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Mercans CountryIntel ® Germany Payroll And HR Insights

Mercans offers complete payroll, PEO and HR services in Germany

Germany shares borders with nine neighboring European countries. Despite economic fluctuations, earnings have risen in most sectors, with the automotive industry leading. In 2018, Germany topped the European rankings with 67,898 patent applications. Europe’s largest economy is supported by excellent infrastructure, a highly developed corporate sector and higher education system.

Doing Business in Germany

More than 99% of all German businesses are small to mid sized enterprises. The German infrastructure makes it easy to set up a business. Supported by a stable political and economic environment, the government ensures businesses receive full professional support and funding.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Germany is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.

Banking

Banks are open from Monday to Friday 8:30 am to 4 pm.

Working Week

The standard working week is 40 hours per week usually worked from Monday to Friday.

Labor Law

The new Skilled Immigration Act eases the entry of non-EU foreigners with professional training into the German labour market. It is now easier for skilled workers with vocational, non-academic training from non-EU countries to migrate to Germany to work.

Main Industries

Automotive, mechanical engineering, chemical and electrical

GDP Growth

1.80%

Dates & Numbers

yyyy-mm-dd

Official State Name

The Federal Republic of Germany

Population

83.24 million

Capital

Berlin

Major Languages

German

Currency

Euro

Internet Domain

.de

International Dialing Code

+49

Germany
Berlin, DE
10:18 am, December 2, 2022
1°C
overcast clouds

Payroll

Germany has a well-developed system that provides people with financial security, in times of illness and unemployment. Companies that operate global payroll (whether in house or through a global payroll provider) should take note of the distinction between taxes and social security contributions.

It is acceptable to provide employees with online pay slips

Payslip

Payroll report must be kept for five years

Reports

24 days

Annual Leave

6 weeks fully paid leave

Sick Leave

14 weeks of paid maternity leave

Maternity & Paternity Leave

On provision of four weeks’ prior notice

Employee Termination

A 13th Salary is customary in Germany and paid by December

13th Salary

€9.91 per hour

Minimum Wage

This can be no more than 60 hours a week. Overtime will usually be compensated.

Overtime

-

Severance Pay

Tax and Social Security

The most important tax for employees is income tax which is dependent on the income earned. An individual’s tax bracket is influenced by factors such as marriage and children. Additionally, if an individual earns beyond a certain limit, they will be subject to social security contributions.

Tax

An individual’s income tax return is sent to the tax office. Mostly, this is voluntary, but in some cases, the tax return is compulsory

30%

Corporate Income Tax Rate

45%

Personal Income Tax Rate

19%

Sales Tax

19%

VAT

Social Security

Individuals who earn above a certain limit are subject to social security contributions including statutory health insurance, statutory nursing care insurance, statutory pension insurance, statutory accident insurance and statutory unemployment insurance.

12.8%

Social Security Rate

6.4%

Social Security Rate for Employers

6.4%

Social Security Rate for Employees

Employment Law

Germany has one of the lowest unemployment rates in the world. When an individual signs a work contract for employment, the contract will state the gross salary but the amount received will be a net amount, less deductions for income tax and statutory social security contributions. There are shorter working hours, plentiful vacation and public holidays.

Employment Agreement

The written employment agreement is the standard way things are done and it should contain information such as inception of the contract, applicable time limit, probation period, place of work, remuneration, leave, notice period and more. Where collective bargaining agreements or company agreements are used, special regulations may apply.

Working condition

The working condition is generally good with weekly working hours set at 48 hours maximum. Collective labour agreements may reduce this to between 35 - 40 hours per week. Most companies are quite hierarchical in structure with strongly defined roles and decision processes.

Leaves

In addition to the other typical leave types, any individual who has a German employment contract (whether full time, part time, fixed term or permanent) is entitled to parental leave. This is an entitlement that exists until the child reaches the age of three.

Employment termination

German employers are subject to legal regulations which must be followed when hiring international professionals. The relevant Foreigners’ Authorities must be notified in the event of early termination of employment (within four weeks from the time of knowledge of termination).

7 days prior notice

Minimum notice period for terminating an employee

5 Days

Total number of public holidays

40-42

Working hours per week

20 days

Total number of days for Compassionate & Bereavement Leave

Immigration

There are a number of different visa types including work visas for qualified professionals and the EU Blue Card (special residence permit for foreign academics seeking qualified employment in Germany). There are also visas for IT professionals, jobseekers, visas for self employment, visas for training and studying and other visas.

Residency Permits

There are a few requirements to receive a work visa. Your qualifications must be either recognised in Germany or comparable to those from a German higher education institution. If you have received a job offer, your recognised qualifications must enable you to perform the job for which you are hired. For those 45 years and older who are entering Germany for the first time for employment purposes, their gross annual salary for the position intended to be taken must be at least € 46,860 (as of 2021).

Work Permit validity

Four years

Required Documents

Proof of financial stability

Possessing valid health insurance

Proficient in German

Applicable German visa such as business visa, employment visa, family reunion visa

Applicable Residence Permit – Standard, EU Blue Card or Permanent Residence Permit

Compliant, reliable, error-free and touchless payroll in Germany

Build the best team and hire top talent compliantly in Germany. Get in touch with Germany payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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