Payroll and HR in Germany

Payroll and HR in Germany

Local Information

Local Time (LIVE):5:57 PM
Local Currency:$1 = €0.88
Business Language(s):German, English
Tax Year Dates:1st January – 31st December

 

If you’re thinking of expanding your business to Germany, you’re in good company – 22,000 foreign enterprises have established businesses there. As Europe’s largest national economy and one of Europe’s most cost-effective production locations, Germany presents endless opportunities for growth. Among the country’s main exports are cars and vehicle parts, medical goods and aircraft machinery.

Part of the reason for Germany’s historic economic success is its proximity to other wealthy European nations. The country is bordered by the Netherlands, Belgium, Luxembourg, France, Switzerland, Austria, Czechia, Poland and Denmark, revealing its central position within the continent. Germany also has a famously reliable public transport network, and 31 airports. The largest airport, Frankfurt International Airport, offers flights to more than 300 destinations in almost 100 countries.

Business owners who feel that expansion into Germany is the right move for their company will need to ensure the business is payroll and HR compliant in Germany. To achieve this, you need an international employment specialist by your side. That’s where FMP’s HR and payroll services come in.

Working & Living in Germany

For information on what it’s like to work and live in Germany, check out our Living & Working in Germany Guide.

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Details correct at time of publication. You should not rely on these details without first seeking professional international advice.

Employer Must-Dos

In Germany, the following reports must be submitted to strict deadlines:

  • Social Security Statements (Beitragsnachweise)
  • Withholding Tax Statements (Lohnsteueranmeldung)
  • Accident Insurance (Berufsgenossenschaftsmeldung)

Payroll in Germany

What tax considerations are there?

In Germany, the tax system can be quite overwhelming when it comes to maintaining compliance.

Personal income tax (PIT)

In Germany, residents are subjected to income tax on their worldwide income, whereas non-residents are only subjected to tax on income derived from within Germany. Income tax is charged at a progressive rate and varies between employees depending on their personal circumstances. Single individuals must pay income tax as soon as they earn more than €9,408 annually, whereas married individuals must pay income tax when they earn more than €18,816. The starting rate for both is 14%, then it increased to 42% and finally 45% for those on the highest salaries.

There is also a social security system in Germany which is structured and paid in equal parts by employees and employers.

Corporate income tax (CIT)

CIT applies to all German companies on their worldwide income, and on foreign-resident companies on their income derived from Germany. CIT is charged at a flat rate of 15%, however, there is an additional surcharge of 5.5% on this. This means the overall corporate income tax rate is 15.825%. In addition to this, there are other taxes businesses are subject to, such as trade and turnover tax.

HR in Germany

What are the regular working hours in Germany?

In Germany, there is a lot of flexibility when it comes to working hours. Employees are allowed to work 8 hours a day, with Saturday considered to be a usual working day (48 hours a week). Overtime must be compensated with time off. On Sundays, most businesses are closed with the exception of businesses such as petrol stations.

Vacation, maternity and sickness

Those working a five day week in Germany are entitled to 20 days of annual leave, and those working a six-day week are entitled to 24 days. Most employers offer employees between 27 and 30 days annually, however. In addition to annual leave, there are nine national holidays on which employees are not expected to work, depending on their sector. There are additional regional holidays in different areas of Germany also.

Pregnant employees in Germany are entitled to 14 weeks of maternity leave. Six weeks of this must be taken prior to the birth, and the remaining eight weeks afterwards.

During the first six weeks of sickness, employees are entitled to time off with full pay. After this, the employee will receive statutory sick pay which is 70%, for a maximum of 78 weeks.

Termination

If an employee or employer wishes to terminate the contract, the minimum notice period must be given. This starts at four weeks prior to the 15th of the month.  An employee who is employed for more than 6 months can be terminated only for a reason permitted by the German Termination Protection Act, such as unlawful activity.

business in munich

HR and Payroll in Berlin

As Germany’s capital and largest city, Berlin is home to around 3.7 million people. Expats from all over the world call Berlin home, and an estimated 40,000 people move there every year. As a multi-cultural, economic hub, it will come as no surprise to learn that Berlin is the fastest-growing city in Germany when it comes to start-up businesses.

In addition to its varied opportunities, Berlin is attractive because of its relatively low living costs – including low rent –  world-class dining, bustling nightlife and its English-speaking population. Access to generous funding, a growing population, and access to a diverse, skilled workforce makes Berlin an ideal place for setting up a business in Germany.

HR and Payroll in Munich

Those considering opening a business, or expanding an existing business into Munich will benefit from a number of helpful initiatives that are on offer in the city. This begins with the Point of Single Contact (PSC) office, where it is free to make an appointment and ask any questions you may have about doing business in Munich. This service is available in German and English.

Business-owners also benefit from a relatively low corporate income tax rate and excellent transport connections throughout Germany and beyond. Munich is home to 17 higher education institutes, making it the second-largest university hub in the country. This means employers have access to a varied and talented workforce.

HR and Payroll in Frankfurt

Known as the finance hub of Germany, Frankfurt is a popular business destination among bankers and investors. It’s home to the offices of more than 150 foreign banks, one of the largest stock exchanges in the world, and a number of business consultancy firms. The economic strength of Frankfurt is not the only reason why businesses choose to set up shop in this part of Germany; the city is also in an advantageous strategic location. No destination in Europe is more than a few hours away via autobahn, air, or rail.

Want more information?

If you want to know more about international payroll and the implications and considerations that come along with it, download our free guide to international payroll today.

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FMP’s HR and Payroll Services for Germany

At FMP Global, our German HR and payroll services are designed for businesses looking for a legally compliant payroll and HR team who know the ins and outs of German legislation. Whether in Berlin, Munich or Hamburg, we can help tailor a service suited to your business’s needs and requirements. Our cost-effective services include but are not restricted to:

  • Payroll Processing
  • Regulatory Compliance
  • Benefits Administration
  • Handling of payments (salaries & social charges)
  • Pension Administration
  • Payroll Audit Assistance
  • WebCentre Services
  • Legal Entity Services
  • Employment Contracts
  • Business Visa Applications
  • Work Permit Applications
  • Legal Advice/Services
  • Translation Services
  • Assistance with start-up (in link with lawyers)
  • Monthly Master Report
  • Employee Registration with German Health Insurance
  • Tax advice, Bookkeeping & Accounting

Stay Compliant - Payroll and HR Services in Germany

Our specialist in-country teams will help ensure you meet the mandatory requirements of payroll and HR processes in Germany. So, let us help guide the way.

Start your German Expansion Today