Country Spotlight: Payroll In Germany

Being home to some of the most successful ventures, Germany is the largest economy in the EU in terms of GDP. However, for a country that also comes with an identity of having the highest employment rate, it is not devoid of payroll processing complications.

Germany is a complex country to do business in since the payroll system is challenging with the involvement of several different types of taxes.

Along with the inclusion of equal treatment and reasonable accommodations for disabilities, German employers have many statutory requirements, including working hours and leaves.

ALSO READ: Complexities in European Cross-border Payroll Management

Understanding the availability of Employees

If the past didn’t address it, the present and future would not stop talking about it: employee experience. If your organization has German employees, it has become more critical than ever to be mindful of their working conditions. This could entail being aware of their work timings and understanding their different holiday categories from an empathetic perspective.

General

On average, employees typically work between 37.5 – 40 hours a week and sometimes up to 48 hours for exceptional cases. A typical day at work for a business in Germany is usually 8 hours per day and should not exceed 10 hours.

Overtime

Overtime payment is required when stated in employment contracts or collective labor agreements. The maximum weekly working time is 48 hours. The regular daily working time may be extended up to 10 hours, provided that, on average, 8 hours per working day are not exceeded within a reference period of 6 months or 24 weeks.

Hence, in such situations, where capturing multiple time modes of employees can be challenging, it is helpful to employ a vendor that efficiently manages time entries across any location. There are also technically advanced options available to capture GPS-based attendance with mobile applications, about which you can find out more here.

Understanding the absence of the Employees

Public Holidays

German holidays differ based on the state. However, as of 2022, there are nine national holidays that all states follow.

Sick Leave

In Germany, the employer covers the first six weeks of sick leave, which is paid at 100% of the regular salary. After six weeks, any additional sick pay will be made by health insurance (the amount will not be 100% of regular pay and will be determined according to personal criteria). Employees must notify their employers that they are ill if absent and submit a doctor’s note if the leave is longer than three days.

Maternity Leave

Mothers are entitled to 6 weeks of leave at full pay before their child’s birth and eight weeks at total compensation after birth. In the case of premature or multiple births, 12 weeks of paid leave is permitted after birth.

During such maternity leave, the employer will continue the pay the employee’s salary, and the health insurance company shall fully reimburse the employer.

ALSO READ: Promoting an Inclusive Culture for Mothers in the Workplace

Parental Leave

Parental leave is 36 months and can be divided between the parents as they see fit. The eight weeks of maternity leave after labor) are counted as part of this leave. In the mother’s case, the parental leave starts after maternity leave stops. During parental leave, parents can choose to work part-time up to 30 hours per week.

At least 12 months of parental leave must be taken within the first three years after labor – the remaining can be accepted until the child reaches the age of 8. Parental leave does not start automatically. It must be requested in writing or submitted to the employer at least seven weeks before the start of parental leave.

As a result, keeping track of employee absence from work is vital. A good provider can streamline and configure complex plans easily.

When is payroll run in Germany?

Germany’s payroll disbursement usually falls under one of the following categories:

• Salary payment will be until the last days of the month (Monday-Friday)

• The hourly wage will be paid until the 10th of the following month

There are plenty of statutory deductions, the standard ones made are as follows:

– Wage tax: The employer deducts the basic tax rate from the salary.

– Church tax: Germany allows churches to collect taxes from its mass.

– Solitary tax: It is an additional charge (currently 5.5%) made to balance the cost of German unification.

– Health insurance: As of now, a deduction of 14.6% is made as part of health insurance in Germany.

– Long-term care insurance: It is a mandatory contribution provided by private or statutory health insurance.

– Pension insurance: Employees are provided with 70% of their operating net income during their retirement under pension insurance.

– Unemployment insurance: It is a compulsory contribution subject to taxes and social security deductions.

Employers can face a challenge regarding tax, recordkeeping, and filing requirements. While promptly ensuring the accuracy and efficiency of payroll can be taxing, it would be worthwhile to invest in a provider that can take that excruciating task off your shoulders.

With an extensive team of professionals serving clients across 160+ countries, Neeyamo leverages its unique service-based model and functionality-rich, next-generation portfolio of HR & payroll products to help organizations enable agile and scalable business. Talk to our experts today.