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Last updated at September 07, 2022
A beautiful view of Germany

Currency

Euro (EUR)

Capital

Berlin

Time Zone

GMT+1

Key Country Facts

Introduction

Germany, officially the Federal Republic of Germany, is one of Europe’s largest countries. With a population of over 83 million people, it is the most populous country in the European Union (EU). Known for its highly skilled workforce and high levels of innovation, the German economy is the world’s fourth largest by GDP.

Area

Germany lies between the Baltic Sea and the North Sea to the north and the Alps to the south. It has international land borders with nine other countries.

Climate

Germany’s climate is moderate and generally has no extreme or longer periods of cold or hot weather. Coastal areas and Northern Germany have a maritime-influenced climate, typically with warm summers and mild cloudy winters. Further inland, the climate is continental, marked by greater seasonal variations in temperature. This region has warmer summers and colder winters.

Culture

Germany is known for its long and rich cultural history. The country has significantly contributed to European art, music and intellect throughout history. While Germany exerts its influence on each of the countries it borders, these cultures have also had a hand in shaping culture in today’s Germany.

Religion

Latest census records identify Christianity as the largest religion in Germany, with just over 50% of Germans identifying themselves as Christian. The Christian population is split, more or less, evenly between Protestant (primarily Lutheran) and Catholic. Islam is the next largest religion among Germans, practiced by approximately 5% of the population. Just under 40% of the German population has no religious affiliation.

Official Language

German is the official and predominant spoken language in Germany. Turkish, as an immigrant language, is spoken by approximately 2% of the population. Most Germans now learn English as a second language. English is spoken fluently among younger populations in Berlin, Hamburg and other urban centers.

Germany HR at a Glance

Employment Law

Employment relationships in Germany are governed and regulated by:

  • Statutory laws
  • The employment agreement
  • Collective agreements (if any), such as works agreements with the works council or collective bargaining agreements (CBAs) with the union.

Employment Contract

The terms of the employment (e.g. working hours, remuneration, holidays and benefits) are usually agreed on in a written employment agreement. Except for fixed-term employment and non-compete obligations (which must be in writing), verbal agreements are also permissible, but are not recommended. In addition, the employer is obliged to provide a written statement of the employment terms to the employee within one month of the commencement of employment. The written statement must include, in particular:

  • Start date of the employment
  • Usual work location
  • Brief job description
  • Salary and other elements of the remuneration, and the due dates of such payments
  • Working hours
  • Rest times
  • Annual holidays
  • Notice period
  • Applicable collective agreements
  • Procedures in the event of termination

For indefinite-term contracts, there must be documentation showing evidence of wet signature prior to the start date of the employee.

Employment agreements often include additional provisions, such as:

  • The flexibility to assign other comparable duties
  • Confidentiality provisions
  • Non-compete requirements for approval of other occupations
  • Provisions regarding the return of company property
  • The deadlines to claim rights based on the employment relationship

Contract Terms

The terms of an employment contract may not provide for lesser conditions than any minimum legal entitlements established in employment legislation or by the applicable collective agreement.

Probation Period / Trial Period

Probation periods are permitted up to six months in length. During the probation period, both parties are entitled to offer two weeks’ notice of termination.

Working Hours

An average working week is considered to be from 38 to 40 hours. Workdays are typically eight hours and should not exceed 10 hours. There is a statutory maximum of 48 work hours as the weekly average in any six-month period. There must always be an uninterrupted minimum break of 11 hours after each workday. Special permission is required in order for work to be performed on Sundays and official holidays in Germany.

Overtime

No overtime rate is set forth by statute, instead that is subject to contractual agreement. Overtime is largely regulated by standard contract term provisions. The agreement needs to be fair. Any provision incorporating overtime into overall wages must outline a defined amount of overtime.

Bonus

Bonuses are common but due diligence should be taken to ensure clear and objective language in the contract or within addendum to the contract. For example, schemes may refer to a bonus as entirely discretionary. In practice, as soon as a bonus has any relation to performance, it becomes very difficult for the employer to maintain it as entirely discretionary in the eyes of the law.

Notice Period

The employer is obliged to provide the employee according to these guidelines:

Length of Employment

Length of Notice
During probationary period two weeks’ notice at any time
After or without probationary period four weeks’ notice to the 15th of the month or to the end of the calendar month
After two years’ service one month’s notice to the end of the calendar month
After five years’ service two months’ notice to the end of the calendar month
After eight years’ service three months’ notice to the end of the calendar month
After ten years’ service four months’ notice to the end of the calendar month
After 12 years’ service five months’ notice to the end of the calendar month
After 15 years’ service six months’ notice to the end of the calendar month
After 20 years’ service seven months’ notice to the end of the calendar month

 

The Employee is obliged to give the Employer the following notice:

Length of Employment Length of Notice
During probationary period two weeks’ notice at any time
After or without probationary period four weeks to the 15th of the month or to the end of the calendar month

 

Termination

In most instances the Dismissal Protection Act (“Kundigungsschutzgesetz”) will be applicable (once the employee is employed for more than six months) and this act states a termination is only effective on the following grounds:

  • conduct related (malperformance or misconduct)
  • personal (such as a long standing illness) or
  • operational reasons.

Certain employee groups enjoy special protection against termination, such as pregnant employees and mothers within four months after the birth of the child, employees on parental leave or caregiver leave, severely disabled employees, works council members and data protection officers.

The termination notification must be provided in writing (e.g. signed in ink by a duly authorized representative of the employer) but it does not need to state the reasons for the dismissal. The dismissal letter must be delivered to the employee in its original form. If there is a dispute, the employer is required to provide evidence of the proper and timely delivery of the dismissal notification.

Post-Termination Restraints

Any post-termination restraints must be concluded in writing. Those that protect the employer’s legitimate business interests are generally enforceable, if reasonable.

  • Non-competes are typically set for no longer than six to 12 months, with a statutory maximum of two years. Employers are required to compensate 50% of the employee’s wages during the non-compete period
  • Customer non-solicits are permissible in few circumstances.
  • Employee non-solicits are permissible only if the parameters relate to illegal poaching. An agreement that restricts the hiring of employees from a certain business is not enforceable.

Severance Pay

There is no statutory severance pay in Germany. A valid dismissal will end the employment without compensation, unless the agreement is part of a collective restructuring covered by a social plan agreed with the works council. An invalid dismissal in Germany will lead to an enforced reinstatement by the labor courts, unless a settlement is agreed upon. Settlements are standard in Germany. The general formula grants the employee between 1 and 1.5 times the monthly salary per year of service. There is no maximum threshold set on settlements.

There is no statutory right for the employer to pay the employee in lieu of notice. As for garden leave, the right depends on contract terms and merits of the case. This weighs the interests of both parties. Garden leave is common for senior employees in Germany.

Fixed Term Contracts

Fixed-term contracts are only permissible for objective and material reasons. However, contracts with a term of two years or less are exempt from this ruling. Within this period, the maximum number of successive fixed-term contracts is four. Fixed-term contracts and contracts under ‘AüG’ license must be signed in original, hard copy, wet ink signature.

Tax and Social Security

Personal Income Tax (PIT)

Income tax in Germany is calculated by applying a progressive tax rate schedule to taxable income as follows:

Taxable Income Bracket   Tax Rate
From (EUR) To (EUR) %
0 (0*) 10,347 (20,694*) 0
10,348 (20,696*) 58,596 (117,192*) 14-42
58,597 (117,194*) 277,825 (555,650*) 42
277,826 (555,652*) No limit 45

*figures in brackets denote married couple filing a joint return

In addition to the rates above, the following tax and surcharge are levied on all types of income:

  • Solidarity surcharge: 5.5% of the income tax if the income tax exceeds EUR 16,956 (single/separately assessed taxpayers) or EUR 33,912 (married/joint tax assessment)
  • Church tax: 8 or 9% of the income tax: church tax is only levied if the taxpayer is a member of a church that is recognized for church tax purposes.

The following categories of income are exempt from tax:

  • certain payments from health or accident insurance
  • certain social security benefits including unemployment benefits and maternity grants
  • kindergarten fees if certain conditions are met

In case a secondary household is established in Germany for business purposes, the following payments are exempt from taxation under certain circumstances:

  • home trips (once per week)
  • meal allowances (up to certain amounts and subject to certain time limits)
  • rent at the place of work (actual costs but limited to EUR 1,000 per month).

If certain other conditions are met, rental cost incurred for the employee, meal allowances and commuting expenses can generally be reimbursed tax-free.

Wage tax is due monthly and must be withheld from the salary by the employer. Other categories of income where prepayments may be due will be assessed by the authorities. These will be paid by the individual.

Interests, dividends and capital gains on stocks are subject to a flat tax of 25%, plus a solidarity charge.

Social Security

The employer is required to make social security contributions as follows:

Rates for 2022

Insurance Employer Contribution % Employee Contribution % Charged up to an annual income ceiling of:
Pension insurance (Rentenversicherung) 9.3 9.3 EUR 84,600 (West), EUR 81,000 (East)
Unemployment insurance (Arbeitslosenversicherung) 1.2 1.2 EUR 84,600 (West), EUR 81,000 (East)
Health insurance (Krankenversicherung) 7.3 + 0.8 7.3 + 0.8 EUR 58,050
Accident insurance 1.5
Employer allocation health insurance 2.9
Nursing insurance (Pflegeversicherung) *supplement 0.35% for childless individuals over 23 years of age 1.525 1.525 (+0.35 for childless employees) EUR 58,050

+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 by GoGlobal will differ.

Employees

Salary Payment

Normally paid monthly on or around the last workday of the month, salary payments must be issued by electronic transfer.

Payslip

If an employee has an employment contract, then a written salary payslip showing gross payments and full details of deductions is a legal requirement.

Timesheets and Record Keeping

In 2019, the European Court of Justice stated companies must set up an objective, reliable and accessible system to record the working time of each employee.

Annual Leave

There is a minimum entitlement of 20 days per annum for full time employees. However, many employees are provided with a greater number of days. Common practices call for 25-30 days among white collar employees.

Holiday leave should, under normal circumstances, be used in the same year it is granted. Carry over is only permissible if urgent to business operations or for urgent personal reasons for the employee. However, all carry over must be agreed by both the employer and the employee. Any leave carried over must be used within the first three months of the new holiday year.

Public Holidays

German public holidays, between 9 and 12 days each year, are determined by each federal state. German Unity day is an exception to this. There is, in principle, a ban on working on public holidays, for which there are only a few exceptions. Holidays are normally observed on their calendar day.

Sick Leave

Employees are entitled to receive the full remuneration from their employer for up to six weeks of sickness. This is subject to certain conditions. Afterwards they can apply for sick pay with the statutory (or voluntary private) health insurance for up to 72 weeks.

Maternity & Parental leave

Women must not work for a period of six weeks before giving birth and eight to 12 weeks after.

A woman is entitled to 14 weeks’ maternity pay, which is equal to the last salary. This is funded by the employer with a contribution from the employee’s health insurance.

Mothers and fathers are entitled to parental leave of up to three years. Parental leave is paid by the state for 12 months (14 months if the other parent takes at least two months) with a 67% net payment rate. Furthermore, 24 months of unpaid parental leave is possible, with the employee still enjoying full protection of the workplace and the right to return to work.

While on parental leave and subject to certain conditions, the employee is entitled to take up part-time employment. This can be set for up to 30 hours per week, either with the original or with a different employer. In the latter case, the permission of the original employer is required. At the end of parental leave, the employee has the right to return to work on their original terms and conditions.

Employees who are pregnant, on maternity leave or on parental leave have additional protections against termination.

Nursing Care Leave

Employees who need to provide acute care for a child or adult dependent are entitled to up to 10 days of caregiver leave from the employer. Employers may be required to continue salary payment if this term exists in a bargaining agreement or the employment contract. If not paid, employees can claim a subsidy from the state under the nursing insurance social provision.

Compassionate and Bereavement Leave

Any leave other than statutory leave periods is generally subject to individual negotiations or may be part of CBAs or works council agreements. This includes compassionate leaves or leave when relocating.

Benefits to the Employee in Germany

Statutory Benefits

Social security contributions underwrite excellent social welfare protections in Germany, ranging from unemployment benefits of up to 67% of previously received net salary to one of the best and most comprehensive healthcare systems in the world. This system provides residents of Germany with insurance coverage for healthcare, sick pay and long-term nursing care.

The employee can choose between different statutory health insurances. Only employees with an income higher than the annual remuneration thresholds (62,550 Euros in 2020) are exempt. They can become members of private health insurance plans. In all cases, the contributions will be shared equally by the employer and the employee.

Other Typical Benefits

Different types of bonus payments and other benefits are common, all of which must be negotiated individually or are typically part of CBAS or works council agreements. These include company cars, car allowances, gym memberships, group accident insurances, ‘Jobticket’ (subsidized commuter passes), childcare arrangements or additional allowance for sick pay.

Transportation

If an employee’s role requires a lot of business travel and a company car is not provided, it is common practice for the employer to pay a car allowance.

The car allowance is a normal taxable amount, like gross salary. The amount can be dependent on how many business trips the private car will be used for and which kind of car will be used. Typical allowances range from EUR 500 to EUR 800 per month but can also be as high as EUR 1,400 per month in certain circumstances.

The employer is still allowed to pay an additional mileage rate of EUR 0.30 per kilometer for all business-related kilometers driven with the private car. This mileage rate is tax free.

Visas and Foreign Workers

General Information

To be eligible to work in Germany, an individual must either have a work/residence permit and a work visa. While not everyone is subject to the visa requirements, everyone is required to have a residence permit or work permit.

  • Residents of the following jurisdictions do not need a visa to work in Germany: EU/EEA, Australia, Canada, Israel, Japan, Republic of Korea, New Zealand, Switzerland, USA.
  • Individuals from the EU/EEA, Switzerland, Liechtenstein, Norway or Iceland will not need a work visa to enter Germany for employment purposes. They just need to register their residence once they arrive in Germany, using a passport or valid ID.
  • Those from Australia, Israel, Japan, Canada, South Korea, New Zealand or the USA do not need a work visa to enter Germany nor do they need to have a job offer prior to entering Germany. But they do need to apply for a residence permit at the Foreigners’ Office upon their arrival in Germany.
  • Anyone who is not a resident of any of the aforementioned countries will be required to apply for a work visa in order to enter Germany and start work. They must also apply for a residence permit for work purposes upon their arrival in Germany.

Visas can currently only be issued in the specific exceptional cases listed below:

  • Healthcare professionals, health researchers and professionals in elderly care
  • Transport personnel employed in the movement of goods, seasonal workers, sailors (for transit)
  • Temporary visits
  • Diplomats, staff of international organizations, military personnel, humanitarian aid workers in the exercise of their functions
  • Passengers in transit
  • For humanitarian reasons or protection
  • Family reunification.

Applications from skilled workers and highly qualified workers from the following categories are as follows:

  • skilled workers with a specific job offer (in accordance with the legal standards)
  • scientists and researchers
  • secondments and in company transfers restricted to managers and specialists
  • senior employees
  • IT experts
  • employment in particular public interest

Entry as a skilled worker or highly qualified employee is conditional on proof of an obligation to be present in Germany (e.g. employment contract) along with prima facie evidence that employment is necessary from an economic perspective. There must also be evidence that the work cannot be postponed or carried out from abroad. This verification can be provided by the employer or contractor. Economic necessity refers to economic relations of Germany or that of the single market. Individuals will need to carry the relevant documentation and present it to border control personnel.

Public Holidays in 2022

S.No Occasion Date
1. New Year’s Day January 1st
2. Good Friday April 15th
3. Easter Monday April 18th
4. Labour Day May 1st
5. Ascension Day May 26th
6. Whit Monday June 6th
7. German Unity Day October 3rd
8. Christmas Day December 25th
9. Boxing Day December 26th

*above mentioned holidays are nationwide – regional and local holidays may apply in certain states of Germany

 

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