German Employment Regulations and Implementation Practices
Recently, Slasify was invited to speak at an online webinar organized by HiredChina about hiring in Germany. During the event, Slasify delivered an insightful presentation for companies interested in hiring in Germany. The session covered essential information on employment regulations and compliance requirements that need to be addressed before hiring in Germany. Additionally, it highlighted how Slasify can assist businesses in expanding to Germany and included compelling case studies. This article summarizes the key points from that presentation.
Why Germany?
| Economic Strength | Germany is the third-largest economy globally and the largest in the EU, making it a prime destination for business expansion. |
| National Characteristics | Germans are known for their hard work, discipline, and efficiency. They value preparation and work-life balance, preferring openness and equality over hierarchy. This cultural difference necessitates adjustments in business interactions. German management styles emphasize fixed norms and direct, fact-based decision-making, contrasting with the more flexible and hierarchical approaches seen in some other cultures. |
| Leading Technologies | Germany excels in manufacturing, automotive, industrial manufacturing, chemicals, pharmaceuticals, financial services, engineering, and construction. Many German companies have branches in China, making them familiar to Chinese businesses. This technological prowess and established presence offer a solid foundation for new businesses entering the market. |
Key Steps for Expanding into Germany
| Market Research: | Entering the German market can be done through entity establishment, joint ventures, and M&A investments. HRBP must clarify overseas goals with the CEO to set a foundation for these actions. |
| Resource Integration and Strategy | Companies need to decide on short-term business trips, long-term stationing, or local recruitment. Short-term trips require a Schengen visa, while long-term stays involve work visas or EU Blue Cards. HRBP must support company registration, including managing travel, wages, social security, taxation, and other matters. Slasify’s strategic partners can assist in navigating the complex registration processes, such as opening bank accounts, financial verification, and compliance with VAT numbers, import/export certificates, and tax returns. |
| Cultural Exchange and Collaborative Initiatives | Cultural activities like Oktoberfest, football matches, and concerts can impact work plans. Companies should manage attendance accordingly and respect private time after work hours |
Compliance in Germany
Compliance is crucial in Germany, focusing on labor relations, labor conditions, and payroll management. Labor relations cover recruitment, employment, and contracts. Labor laws include wages, working hours, and vacations. Payroll management involves social insurance, personal income tax, and employee resignation and retirement matters.
Recruitment in Germany: Five Recruitment Channels
1. Local Headhunting: Usually requires more than 30% of the annual salary as a fee.
2. Social Networking: Platforms like LinkedIn and WhatsApp are popular for recruitment.
3. Employee Recommendation Programs: Offering incentives, often additional time off rather than monetary bonuses.
4. Campus Recruitment: Engaging with universities and professional colleges.
5. Local Exhibitions: Participating in events in major cities like Frankfurt.
Hiring in Germany
While oral agreements are legally binding, written contracts are recommended. Labor contracts can be fixed-term or irregular, with specific rules for termination and probation periods. Part-time and shared work models are also common, supporting work-life balance.
Labor Contracts and Conditions
The Evidence Act mandates 15 necessary points in labor contracts. Contracts must be signed within one month, in writing, and by both parties. The minimum wage is currently 12.4 euros per hour, expected to rise. Employers typically pay monthly salaries in euros, with no statutory bonus system but an annual salary often covering 13 months.
German Salary
Germany introduced a minimum wage standard of 8.5 euros per hour in 2015. This year, it has increased to 12.4 euros per hour, with an expected rise to 12.82 euros next year. Salaries must be paid monthly in euros. Although there is no statutory bonus system, it is customary for annual salaries to cover 13 months, with a year-end bonus equivalent to one month’s salary typically given during New Year’s Day and Christmas. Employers can also design incentive bonuses for top executives to attract and retain talent.
Working Hours and Vacations
Standard working hours are 8 hours per day, with a maximum of 10 hours. The typical workweek is 40 hours, with mandatory breaks and restrictions on Sunday work. Overtime and holiday work are compensated at higher rates. Paid annual leave is generous, usually 20-30 days, with additional leave common in labor agreements.
Social Security and Personal Tax
Germany’s social insurance system includes medical insurance, supplementary medical insurance, long-term care insurance, pension insurance, and unemployment insurance. Personal income tax rates range from 14% to 45%, with additional solidarity and religious surtaxes.
Retirement and Termination
Terminating employees in Germany is challenging due to strict dismissal protection laws. Employers must give advance notice, with specific rules for probation periods and long-term employees.
How Slasify Can Help
1. Coverage: Services in over 150 countries.
2. Online Platform: Tools like the German punch-in system to meet specific country requirements.
3. Quick Response: Timely feedback and efficient problem-solving.
4. Quick Onboarding: Onboard local employees in as fast as 48 hours.
5. Various Service Plans: Customised solutions, including global contractors, employer of record (EOR), and global payroll.
Slasify’s Commitment to Supporting Employers
Slasify remains dedicated to guiding you through these regulatory changes. With our expertise, resources, and support, we’re here to help your transition be as smooth as possible, ensuring your business operations are both compliant and optimised for Japan’s evolving legal landscape.
For further assistance or detailed discussions on how these changes impact your specific situation, reach out to us. Together, we can navigate these complex updates, ensuring your business continues to thrive in a dynamic global market. Schedule a personalised consultation today!
Slasify is a one-stop platform offering Global Payroll, Employer of Records (EOR), and HR Outsourcing functions for the remote working generation. Our dedication to Diversity, Equality, and Inclusivity (DEI) and a proven track record with Forbes Top 100 Companies make us your ultimate payroll partner. Join us on a global HR journey, where we cater to your needs across 150+ countries. Unlock HR solutions tailored to you – Book a free consultation today!
