Hire in Germany

Employer of Record(EOR) in Germany

Germany Workforce Unlocked: How Employer of Record Makes Hiring Easy

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At a Glance

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Germany has the largest economy in the whole of Europe. Also, Germany holds the position of the 4th-largest economy by nominal GDP and the 5th-largest by PPP. The country holds the best and growing industries within years, having the largest domestic market in the EU.

Major economic hubs:

Berlin, Hamburg, Munich, Frankfurt Am Main

Skills in demand :

Software Developers, Architects, Programmers; Electrical Engineers, Nursing Professionals, IT Consultants, And Analysts.

Public and Provincial Holidays

Employee Leaves


Resident Tax Information

Germany is one of the most taxation heavy countries in Europe. All resident individuals are taxed on their worldwide income, but non- residents only pay when they make money there which makes it easier for them, since most people don't know how much taxes apply to specific types or sources. Employers will also be collecting that tax from employees'checks along with any other social security payments like unemployment insurance premiums.

Taxable income in Germany covers the income an individual earns from the following categories:

  • Agriculture and forestry
  • Trade or business
  • Independent professions
  • Employment
  • Capital investment
  • Rents and royalties
  • Other income (as defined by tax law)

The tax system in Germany is progressive, meaning that as employee's income increases so does the percentage of it which must be paid. The taxable income and the income tax rates are as below

* Progressive tax rates start at 14% and rise to 42%.

Social Security

Social security in Germany is known as the Sozialgesetzbuch (SGB) and is codified as the "Social Code."  

The German social security contains 8 main parts that include:

  1. SGB II[1] –  Unemployment insurance
  2. SGB VI[4] – Old age,  orphans, widow's/ widower, and disability  pension insurance
  3. SGB XI[8] – Social care
  4. SGB III[2] – Public employment agencies
  5. SGB VII[5] and IX[6] – Invalidity insurance
  6. SGB V[3] – Health insurance
  7. SGB VIII[7] – Child  support

Unemployment benefits

The unemployment benefit in Germany is alternatively known as the unemployment insurance

Statutory Benefits

The employee benefits that an employer must provide their employees in Germany include unemployment insurance, retirement and healthcare.

*Depending on the provider selected, the supplemental premium can be up to an additional 2.5% (average 1.3%), split equally between employer and employee contribution.

*The above rates serve as a broad guideline. Actual rates charged will differ.

Fringe Benefits

In Germany, fringes benefits are given to employees. These can be either monetary or non-monetary depending on the business requirements and budgets set for providing them as well as what goals one might want their company reach through this practice of offering perks that help attract quality staff members who will work hard towards achieving those objectives.

Commonly provided fringe benefits include

  • Fringe Benefits
  • Childcare allowances
  • Flexible working hours
  • Gym
  • Additional annual leaves
  • 13th-month pay or Christmas bonus
  • Employee product discounts
  • Lunch allowances or meal vouchers
  • Company  transportation
  • Additional annual leaves
  • General wellness benefits

Exempt Benefits

The exempt benefits include

  • Health insurance
  • Childcare allowances

Long-term Incentives

Long-term incentives are a great way to incentivize and empower employees. They provide the employee with long term growth, while providing company stability in return for their hard work!

In Germany specifically, there is one form that employers use more than others: stock options or restricted stocks which allow workers some degree of ownership rights over shares they may eventually sell off after holding them throughout an entire career (3 - 5 years).

Termination/Severance in Germany

Termination Process

The employer has to provide a valid reason for termination of the employment. Moreover, after 6 months of employment, the employee is protected by the German Termination Protection Act. According to this act, an employee can be terminated based on the following categories;

  • Personal situation (e.g., Long term Sickness)
  • The behavior of the individual (e.g., fraud, theft)
  • Business of the employer (if the employer decides to decrease the number of employees)

Notice Period

Four weeks of notice period is mandatory for the employee. However, the number of days increases with years of service.

Severance Pay

There are no statutory laws for severance pay. However, the employer has to give severance pay if the employee was terminated without notice.

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