How to hire and pay EMPLOYEES IN

Germany

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Before hiring

EMPLOYEES IN
Germany

Before hiring employees in Germany, there are a few important things you’ll need to know. If you’re looking at establishing a business entity in Germany, you should know that it can take up to six months to get started. Because of the volume of financial filings, it’s typically recommended to work with a tax advisor. 

It’s mandatory for health insurance to be provided to German employees and this can be done through either a public or private outlet.

We know this might sound overwhelming—but it doesn’t have to be. A solution like Oyster eliminates the barriers for you. With Oyster, you can automate compliance across 180+ countries, easily managing HR and payroll—all in one, easy-to-use platform. 

Get an overview of what you need to know when hiring in Germany below.

At a Glance

CURRENCY

EUR

OFFICIAL LANGUAGE

GERMAN

PAYROLL FREQUENCY

MONTHLY (Paid around 25th of the month)

PUBLIC HOLIDAYS

9

(based on region;
see here
)

EMPLOYER TAXES

~21%

of gross salary

13th / 14th SALARY

Not mandatory, but a 13th salary is paid as an end of year bonus in some agreements

Good to know

  • German companies are only allowed to employ someone on behalf of another company under their Labour Leasing Law called the AÜG ("Arbeitnehmerüberlassungsgesetz"). This gives the employee the same rights as any other, but their contract is limited to 18 months in length. That said, employees can have an unlimited contract length if they’re employed by a non-German company who is licensed to work in Germany. 
  • Health insurance is mandatory in Germany and can be provided through either a public or private scheme. It is uncommon, however, to reimburse additional private insurances like dental and vision, as these would be taxable. Pensions are common and employers often contribute to private pension funds on behalf of their employees.
  • Overtime payments are required to any worker who works over 48 hours per week, unless the employee already earns over a certain amount. This is around ~€70-80K p.a. depending on the region.

Employment in

Germany

Working hours and overtime

Employees work a maximum of 40 hours a week—typically eight hours a day. Employees in Germany must be given at least 11 hours of resting time between two working days.

In Germany, overtime has to be specifically stated in an employee's contract, and higher wage earners are not eligible for overtime payments. The salary cap for overtime payments ends at ~€80K p.a. in Western Germany or ~€70K p.a. in Eastern Germany.

Employment contracts

Employment contracts should be written in German.

Probationary period

A common probation period in Germany is three months, though it can be up to six months.

Pensions

In Germany, pensions are common and employers often contribute to private pension funds on behalf of their employees.

Notice period

In Germany, an employee must be informed (in writing) four weeks in advance of separation during the first two years of employment. After that, the notice period increases depending on the employment duration.

Non-compete agreements

Non-compete agreements in Germany must be limited in scope and duration, and must include compensation for the entire non-compete period. They must amount to at least 50% of the latest salary of the employee (including any bonus payments and gratuities).

The employer may waive the non-compete before termination, but the obligation to pay the necessary compensation continues for a period of 12 months following the declaration of the waiver.

Employment cost calculator

Holidays

01 Jan

New Year's Day

24 May

Whit Monday

02 Apr

Good Friday

03 Oct

Day of German Unity

05 Apr

Easter Monday

25 Dec

Christmas Day

01 May

Labour Day

26 Dec

2nd Day of Christmas

13 May

Ascension Day

01 Jan

New Year's Day

02 Apr

Good Friday

05 Apr

Easter Monday

01 May

Labour Day

13 May

Ascension Day

24 May

Whit Monday

03 Oct

Day of German Unity

25 Dec

Christmas Day

26 Dec

2nd Day of Christmas

Employer tax

An employer can expect to contribute about 20.7% on top of an employee’s salary to social security. This includes pension contributions, health insurance, unemployment insurance, nursing care insurance, and accident insurance. 

Individual tax

Employees in Germany are taxed federally from 0% to 45% depending on their income bracket. Social security contributions total 14.7% and include contributions for pension, health insurance, unemployment insurance, and nursing care insurance. 

Termination of employment

In Germany, employees who have worked at a company with more than 10 employees for more than six months can only be terminated for certain causes. An employer must provide written notice of termination, and the decision of the employer can be legally challenged by the employee in court. 

Even though there is no statutory severance in Germany, in practice, many employers and employees will agree on severance pay provisions to avoid court proceedings. This severance will often amount to 50% of the monthly salary per year of service. This can vary depending on the strength of the case for dismissal and the previous practice of the employers. In Germany, it’s typical for companies to pay severance packages of up to six months of an employee’s salary to settle termination of employment.

Start hiring employees in

Germany

Setting up a business entity everywhere you want to hire a new employee isn’t scalable—it takes too long and the legal fees are high. At the same time, understanding and adhering to the local labor laws and employee expectations can be complex and time consuming. And it’s hard to find reliable information on up-to-date employment information for all the countries where you’re considering hiring. Not to mention tracking down invoices and managing employee contracts over email and spreadsheets—that gets messy fast. 

We can’t afford to take risks when it comes to compliance—we need to make sure we follow the local guidelines, especially when it comes to taxes and legalities. 

With Oyster, you can manage HR and payroll, and automate compliance across 180+ countries—all in one, easy-to-use platform.

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wherever they work in the world.

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