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.
Banks are open from Monday to Friday 8:30 am to 4 pm.
The standard working week is 40 hours per week usually worked from Monday to Friday.
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.
Automotive, mechanical engineering, chemical and electrical
Dates & Numbers
Official State Name
The Federal Republic of Germany
International Dialing Code
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
Payroll report must be kept for five years
6 weeks fully paid leave
14 weeks of paid maternity leave
Maternity & Paternity Leave
On provision of four weeks’ prior notice
A 13th Salary is customary in Germany and paid by December
€9.91 per hour
This can be no more than 60 hours a week. Overtime will usually be compensated.
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.
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
Corporate Income Tax Rate
Personal Income Tax Rate
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.
Social Security Rate
Social Security Rate for Employers
Social Security Rate for Employees
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.
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.
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.
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.
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
Total number of public holidays
Working hours per week
Total number of days for Compassionate & Bereavement Leave
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.
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
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
Build the best team and hire top talent compliantly in Germany. Get in touch with Germany payroll outsourcing & PEO specialists for a free consultation!