Germany Employer of Record
If a lack of speed or local expertise are among your top concerns when expanding to or employing workers in Germany, an employer of record may be the best option for achieving your global growth objectives.
An employer of record, sometimes known as an international PEO, enables you to quickly hire and onboard workers in Germany―often in as little as two weeks―without having to take on the cost and risk of establishing a local entity.
Learn about the hiring, employment, payroll and benefits requirements for workers in Germany and how our employer of record service, Global Employment Outsourcing (GEO), and local HR experts can help you manage your international employment needs.
Hiring in Germany
There are several federal statutes, court decisions and industrial practices that govern German labor law. The Civil Code defines the employment relationship; the Works Constitution Act regulates cooperation between employers and employees; and the Act on Collective Agreements governs collective bargaining agreements.
Collective bargaining always takes precedence over works agreements, and works councils play a significant role in labor relations in Germany.
Since employment in Germany is highly regulated and nuanced, compliant employment contracts are an essential business need. As your employer of record and PEO in Germany, we can ensure that every contract, for every worker, meets all requirements. We can also provide you with guidance about cultural norms and hiring best practices and keep you up-to-date with employment regulations as they change.
Employment contracts in Germany
As you look to hire employees in Germany, here are some common regulations you’ll need to know to create a compliant contract, as well as how an employer of record and PEO can provide support for your unique HR needs.
The workweek in Germany is defined as Monday to Saturday, and under the Working Hours Act, German employees cannot be expected to work more than eight hours a day and 48 hours a week.
Regular breaks—at least every six hours—are required throughout the day and employees are expected to have at least 11 hours of daily uninterrupted rest.
As you consider the appropriate salary to offer new employees, keep in mind:
- Minimum wage in Germany is €9.82
- Collective agreements may regulate the legal salary range
- Overtime pay is not required by law and may be compensated by granting additional time off; additionally, overtime work can’t be required unless there’s a provision in the contract or collective bargaining agreement
As your employer of record in Germany, we can provide you with resources and insights about employee compensation, so you are better equipped to make a competitive employment offer.
German employees are not entitled to bonus payments in addition to wages; however, it is common for employers to provide additional payments in the form of:
- Supplemental pay
- Piecework rates
The most common types of gratuity in Germany are a Christmas bonus and vacation allowance. Legal claims for gratuity can arise from collective bargaining agreements, works agreements, contracts, equal treatment and/or operational practice based on said bonus being given three times before.
Probationary periods are permitted and commonly required in Germany, but they may not be longer than six months, and collective bargaining agreements may limit this period even further.
During a probationary period, employment contracts may be terminated with two weeks’ notice. Shorter notice periods are only permissible if a collective agreement provides for them.
As long as the probationary period does not exceed six months, the employer needs no reason to terminate the employment contract.
Termination and severance
Under the Civil Code, the employment relationship can be terminated for good cause by the employer or employee without a notice period if certain conditions are met.
However, the Act on Protection Against Unfair Dismissal restricts an employer’s ability to terminate an employee unless there are personal, conduct-related or business-related grounds to justify the reason for dismissal. Any dismissal not justified under the Act on Protection Against Unfair Dismissal is void and the employee is entitled to continued employment and remuneration.
Employees may be entitled to severance pay under collective bargaining agreements or works council. It’s common for termination claims that have been filed with the labor court to be settled with a severance of between .5 and 1.5 times the employee’s monthly wages for every year of service.
As your employer of record in Germany, we can work with you to quickly handle the unforeseen event of an employee termination, providing legal guidance and a personalized process that ensures you stay out of labor court.
Employee benefits and paid leave in Germany
When negotiating terms of an employment contract with a candidate in Germany, here are some of the statutory benefits and paid leave requirements to keep in mind, as well as how an employer of record can support your company’s benefits strategy.
The Maternity Protection Act ensures that female employees suffer no financial disadvantages as a result of maternity.
Expectant mothers may not work for six weeks prior to their due date unless they have declared that they agree to do so. They also may not work for eight weeks after giving birth or 12 weeks for premature or multiple births. During the period of leave, employees are eligible for maternity benefits from health insurance.
Employees who work a five-day workweek are entitled to a minimum of 20 days per year in addition to public holidays, and those who work a six-day week are entitled to 24 days plus public holidays. Collective bargaining agreements or works agreements may grant additional days off. It’s typical for German employees to have five to six weeks of paid annual leave.
Ten holidays are observed nationwide:
- New Year’s Day
- Good Friday
- Women’s Day
- Easter Monday
- Labor Day
- Whit Monday
- German Unity Day
- Christmas Day
- St. Stephen’s Day
There are also holidays specific to individual regions.
Employees are not entitled to extra pay if they are required to work on a public holiday but they are entitled to a day of rest as compensation.
In the event of illness or accident, the Continuation of Remuneration Act gives employees the right to receive sick pay up to 100% of salary for six weeks.
If the six-week limit is reached, employees are entitled to receive a sickness allowance paid by their statutory health insurance plan.
Health insurance for German employees is funded by the national social security system, but some professionals, especially executive employees, often request supplementary health and life insurance or an allowance in lieu of additional coverage.
As your employer of record in Germany, we may be able to provide optional supplementary medical insurance coverage for professionals and their dependents at a more cost-effective rate.
In addition to medical care, the German social security system funds numerous benefits like pensions insurance, unemployment insurance, nursing care insurance and accident insurance.
Employer social costs will cover a large portion of employee benefits in Germany, but we can consult with you about supplemental coverage options, such as additional pension contributions or life insurance, if needed.
Employee onboarding with an employer of record in Germany
We write and validate all local employment contracts, streamlining the onboarding process for you and your German employees—all you have to do is provide relevant information and review and approve the employment agreement.
As your employer of record in Germany, we will:
- Schedule a welcome call to discuss HR and employment information for Germany, as well as answer any questions
- Prepare a customized employment contract in English and in German (or other local language)
- Share the employment contract and benefits information with the new employee for signature and review
- Gather tax and banking information from the employee to set up payroll
- Provide a local point of contact to the employee to answer any questions regarding their employment, local HR or payroll
The entire onboarding process for the employee can often be completed in as little as two weeks.
Partner with Safeguard Global as your Germany employer of record and PEO
With over a decade of service, we are the longest-serving employer of record and PEO provider in the international market. Organizations around the world rely on Global Employment Outsourcing (GEO) to expand and hire in over 179 countries around the world, quickly and compliantly.
We’ve seen just about every global employment circumstance imaginable—and with our extensive knowledge of local law and culture, we know what it takes to get employment right in Germany. We provide written contracts in the local language, salaries in the local currency and HR support in your employees’ time zone.
Additionally, as a global payroll provider we support payroll administration—including payments, filings and other calculations—in more than 150 countries and can accommodate the payroll outsourcing needs of any size organization.
Whether you’re looking to hire as part of a strategic expansion or to meet specific talent needs, our global solutions advisors can walk you through your international hiring options so you can make the right choice for your organization. Contact us today.
The information provided on or through this website is for informational purposes only and does not constitute legal advice. Safeguard Global expressly disclaims any liability with respect to warranty or representation concerning the information contained herein, including the lost essence, interpretation, accuracy and/or completeness of the information in transit and language translation.
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