EWS helps you to hire an international workforce quickly and compliantly, without setting up a legal entity locally. If you’d like to get in touch about our employer of record solution in Germany, click here
Country Introduction – Germany:
Capital – Berlin
Currency – Euro
GDP – 4.26 trillion USD (2021)
Language – German
Major Religion – Christianity
Population – 83,290,705 (2023)
Germany possesses a robust and influential economy characterized by its industrial strength, export focus, innovation culture, and commitment to renewable energy transition. It excels in manufacturing, especially automobiles, and is a global export leader. Its skilled workforce, emphasis on research, and social market economy contribute to its prosperity.
Holds the position of being the world’s fourth-largest economy, following the United States, China, and Japan. Additionally, it claims the top spot as the largest economy in Europe. Globally, it ranks as the third-largest exporter, with the service sector contributing a significant 70% share to its GDP.
Germany’s economic approach blends elements of a free-market system with a strong social welfare structure. This “social market economy” aims to harmonize economic progress and social well-being, affording citizens a superior quality of life, extensive healthcare, and various social advantages.
It is known for its strong economy, top-tier education, efficient infrastructure, rich culture, commitment to the environment, quality healthcare, social welfare, safety, diverse landscapes, culinary delights, efficient public transport, and civic engagement. These factors combine to create a high standard of living and a positive overall experience for residents and visitors alike.
Life in Germany provides a high quality of living with efficient infrastructure, cultural richness, a strong economy, excellent education, and comprehensive social support. The country’s commitment to sustainability, diverse landscapes, culinary delights, and active civic engagement add to its appeal. A safe and stable environment, work-life balance, and global connections make Germany an attractive destination for residents and visitors alike.
Contract of Employment
In Germany, it is a legal requirement for an employment agreement to be in written form, and this document must be provided to the employee within one month from the start of their employment.
The duration of the probation period can vary but is typically limited to a maximum of six months. For certain positions or collective agreements, the duration might differ.
Employees in Germany are generally subject to notice periods that increase with the length of their employment. The legal minimum notice periods are as follows:
– Up to 2 years of employment: 4 weeks’ notice
– 2 to 5 years of employment: 1 months’ notice
– 5 to 8 years of employment: 2 months’ notice
– 8 years of employment or more: 3 months’ notice
Employers are also required to provide notice to terminate an employment contract. The notice periods for employers are usually longer than those for employees and depend on various factors, including the length of the employment.
The standard legal working week in Germany is generally 40 hours. However, collective agreements, industry norms, and specific job roles can lead to variations in working hours. Many companies offer flexible working arrangements, including part-time work, job-sharing, and flexible schedules to accommodate employees’ needs.
employees in Germany are not allowed to work more than 48 hours per week, including both regular working hours and overtime. However, there are exceptions for specific industries or cases, subject to certain conditions. Overtime regulations also apply to night work and work on Sundays and public holidays. Additional compensation or time off may be granted for such hours.
13th Month Pay
In Germany, the concept of a “13th month pay” or “Christmas bonus” is not a standard legal requirement, as it is in some other countries. However, some employers in Germany may voluntarily offer a year-end bonus to their employees, especially during the holiday season.
Full-time employees are generally entitled to a minimum of 20 working days of paid vacation per year, based on a standard five-day workweek. This corresponds to four weeks of vacation.
Sick leave in Germany, known as “Krankmeldung,” involves notifying the employer of illness, providing a medical certificate for absences exceeding three days, and receiving continued payment during the sick leave period. After six weeks, health insurance takes over payments.
Employees are protected from termination during sick leave, and collective agreements may offer additional benefits. Return-to-work certification is required, and rehabilitation options are available for prolonged illness. Familiarity with these regulations is essential for both employers and employees.
Maternity and Paternity Leave
Maternity leave typically begins six weeks before the expected due date and continues for eight weeks after childbirth. It is mandatory to take at least eight weeks after childbirth. The total maternity leave period is 14 weeks. However, the duration can be extended under certain circumstances, such as multiple births or complications.
Fathers are eligible for paternity leave of up to two months (or 65 working days) within the first eight weeks after the birth of the child. Paternity leave is available to fathers who are employed, self-employed, or engaged in a freelance profession and are covered by statutory health insurance.
After maternity leave, parents can transition to parental leave, which can last until the child’s third birthday. During parental leave, employees can work reduced hours or not work at all.
VAT / GST
In Germany, the typical VAT rate is 19%, which is levied on most goods and services. There is also a lower rate of 7%, applicable to specific items like certain food products, books, cultural activities, hotel stays, and healthcare services. Additionally, certain goods and services, such as cross-border and international transportation, are exempt from German VAT.
The income tax brackets for 2023 are as follows:
|Less than 10.908 euros
|10.909 – 62.809 euros
|14% to 42%
|62.810 – 277.825 euros
|More than 277.826 euros
Employer / Employee Contributions
In Germany, both employers and employees contribute to social security programs. Employers contribute to health, pension, unemployment, and accident insurance, while employees share costs for health, pension, and nursing care insurance.
These contributions fund benefits like healthcare, retirement, and unemployment support. The amounts vary based on factors like income and insurance type. Income tax and solidarity surcharge are also deducted from employee earnings.
In Germany, public holidays, known as “Feiertage,” vary by state due to the federal structure of the country. However, there are several nationwide public holidays, and each state also has its own regional holidays. Here are some of the key nationwide public holidays in Germany:
January 1 – New Year’s Day
Date varies (Christian holiday) – Good Friday
Date varies (Christian holiday) – Easter Monday, the day after Easter Sunday.
May 1 – Labour Day
Date varies (Christian holiday) – Ascension Day
Date varies (Christian holiday) – Pentecost Monday
October 3 – Day of German Unity
December 25 – Christmas Day
December 26 – Boxing Day
In addition to these nationwide holidays, each state in Germany has its own set of regional public holidays, such as state foundation days, religious observances, and cultural events.
Severance pay is not legally mandated in most cases. It is generally negotiated between the employer and the employee or can be provided based on collective agreements or company policies. In cases of immediate termination, such as serious breaches of contract, the employer is not required to provide severance pay.
Work and Residence Permits (Expatriates)
EU/EEA/Swiss Nationals: Citizens of European Union (EU), European Economic Area (EEA), and Switzerland generally have the right to work and reside in Germany without a specific work permit. However, registration with local authorities may be required.
Non-EU/EEA/Swiss Nationals: Non-EU/EEA/Swiss nationals typically need a residence permit to work and live in Germany.
Application Process: Expatriates generally need to apply for a residence permit at a German embassy or consulate in their home country before entering Germany. Some permits may also be applied for after entering Germany.
Requirements: Requirements for obtaining a residence permit may include a valid job offer, sufficient funds, health insurance, accommodation, and meeting specific criteria for the chosen permit category.
Duration: Residence permits may be granted for a limited duration, often tied to the employment contract. Renewal is possible in many cases.
Family Reunification: Some permits allow for family members to join the expatriate in Germany.
Integration Courses: Some permit holders may be required to attend integration courses to learn German and gain familiarity with German society.
Permanent Residence: After a certain period of lawful residence, expatriates may be eligible to apply for permanent residence or settlement permits.