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Country Guide

Germany

Hiring in Germany at a glance

CURRENCY
€ Euro / EUR
WORKING HOURS
36-40 hours / week
PUBLIC/BANK HOLIDAYS
9 days per year
CAPITAL
Berlin
LOCAL LANGUAGE
German
REMOTE WORKERS
9.9M
MINIMUM HOURLY SALARY
€ 12.00
TAX YEAR
1st Jan - 31st Dec
DATE FORMAT
DD / MM / YYYY
MISCLASSIFICATION PENALTIES
Fines between €30,000 - €500,000 plus up to 5 years imprisonment and personal liability for each employee's social contributions
FUN FACT
There are over 300 different kinds of bread and 1,000 types of sausages in Germany.

Employer tax: 

19.3%

Pension: 9.3%

Health insurance: 7.3%

Long-term care: 1.53%

Unemployment insurance: 1.2%

Employee tax: 

19.3%-64.3%

Pension: 9.3%

Health insurance: 7.3%

Long-term care: 1.53%

Unemployment insurance: 1.2%

Income tax:

Income Tax

Rate
Single Band
Married Band
0%
Up to €10,347
Up to €20,694
14-42%
€10,348 - €58,596
€20,695 - €117,192
42%
€58,597 - €277,825
€117,193 - €555,650
45%
Over €277,825
Over €555,650

Germany Employment Cost Calculator

Use our handy calculator to understand what are all the employment costs you have to consider in Germany.

Provide us with some extra details and we will send you a full breakdown of the salary costs.

Employer of Record in Germany

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An Employer of Record (requiring an AUG licence in Germany) is the legal employer of a worker in Germany. As such, the Employer of Record takes care of all Germany compliance aspects of employment, including payroll, taxes, statutory benefits, employment contracts and more.

the AUG Licence holder is responsible for:

Ensuring their employment is compliant with local employment laws
Processing local payroll
Filing employment related taxes and returns
Issuing payslips to the employee
Distributing salary payments

How AUG licence works

COMPANY

Maintains a direct relationship with the employee, allocates them work tasks, and manages their performance.

BOUNDLESS

Takes care of payroll, taxes, benefits, ensuring the employee and the company are compliant with all legal regulations.

EMPLOYEE

The third party to the agreement, the employee, fulfils all of their obligations as a worker for the company.

Statutory Employee Benefits

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Social insurance

The social insurance includes contributions to a pension fund, national health insurance, unemployment funds, long-term care, accident insurance

Common Non-mandatory Employee Benefits

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Christmas bonus or 13th-month bonus
Extra annual leave
Flexible working hours
Telephone costs
Housing and child care subsidy
Life insurance
Company pension scheme
Gym membership
Saving plans (VML)

Employee Rights and Protections

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Employment contract signed by both the employer and the employee
Flexible working
Healthy and safe working environment
Time off due to incapacity
Whistleblower protection
Termination protection
Employee representation bodies
Redundancy payment
Payslip

Paid time off: 20-24 working days +9 public holidays (some states have extra public holidays)

Paternity leave: none

Sick leave: 6 weeks

Parental leave: 12-14 months

Maternity leave: 14 weeks (six weeks prior and eight weeks following childbirth)

Probation

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The probationary period in Germany can be up to 6 months.

Payment Frequency

Salaries are paid monthly.

End of Employment

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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 length or contractual notice period if this is longer. Extraordinary dismissal allows the employer to end the employment contract immediately and is used in situations such as gross misconduct.

There are unfair dismissal protections for employees employed with an employment contract 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 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.

Frequently Asked Questions

What are my options if I want to hire a worker in Germany?

While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in Fermany, outlining the potential cons.
 

HQ country employment & payroll

While the person is in Germany, they are employed and payrolled directly by the company’s HQ entity.
Cons: This may appear attractive, but it generally isn't legal in the long term. HQ payroll won't be possible if the person is not a tax resident in the HQ country.

Independent contractor agreements

 
People are locally registered as sole traders or limited liability company owners in Ireland and invoice for their work. There is no direct employment relationship.
Cons: In Germany, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.
 

Direct local employer setup

 
The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.
Cons: Expensive, time-consuming, and with high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.
 

Partnering with an Employer of Record Germany

 
Employment is handled by a platform that specialises in employing people on behalf of customer companies. The Employer of Record, which in Germany is a temp agency holding an AUG Licence, helps to hire and pay employees.
Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

How long does it take to set up a company in Germany?

Setting up a local company in Germany is very time-consuming and complicated. That is further complicated by the monthly activities - payroll needs to be calculated and run every month, taxes filed, benefits extended, change of rules and regulations followed. Here is an overview of everything you will find yourself needing to do.

Can I employ people as independent contractors in Germany?

While many employers practice employing remote workers as independent contractors, it's a bad practice. If an individual is giving their full and undivided attention to your company in Germany, treating them as an independent contractor is a likely breach of German employment laws and of those in your country.
 
Your company could be liable for fines on owed holiday pay, sick pay, social welfare payments, paternity benefit, maternity benefit, or other legal measures. Since the individuals you are working with do not receive the benefit of local employment laws and protections that are often afforded to people working full-time hours.
 

What does HR compliance mean in Germany, and why does it matter?

When you hire employees in Germany, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect German law and all applicable regulations regarding employment and work practices. Complying with local employment law in Germany is fundamental for the correct running of your business - not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, annual leave, minimum wage, tax credits, working hours regulations.

How much does it cost to employ someone in Germany?

As with every other country, there are certain costs associated with employing a worker in Germany that come on top of the gross salary you are offering. In Germany those are contributions employers make to pension, health insurance, long-term care, and unemployment insurance. To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

What does Employer of Record mean in Germany?

In Germany, the model for employing a worker on behalf of another requires an AUG Licence. Employing someone through the AUG Licence temp agency means that Boundless is the legal employer of the individual, as far as the German government, tax, and employment authorities are concerned. We are responsible for:

  • informing you about any pre-employment requirements
  • ensuring their employment is compliant with German employment law
  • informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
  • providing a locally compliant employment contract
  • processing local payroll
  • filing employment-related tax returns
  • issuing payslips to the employee
  • distributing salary payments
  • payments to the local tax authorities
Customers that work with an AUG Licence holder in Germany are responsible for:
  • sourcing and recruiting their own workers
  • managing the employee’s day-to-day work load
  • contributing to the personal / professional development of the employee through their work
  • following any guidance we give on employment and HR best practices or legal obligations in Germany, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
  • ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Who is responsible for filing and paying employees' taxes and social insurance contributions in Germany if employing through an Employer of Record (AUG Licence temp agency in Germany)?

Boundless as the Employer of Record Germany (AUG Licence temp agency) files all pertinent taxes and social contributions as they relate to the compliant employment of an individual in their home country.

How does Boundless as an Employer of Record (AUG Licence temp agency in Germany) ensure HR compliance?

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Germany. They ensure the Germany employment contracts and any other relevant documents required for new employees comply with the local jurisdiction. We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice period or work-from-home regulations. Whenever a potentially sensitive issue arises in Germany, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

What are the legal responsibilities of a company when they use an Employer of Record service like Boundless in Germany (AUG Licence)?

The company remains responsible and informs employees of the day-to-day management of the people and teams that are employed through Boundless, including any disciplinary or performance issues.
 
Boundless ensures compliance with Germany-specific procedures, practices and labour laws while employing people and teams on behalf of the company.

Do employees get all their rights and benefits when employed through an Employer of Record  (AUG Licence) in Germany?

Any new employee that is locally employed through an Employer of Record (AUG Licence temp agency) gets full employment rights and benefits as specified in local law. They get a locally compliant employment contract, statutory maternity leave, annual leave, illness benefits, any relevant tax credit, and many more. All Germany-based employees receive healthcare through the public healthcare system.

What taxes do I need to pay in Germany?

In Germany, both employers and employees have to pay taxes and social contributions. For employers these include pension, health insurance, long-term care, and unemployment insurance and for employees they include pension, health insurance, long-term care, unemployment insurance, and income tax. To get a clear overview with both employee and employer taxes, use our salary breakdown calculator, submitting any additional data needed and get a downloadable pdf like this one.

Choose Boundless as your employment partner in Germany
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