offer employer-paid supplemental life insurance, which covers up to five salaries, depending on the accident type.
There are different kinds of company pension schemes. They can be financed by the employee or the employer or a combination of both. Each employee is entitled to convert a part of his gross salary into a pension scheme (Entgeltumwandlung). If the employer saves social contribution due to this salary conversion, they contribute 15% of the gross amount. Apart from this salary conversion, employers can also offer a company pension scheme which is wholly or partially financed by the employer.
Mostly common for enterprise organizations. The maximum amount is €40 per month.
Some tech companies offer travel insurance as a perk.
Some companies offer a free pass or partially pay for employee's public transport to and from work.
Some companies offer free gym membership as a benefit to employees.
Employers must withhold income tax, solidarity tax and levies on social insurance schemes that cover pension, unemployment benefits, health insurance and long-term care insurance.
The split in the contribution is equally divided between the employer and the employee, except for the accident insurance paid solemnly by the employer. In total, the employer contributes 19.325% on top of the employee's salary to social security.
There are four components to the German Social Security System:
|TYPE OF INSURANCE||CONTRIBUTION||OLD GERMAN STATES|
(INCL. BERLIN WEST)
|NEWLY-FORMED GERMAN STATES|
(INCL. BERLIN EAST)
*Employees who earn up to €56,250 annual gross wage must be insured by one of the public health insurance providers; those who earn above that threshold can choose between public or private insurers
*In addition, employers often provide additional supplementary insurance benefits
All residents (those who spend more than 183 days out of the year in Germany, or who average 90 days a year for four years) have to pay tax on their worldwide income. Non-residents (those who spend less than 183 days in the country) pay tax only on income sourced from within Germany.
Income tax calculator.
The contributions to the German Social Security System are split equally between the employer and the employee. In total, an employee can expect to contribute 19.325% of their gross salary to social security.
There are four elements to the Social Security System:
|TYPE OF INSURANCE||CONTRIBUTION||OLD GERMAN STATES |
(INCL. BERLIN WEST)
|NEWLY-FORMED GERMAN STATES |
(INCL. BERLIN EAST)
*Employees who earn up to €56,250 annual gross wage must be insured by one of the public health insurance providers; those who earn above that threshold can choose between public or private insurers
**Employees aged 23 or older who do not have children contribute an additional 0.25% (1.775% in total)
|PROGRESSIVE TAX RATE||TAX BAND FOR SINGLE TAXPAYER||TAX BAND FOR MARRIED TAXPAYER|
|0%||Up to €9,408||Up to €18,816|
|14% for the minimum amount, rising to 42% as income increases||€9,409 - €57,051||€18,817 to €114,102|
|42%||€57,052 - €270,500||€114,103 - €541,000|
|45%||Over €270,500||Over €541,000|
Employees who belong to a church have to pay church tax, which is withheld from their total monthly taxable income. The church tax varies by federal state and is 8% to 9%.
The Solidarity Tax (also known as Soli) was created in 1991 to aid Germany's economic reunification. The flat tax rate is 5.5% of the employee's gross income. Partial abolition of the solidarity surcharge tax is planned for 2021.
Child benefits are extended to all parents in Germany, regardless of their income, by the Family Benefits Office (Familienkasse) at the Federal Employment Agency.
The allowance depends on the number of children:
The child benefit can only be claimed by one of the parents, so married couples will need to decide who receives it. If they are separated, the parent who has primary custody should claim child benefit. If a child is living with someone who is not their parent, they can still claim child benefit.
Parents can continue to claim child benefits until:
Besides child benefits, some parents can claim a supplementary child allowance (Kinderzuschlag). It'sup to €182 per month for each unmarried child under the age of 25 who lives in their household. The exact amount received is based on each individual's income and assets.
To qualify, the parent needs to fulfil the following conditions:
Parents can also claim extra assistance for school trips, school supplies and school meals.
Under certain conditions, a tax-free child allowance (Kinderfreibetrag) may also be granted to parents. As of 2020, this is €7,812 per child for a married couple or €3,906 for a single parent. When assessing the parent's income tax, the tax office (Finanzamt) will compare the amount of child benefit they have already received with the amount they could save if the tax-free child allowance were granted. If the parent is granted the child allowance, the tax relief given will be offset against the child benefit pay already received.
Parents can also make further tax savings by deducting 2/3 of their childcare expenses (max. €4,000/year) and 30% of school fees (max. €5,000/year). The tax relief from these allowances will also be balanced against the amount of child benefit already received.
There is an additional supplementary payment (Unterhaltsvorschuss) for single parents who receive no maintenance from the other parent to help cover costs. The amount of maintenance advance received depends on the child's age:
* To qualify, children above the age of 12 and their parents must not receive unemployment benefit.
New parents who fulfil certain conditions are also eligible for the parental allowance (Elterngeld). This income-replacement benefit is important for offsetting the loss of earnings caused by a child's birth, enabling parents to rest and spend time with their newborn children.
Parents make a tax deduction on their income based on their children's education, whether in Germany or abroad (with limitations). To be eligible, the child must be:
Deduction amounts to €924 per year. For children studying abroad, the amount may be reduced.