GERMANY - Employer Of Records service

If you are embarking on expanding abroad where you have not incorporated a legal entity yet, you will need our in-country Employer of Record (EOR) services to be able to hire employees fast and in a compliant manner. We make hiring an easy, effective and highly cost efficient experience and take on the burden of all administration. 

Your candidates get hired by CoberonChronos’ PEO legal entity in accordance with local Labor Laws and can be onboarded in days by signing an employment contract we can provide in German. The employed is eligible and assigned to work with and on your company’s behalf exactly as if he or she were your employee in-country. We prepare the monthly salary, benefits and allowances payroll based any timesheet provided and we calculate all expense reimbursement costs too.

Employment At a Glance

Hiring in Germany

Germany has one of the most highly regulated labour markets in the world, with its Labour law designed to protect employees. Whether or not an employment contract exists, all employees have basic rights to:
  • holidays
  • sick pay
  • chose to work part-time
  • receive training
  • receive maternity/paternity leave and related employment protection

Periods of notice are also laid down under law, but companies can agree longer periods of notice under individual or collective labour law agreements. Working conditions which do not reach the legal minimum standard are not permitted and are not legally binding.

Employment contract in Germany

As a basic principle employers and employees are free to negotiate employment agreements. These contracts may be put down in writing or be concluded orally. In order to ensure that evidence of the employment relationship exists, it is recommended that a written employment agreement should be concluded.

The employment contract should name the most important terms of employment:

  • Beginning and duration of the employment relationship
  • Trial period
  • Job description
  • Remuneration
  • Agreed working hours
  • Days of holiday
  • Period of notice
  • Collective agreements or company agreements (if applicable)

An important part in every employment contract is remuneration. Will the company pay supplements or bonuses, for example at Christmas or for working weekends, on top of the normal pay? When does the company pay the employee - for example, at the end or beginning of the month? The work contract usually states the gross remuneration. From this, certain amounts will be deducted for tax and social contributions, such as health insurance, long-term care insurance, a retirement/pension contributions and unemployment insurance. One also has to consider the costs of living in the respective area of Germany.

Probationary period

The parties entering into an employment contract may agree upon a trial period of up to six months. During the probation period, the statutory period of notice for terminating the employment relationship is two weeks.

Social Security, Health services and Insurance in the Germany

There are three options for health insurance while living in Germany, such as:

  1. Government-regulated public health insurance system (GKV),
  2. Private health insurance from a German or
  3. International insurance company (PKV) or a combination of the two.

Germany has a reputation for having one of the best health care system in the world, providing its residents with comprehensive health insurance coverage. Approximately 85% of the population are mandatory or voluntary members of the public health scheme while the rest have private health insurance.
If your gross salary is less than 57,600 Euros per year, or 4,800 Euros per month in 2017 then membership in the GKV is mandatory.

Pension Plans in the Germany
 

There are three pillars to the German retirement system; 1) the government-run Retirement Insurance system, 2) private company plans and 3) private individual retirement investments.
The Public Retirement Insurance System, which also includes survivor and disability benefits, has been dominant. Participation is mandatory for employees, with each worker assessed for a sum based on annual earnings. Premiums are deducted by the employer, with the employee paying half and the employer half. In 2016 the premium is 18.7 percent of the gross monthly wage or salary. This is assessed on monthly incomes up to a maximum of 6,200 euros (74,400 euros a year) in the west and 5,400 euros (64,800 euros a year) in the east. Retirement now normally begins at age 65, though it is to be gradually increased to 67. Contributions to the plan are also to be increased, and maximum pensions eventually reduced from 70% to 67% of net pay.

Public Holidays and Vacation in Germany

Argentina celebrates 15 public holidays:

  • New Year’s Day - January 01
  • Good Friday - April 14
  • Easter Monday - April 17
  • Labour day - May 1
  • Ascension Day - May 25
  • Whit Monday - June 5
  • Corpus Christy - June 15
  • Day of German Unity - October 3
  • Reformation Day - October 31
  • Christmas day - December 25
 
13th month salary in the Germany/span>
 
Salary is stated monthly in your employment contract, which should also detail special benefits, bonuses and salary reviews. Many employers pay 13 monthly payments a year, which is normally paid out in December for Christmas or split between summer and Christmas. In some management positions, you might even get a 14th salary.

 

Bonus payments in Germany

Many companies provide their employees with annual bonus payments to that are subject to the terms and conditions of the employment contract, company bonus schemes and/or agreements with the works council. In many cases, the applicable terms and conditions require that the employment relationship continues to exist (and is not under notice of termination) at the end of the financial or calendar year. Due to a recent decision of the Federal German Labour Court, employers have to be very cautious about the wording of clauses that link a bonus payment with the continuation of employment on a certain date.  
 
Sick Leave in Germany

 

Every country within the EU deals with sick pay and sick leave in a different manner. In Germany, employers are obliged by the law to pay employees on sick leave in Germany full pay for at least six weeks, should their illness continue for that period of time.
However, employees must have been employed for a minimum of four weeks pre-illness to be permitted eligible for claiming their salary for the six-week period. If the illness continues for more than 3 days then proof of incapacity is required, outlining the incapacity itself and its duration.
 
Maternity/Shared Parental Leave in the Germany
 
German law is generous when it comes to maternity and paternity leave. Mothers are allowed six weeks leave at full pay prior to the child’s birth and eight weeks at full pay afterward. In the case of a multiple birth, 12 weeks paid leave is allowed. The mother or father is then allowed up to three years of unpaid leave to stay at home with the child. Recently, the German government initiated a program that allows direct subsidies to new parents (Elterngeld). It is funded by the federal tax system. It is not a permanent subsidy and is limited to the first 12 or 14 months following the child's birth. The amount of the Elterngeld is based on the after taxes income of the parent dedicated to caring for the newborn.

 

Termination of the Employment Contract and Severance in Germany

The employer must observe the applicable notice period when terminating the employment relationship. The basic dismissal notice period is four weeks counting back from the 15th or the last day of a calendar month. This notice period increases depending upon the seniority of the employee. The employment agreement can provide for longer notice periods. Collective bargaining agreements can provide for shorter notice periods.
The statutory notice period for employers depends on how long the employee to be terminated has been working for the company.
If the employee has worked for the company for:

  • up to 2 years, the notice period is four weeks prior to either the 15th or the last day of the next month;
  • 2 to 4 years, the notice period is one month prior to the last day of the next month;
  • 5 to 7 years, the notice period is two months prior to the last day of the next month;
  • 8 to 9 years, the notice period is three months prior to the last day of the next month;
  • 10 to 11 years, the notice period is four months prior to the last day of the next month;
  • 12 to 14 years, the notice period is five months prior to the last day of the next month;
  • 15 to 19 years, the notice period is six months prior to the last day of the next month;
  • 20 years or longer, the notice period is seven months prior to the last day of the next month.

However, in practice, many employers and employees will agree on severance pay provisions to avoid lengthy court proceedings concerning the effectiveness of the termination. This severance will often amount to 50% of the monthly salary per year of service. However, this can vary significantly depending on the strength of the case for dismissal and the previous practice of the employer.

Employment Taxes in Germany

Taxation of an individual's income is progressive. In other words, the higher the income, the higher the rate of tax payable. Since 2016, the Germany tax rates for an individual is in the range of 14% - 45%.
  • 0 Up to 8,652 EUR
  • 14% 8,653-53,665 EUR
  • 42% 53,666-254,446 EUR
  • 45% 254,447 EUR and over

Singles pay on income above EUR 254,447 (couples, on income above EUR 508,894) income tax of 45% before 5.5% solidarity tax and 8%-9% church tax which are imposed on the income tax.

 

Why Coberon Chronos

Hiring a small or large number of employees in Germany can be time consuming, expensive and complex without the extensive knowledge of the local Labor Code but mostly to apply it to the best practices.

Coberon Chronos can help your business to hire your candidates, handle all the hiring administration and payroll and ensure that you’re in compliance with local labour laws, without the burden of setting up a large office or subsidiary abroad in a rush.
Our Global Employer of Record and PEO services lets you focus on running your key business in a new country.
If you have an immediate EOR needs or just wwant to discuss how CoberonChronos can provide a seamless temporary workforce or PEO solutions for hiring employees in Germany, please contact us at sales@coberonchronos.com.

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