Employer Of Record in Germany
We make it easy and painless to expand your business into Germany. Forget about dealing with local regulations, confusing tax laws and international payroll management. We take care of all that so you don't have to.
Accelerate your growth into Germany Compliantly and hassle-free
How we can help you expand in Germany
As your EOR in Germany we’d help you expand by hiring employees and running their payroll without establishing a local branch office or subsidiary.
Your candidate is hired by a PEO in Germany provider in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. Shortly after, your new employee will be working for you, just like any other member of your team.
Expand to Germany with Serviap Global
Through our PEO and EOR services, you can hire qualified talent in your industry without the trouble of opening your own legal entity.
In just a few days, you can easily and safely build a presence in Germany being sure that your staff will be hired in compliance with labor and tax regulations.
Table of Contents
Germany Country FactsGermany is situated in northern central Europe. Germans are known for their hard work and assertiveness, but are also polite and friendly. The country attracts about 39.6 million tourists every year and is the strongest economy in Europe. The nation’s currency is the Euro (€). German citizens enjoy a great standard of living and an amazing public transportation system. With mostly metro and rail networks in the city, and trains with buses in more rural areas. The main German highway, the autobahn, is known for its lack of a speed limit. Germany is also well known for its Oktoberfest festival, which celebrates beer and good food. The major cities are Berlin, Hamburg, Munich, Koln, Frankfurt, Essen, and Stuttgart.
The EconomyThe German economy is strong, diversified, and efficient. It operates as a social market capitalist economy. This means that Germany enjoys a free market economy with the government promoting regulations that protect the consumer. Germany is the fourth largest economy in the world and the first in Europe. It is also the second largest exporter in the world, after China. The top exports are machinery, vehicles, and chemicals. Germany enjoys a low inflation situation with generous social benefits and is a major contributor to the European Union (EU). In fact, it is also a founding member of the EU. The economy also benefits from a highly skilled workforce. Most workers are involved in services (73.8%) and industry (24.6%). Germany plans to replace all its nuclear power with renewable energy.
The Importance of Small and Medium-sized CompaniesGerman small and medium size businesses make up 63.7% of the overall employment, not counting the financial sector. They generate 54.4% of the overall value added to the country. They also account for 99% of German made companies. Germany manages to export twice as many products as the United States and does very well. Germany’s exporting success is based on its small and medium enterprises (SMEs) and most SMEs focus on a narrow set of products. This is because Germans believe focusing on doing less exceptionally well creates better products. Germans then focus on exporting the well-developed products worldwide. Most exports are generated by the manufacturing sector. About 50% of the world’s leading SMEs come from Germany and they tend to fund the education of their workers. This has translated to a lack of student debt and a focus on worker skill and well-being. SMEs have also accumulated great capital due to Germany’s tax environment and because they are located in both Urban and Rural areas, there is a good distribution of wealth and growth among the population.
Economic OpportunitiesThe process of starting a business in Germany has been simplified. Investors will need to open a German bank account, obtain the proper visa, and acquire a residency permit. They will also obtain a trading license and submit their registration to the tax office. It will cost €400 to register the company and the investor will need to bring € 25,000 as base capital. The business visa allows the investor 6 months to set up the business in the country. To complete the business registration, the investor will need to have obtained a current bank account, a valid residence permit, a current passport, and a German tax ID number. From that point, the investor will receive a VAT number and will be able to operate the business. German law is very strict regarding accountancy, cleanliness, work safety and working hours, so heavy research is required for your particular business needs.
Key Sectors of the National EconomyThe major sectors that make up Germany’s annual GDP:
- Export Industry: Germany is one of the largest exporters in the world and has 1810.93 billion dollars worth of goods and services exported in 2019 alone. This is a great place for a business that exports.
- The Service Sector: This sector alone contributes to around 70% of the total GDP.
- Automotive, Mechanical Engineering, Chemical and Electrical: These four major sectors are the dominating industries in Germany. 54.4 billion euros went into research and development in 2016. This country is a great place for innovative mechanics and machinery.
PayrollGermany uses a monthly pay cycle and there is a customary 13th month salary payment. The standard work week must be at or below 48hours, with 8 hours work days.
|Wages||The median salary is 3.994 euros per month|
|Overtime||Overtime is considered the number of working hours that exceed the employee’s fixed workweek Overtime is considered the number of working hours that exceed the employee’s fixed workweek|
|Leaves of Absence||• Vacation leave: There are 24 to 30 paid leave days, depending on the company. • Sick Leave: Sick leave can last for 6 weeks with 100% pay. After that, the employee can extend sick leave by 78 weeks with 70% to 90% pay depending on the health insurance • Maternity Leave: Maternity leave is 14 weeks which can be increased to 18 weeks when there are complications. • Paternity Leave: Paternity leave fits under parental leave and consists of 36 months of unpaid leave. • Family Emergency: Other leaves include 10 days of unpaid leave for family emergencies.|
Tax advantagesGermany offers a Foreign Tax Credit to avoid double taxation for corporation tax on the net income. The German Research Allowance Act offers a tax-free deduction of 25% for a maximum saving of €500,000 per year. There are other local incentives based on the region, such as government aid and accessibility to land.
Renewable EnergyGermany has been labeled “the world’s first major renewable energy economy”. Renewable energies provide 42.1% of its total electrical consumption. Germany plans to raise the percentage to 50% by 2030. It uses wind, biomass, solar, geothermal, and hydroelectricity. German hydraulic turbines are used worldwide due to their efficiency and durability. The German government has a strong commitment to creating clean energy and is praised by the International Energy Agency.
Business CultureThe business culture is based on a person’s professionalism, skill level, and ability to plan.
- Small Talk The people are extremely conscientious and direct. They will engage in small talk but will get to serious business quickly. Education, expertise, and proper planning form the base for professional interactions.
- Get Personal They prefer face-to-face interactions over technological interactions and they value punctuality and preparedness.
- Plan Some Time Apart During business discussions, Germans do not appreciate spontaneous thinking and problem solving on the spot. They prefer well thought out and planned solutions.
- Dress Up Since Germans take pride in dressing well, visitors should consider wearing formal and conservative clothes.
Food CultureGerman cuisine is based on cabbage, potatoes, bread, beer, and meats. It is certainly hearty and does not really resemble that of the French. It has more of an Eastern European flavor. A popular food is the Schnitzel, which can be found just about everywhere. It is cooked using cutlets of meat which are breaded and fried. Another popular dish is the Bratwurst, which is a German sausage made out of beef or pork. It is often eaten with a piece of bread and a glass of beer. They typically do not use ice in their beverages and they seldom drink tap water. Instead, they prefer mineral water, purified water, and of course, wine and beer. Germans are world famous for their beers and each year they celebrate it at Oktoberfest. The celebration happens in the city of Munich and draws out 6 million people every year.
PopulationA favorite is barbecued snags (aka sausages) which is likely because Aussies love to grill, and there’s nothing more important than turning up with the much beloved traditional Australian sausages. They are usually pork or beef, but if you’re feeling adventurous, there are other animals to sample. Lamingtons are widely recognized as the ‘National Cake of Australia’. This sweet treat is an Australian icon, named as it was after Lord Lamington, a former Governor of Queensland. The lamington is a square-shaped sponge cake, which is then dipped into chocolate and coated with coconut. Other variations include two layers and a cream or jam filling. Meat pies are a traditional Australian meat pie that should be hand-sized, filled with mincemeat and gravy, then topped with tomato sauce. Jump in and feast on fresh Australian barramundi, a name which means ‘large-scaled river fish’ in the Aboriginal language. Grilled or seared skin-side first this is a fish that is a healthy alternative and cooked in an Aussie way.
GeographyThe German territory is diverse, with forests, plains, and mountains. It is situated in the northern central part of Europe and shares borders with the Netherlands, Belgium, Luxemburg, France, Switzerland, Austria, The Czech Republic, Poland, and Denmark. The highest point in Germany is a mountain called the Zugspitze and it is surrounded by three glaciers and hosts Germany’s highest ski resort. The middle of the country is made up of mostly rolling hills and forests. The south of the country is more alpine.
- Munich This is considered Germany’s economic capital. Not only does it consistently rank as one of the best places for quality of life, it has a reputation for steady growth. It is the third largest city in Germany, with low unemployment rates, innovative technology, and cultural diversity.
- Berlin This is the start-up capital of Germany, with a large population of tech-savvy, innovative people. Companies specializing in e-commerce, gaming, film making and ad-tech do well here.
- Hamburg This second largest city in Germany is home to Germany’s largest port. It is the world’s third largest aviation center, and also has many media, marketing and IT companies who do well.
|Num. States / Province||There are 16 states: Berlin, Bayern (Bavaria), Niedersachsen (Lower Saxony), Baden- Württemberg, Rheinland-Pfalz (Rhineland- Palatinate), Sachsen (Saxony), Thüringen (Thuringia), Hessen, Nordrhein-Westfalen (North Rhine-Westphalia), Sachsen-Anhalt (Saxony-Anhalt), Brandenburg, Mecklenburg- Vorpommern, Hamburg, Schleswig-Holstein, Saarland, Bremen|
|Thousands Separator Format||999.999.999.99|
|Country Dial Code||+49|
|Border Countries||Denmark, the Netherlands, Belgium, Luxemburg, and France, Switzerland and Austria, and the Czech Republic and Poland.|
|Continental surface||137,988 mi²|
|Fiscal Year||January 1 to December 31|
|Taxpayer Identification Number Name in the country||Steueridentifikationsnummer, steuerliche Identifikationsnummer, Steuer-IdNr., IdNr. or Steuer-ID|
|Current President||Frank-Walter Steinmeier|
Laws and Agencies that regulate labor relationshipsEmployment law in Germany is divided into two parts: Individual Employment Law and Collective Employment Law. Individual employment law is about relations between the employee and the employer, and collective law is the collective representation and organization of employees. This includes their rights and obligations of the representatives for employees. There is no main labor code, instead there is Federal Legislation, case law, collective bargaining agreements, works council agreements and individual employment contracts.
|Germany’s constitution signed in 1949||This includes a basic law that states it works towards peace.|
|Organization membership –||The Council of Europe, European Union, European Space Agency, G4, G8, International Monetary Fund, NATO, OECD, Organization for Security and Co-operation in Europe, UN, World Bank Group and the World Trade Organization.|
|Labor Code||No one labor code.|
|Social Security||This is called the Sozialgesetzbuch (SGB). It includes within it, Unemployment insurance and public employment agencies (SGB II and III) Health insurance (SGB V) Old age, widow’s/widower’s, orphans and disability pension insurance (SGB VI)|
Key Tax and Labor Authorities
|The Federal Ministry of Finance||This deals with taxation, finances, financial markets, European policy and stamps.|
|Federal Central Tax Office||This is responsible for dealing with parts of the country’s tax codes.|
|Most contracts are a permanent employment contract (unbefristeter Arbeitsvertrag)||As it is easier for both the employer and the employee, contracts are mostly unlimited. The contracts for employment must be written.|
|Contracts must include||The important aspects of employment include: parties, work to be performed, salary, benefits, start date, vacation time, location and notice periods.|
|German Termination Protection Act||This act does not allow termination of employment if the employee is employed for more than 6 months, only if the company has more than 5 employees.|
|Work Hours||Full time work is considered 36-40 hours, with daily working weeks in Germany between 7-8 hours 5 days a week. If you are a student, this is 2.5 hours more than your studies.|
Annual Taxable IncomeIncome tax in Germany is progressive, beginning with 1% and rising to 42% or if the income is very high 45%. The tax rate that is 42% applies to any taxable income above €57,051, although this number can change depending on the year. Everyone also pays solidarity tax or Soli, which is 5.5% of income tax. Corporate Tax Rates Everyone pays the same rate of 15% for corporate tax, and then has a surcharge of 5.5%, or the Soli, which is a solidarity tax that everyone pays. In total, this is 15.825%.
|1 January||New Year’s Day|
|Friday before Easter Sunday||Good Friday|
|The first Sunday after the full Moon that occurs on or after the spring equinox||Easter|
|Monday after Easter Sunday||Easter Monday|
|1 May||Labour Day|
|26 May||Ascension Day|
|6 June||Whit Monday|
|3 Oct||German Unity Day|
|25 December||Christmas Day|
|26 December||2nd Day of Christmas|
TerminationIn Germany, there is a council called the Works Council, and if it exists for a company, they must be notified and consulted before every dismissal. This must be specific information, including notice and reasons, as vague generalization is not appropropriate. A notice period of four weeks, counting from the 15th or the end of the month, is required for dismissals, but a contract can allow for longer periods. If you employ less than 10 people, there is no dismissal protection. Otherwise, all dismissals must be socially justified. This includes certain protected employees who cannot be let go: pregnant employees, or mothers af- ter childbirth, employees on parental leave, severely disabled employees, candidates or members of the work council, and the data protection office.
|Type of Termination||Brief Description|
|Justified Dismissal||A termination is justified when it is based on a person, their conduct or urgent operational requirements which preclude the continued employment of the employee in the undertaking. Notice must be given in writing, with an ink signature from an authorized representative. If there is a work council in place, there must be information given to them or a hearing. If the person is disabled, their representative body must also be notified.|
|Separation Agreement||With this agreement, there can be no severance payment if so chosen, and the provision on protection against unfair dismissal does not apply. With respect to age discrimination, regulations in social plans compensation for older employees needs to be drafted with care. Typically, older employees will receive a higher severance pay. This agreement includes: • Date and type of termination • Severance pay • Continued payment of remuneration up to the end of the employment relationship • Release from work duties • Company pension plan • Post-contractual covenant not to compete • Duty to maintain confidentiality • Inventions • Return of company car • General duty to return company property • Reference • Discharge of obligations|
|Whistleblowers||There are no laws protecting whistleblowers and cases will be looked at individually. Employees are advised to first report internally.|
|Mass Redundancy||If more than 20 employees are let go at once, due to the company running into financial problems or otherwise, this requires a negotiation of a social plan to attempt to give reconciliation of interest to the employees affected. This needs to be discussed with the works council.|
|Conduct-Related Dismissal||If the employee breaches their contract, then they must receive one warning. If it happens again, they can be dismissed.|
|Operational Reasons||If the employee is let go due to operational reasons, then the employer has an obligation to prove that the position no longer exists within the company. And that there are no other vacant spots in the company. They must conduct a social selection among comparable employees based on age, years of service, marital status, number of dependent children and severe disability. Then they must consult with the works council, who may heavily delay this position being removed.|
Your one-stop global hiring solution. Secure, reliable, compliant
No matter how big or small, we are ready to answer all your questions- anytime, anywhere.
Our team of in-country experts help you navigate new markets and cultural nuances
Top-tier Benefits Packages
Great talent deserves great benefits. We offer a competitive range of benefits so that you only attract top-tier talent worldwide.
You remain 0% liable
Shift the worry from your shoulders to ours! We stay on top of regulations so you’re always 100% complaint with local laws