Country Spotlight: Employer of Record in Germany
In 2023, the German automobile industry garnered a revenue of around 564.2 billion euros and exported over 3.1 million cars to customers worldwide. Over 77% of cars manufactured in Germany in 2023 were destined for export markets, as German cars are known to be the finest available in the market. Similarly, Germany also possesses a skilled workforce with the finest of talents and abilities across various industries, making it an attractive destination for businesses seeking global expansion.
However, navigating the intricacies of German employment regulations can be a significant hurdle, especially for companies without a legal presence in the country. This is where an Employer of Record (EOR) solution like Neeyamos can be a valuable tool. German employment law is known for being comprehensive and, at times, quite intricate and detailed, and more often than not intensely complex, like their employment laws.
Arbeitsgesetze (Employment Laws):
German employment contracts are more detailed than those of other European Union countries. While there are no legal requirements for them to be in German, it is typically recommended that it be in German, not only that these employment laws must include specifications such as,
- Job Duties
- Compensation (including base salary, bonuses, and overtime pay)
- Working Hours
- Vacation and Time off
- Sick leave
- Termination clause and more
Collective Bargaining Agreements: A worker in Germany can negotiate between unions and employer associations, which can, in some situations, supersede some aspects of individual employment contracts.
In workplaces with a collective agreement, individual employment contracts cannot offer terms and conditions that are less favorable to the employees than those outlined in the collective agreement unless the collective agreement itself contains provisions allowing for individual variations or the existence of legislation specific to your jurisdiction that may supersede the collective agreement in certain circumstances.
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Arbeitszeiten und Überstunden (Working Hours and Overtime):
The standard work week in Germany is 40 hours, with a maximum of 8 hours daily. However, under certain conditions, this can be extended to 10 hours per day under the conditions that:
- The additional working hours are averaged over six months, not exceeding a 48-hour average weekly working time.
- The employer and employee have a prior agreement (written consent is recommended).
- Special regulations or collective bargaining agreements allow for it.
Rest Periods: Employees in Germany are entitled to a minimum of:
- 30 minutes of uninterrupted rest if their daily working hours are between six and nine hours.
- 45 minutes of uninterrupted rest if their daily working hours exceed nine hours.
Anti-Diskriminierungsgesetze (Anti-Discrimination Laws):
Germany's anti-discrimination laws are not to be taken lightly. They are robust and prohibit employment discrimination based on race, ethnicity, gender, religion, disability, age, and sexual orientation. Employers must ensure their hiring practices, workplace policies, and termination procedures align with these laws.
Arbeitnehmerdatenschutz (Employee Data Privacy):
The EU's General Data Protection Regulation (GDPR) and Germany's Federal Data Protection Act (BDSG) are not just legal frameworks; they are the bedrock of trust and respect in the workplace. These laws, which grant employees in Germany strong data privacy rights, highlight employers' significant role in safeguarding employees' personal data, obtaining proper consent, and collecting, using, and retaining data necessary for legitimate business purposes.
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Urlaubsansprüche (Leave Entitlements):
Maternity Leave: German law mandates a 6-week maternity protection period. During this time mothers are prohibited from working and receive full pay from their employer. Mothers are also entitled to a maternity allowance for up to 14 weeks. The statutory health insurance pays this and is equivalent to the employee's net salary from the previous three months.
Elternzeit and Elterngeld: Mothers can choose to take parental leave (Elternzeit) for up to three years after childbirth, though this will be unpaid, or they can receive parental benefit (Elterngeld) during this period, which partially replaces their lost income.
Paternity Leave: Fathers can take up to six weeks of paternity leave (VaterSchutzzeit) following the birth of their child. During this period fathers are prohibited from working and receive full pay from their employers.
Fathers are also given the option to take unpaid parental leave for up to three years after the child's birth. During this period, they can also receive parental benefits alongside mothers.
Sick Leave: Employees receive full pay for up to six weeks of illness, with continued payments possible depending on their contributions towards the social security system.
These are just a few of the complications that are associated with employees taking time off in Germany; having a flexible, locally compliant time and absence tracking solution that mitigates legal risks, reduces overhead and provides employees with the proper leave entitlements they are owed by law is essential for companies employing workers in Germany, especially if they don't have a legal entity in the country.
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Kündigungsfrist (Notice Period):
Germany's legal requirement for employees to provide notice periods before terminating their employment can be a significant hurdle for companies looking to scale their workforce quickly. These notice periods are not fixed terms; they are based on the employee's length of service with the company.
- 0-6 Months of Employment - Two weeks
- Over 7 Months of Employment - Four weeks (ending only on the 31st or 15 of the following month)
- Over 2 Years of Employment - One month (ending only on the 31st or 15 of the following month)
- Over 5 years of employment - 2 months notice period (ending on the last day of the month)
- And so forth, increasing by a month for 8, 10, 12, 15, and 20 years.
An important aspect to keep in mind when dealing with notice periods in Germany is that the default notice period after 7 months of employment is a minimum of 4 weeks, which will be rounded up to the 15th or last day of the month from the day your employer receives your resignation letter.
In some cases, employment contracts or collective bargaining agreements may lead to even more extended notice periods, which must be explicitly mentioned in the employment contract.
Steuern und Sozialversicherungsbeiträge (Taxes and Social Security Contributions):
Both employers and employees contribute a portion to social security, which covers healthcare, unemployment insurance, pensions, and long-term care. The employer typically shoulders a larger share (around half) and is responsible for calculating, withholding, and remitting these contributions to the appropriate authorities, and the remainder is paid for by the employee.
Multiple Tax Rates: There are different tax rates for various social security contributions, with the exact rate depending on factors like employee salary and industry. Employers in Germany need to stay updated on these rates and ensure accurate calculations.
Tax Deadlines: Tax payments and filings need to be made at specific intervals, and failure to comply with these deadlines can potentially result in penalties. To avoid these hefty fines, employers must use an EOR service to navigate compliance in Germany.
Arbeitnehmerüberlassungsgesetz or AÜG
AUG is a German labor leasing license system that is mandatory for EOR companies in Germany. Under the AÜG, employees can be hired using an EOR provider for 18 months, with exceptions for the chemical and automotive industries. After these 18 months, the employer must wait for a small period, after which they may redeploy the same employee through the same provider.
Navigating Germany's complexities around taxes, social security contributions, AND the notification and approval requirements of the AÜG labor leasing system can be extremely challenging, especially for companies without an existing legal entity in the country.
This is where an Employer of Record (EOR) solution like Neeyamo can be invaluable. Neeyamo's EOR solution and Global Payroll Tech Stack provide a comprehensive platform for compliantly employing workers in Germany while handling payroll, taxes, and benefits and ensuring full compliance with changing regulations.
Hire talent and hurdle through your obstacles at lightning speed, just as you would drive on the Autobahn with Neeyamo!
