Visas and Work Permits — 9 min
Germany is well-known for its highly educated and skilled workforce, as well as a strong culture of excellence in many industries. In addition, the country boasts a stable, open economy with supportive laws and regulations to promote business success and development in the European Union. This makes it an attractive destination for businesses looking to hire German employees or expand into the region.
Furthermore, Germany's multicultural and diverse population makes it an especially appealing destination for businesses wanting to leverage different talents and skills. However, handling hiring, payroll, and employee management while complying with German labor laws can be challenging.
This guide provides a comprehensive overview of German employment law. It also provides insights into statutory employment rights, managing employee offboarding, and employee misclassification risks in Germany. Following these insights will enable you to attract and retain top talent in Germany while remaining compliant.
To ensure the protection of employee rights and guarantee fair treatment in the workplace, it is critical to understand and adhere to Germany's stringent labor laws. This will help your business remain compliant and avoid legal complications.
Employment laws in Germany are largely uniform across the country, as the federal government sets them. The states still have an impact on the creation and changes to laws as they participate in the law-making process.
Overall, federal statutes, court decisions, work councils, collective bargaining agreements, and different industrial practices govern the employment laws in Germany.
Before hiring a German employee:
Register your company in Germany.
Apply for an employer identification number.
Set up a German bank account.
Comply with employment and labor law in Germany.
Obtain liability insurance coverage.
Make arrangements for social security and pension contributions.
Determine the terms of employment, including the salary, working hours, vacation entitlements, and any benefits.
Set up systems to handle employees' visa and residency requirements.
Alternatively, you can use the support of a global employment partner like Remote, who will provide assistance with hiring, payroll services, compliance management, and HR-related tasks and help you mitigate permanent establishment risks.
Remote simplifies the process of employing in Germany. Remote's service includes localized contracts, streamlined invoice management, and unparalleled compliance support, enabling you to expand your global workforce with peace of mind.
Remote has its own legal entity in Germany which handles onboarding, benefits, payroll, taxes, and compliance for your team members in the country. Read Remote's guide about employing in Germany to further explore your options for hiring employees in the country.
The calculator breaks down each line item, including statutory benefits, according to German labor laws. This tool makes it easier for organizations to budget and plan for global hires.
Statutory employment rights in Germany refer to the legal rights and protections that are established by German laws to safeguard the rights and interests of employees in Germany. These rights include the minimum wage, working hours, paid annual leave, protections against discrimination, and the right against unjust termination.
You must abide by these laws, and any violation of these rights can result in legal action. The German labor courts play a significant role in interpreting and enforcing these rights, ensuring that employees have access to fair and just treatment in the workplace.
Overall, the statutory employment rights in Germany aim to balance the interests of both employees and employers, promoting a stable and fair work environment.
As of October 1, 2022, the minimum wage in Germany stands at €12 per hour.
In Germany, the government sets a minimum wage that must be paid to all workers. Failure to pay the minimum wage can result in penalties assessed by the German government.
It is important to remember that the minimum wage should be viewed as the baseline. It is not necessarily indicative of the total compensation an employee deserves for their skills and experience.
If your business is positioned to do so, it's always worthwhile to consider paying beyond the minimum wage, as it can help you attract and retain talented employees in the long run.
The standard working hours in Germany are generally limited to a maximum of eight hours per day or 40 hours per week. This may differ slightly with collective agreements. The majority of full-time jobs in Germany are five days a week, from Monday to Saturday. Companies also need to ensure that employees receive a minimum of 11 hours of uninterrupted rest every 24 hours.
Germany has no statutory mandate on overtime compensation. However, regulations require employers to document all employee overtime hours as well as hours worked on public holidays and Sundays. Work councils and collective bargaining agreements mainly influence overtime policies in Germany.
Here are examples of overtime pay rates in Germany:
For weekday overtime, 125% = 100% of the regular hourly rate + 25% overtime supplement for overtime hours.
For Sunday overtime, 175% = 100% of the regular hourly rate + 25% overtime supplement + 50% Sunday supplement for overtime hours.
In Germany, the maximum probationary period for employees is six months. During this time, the employer can usually terminate the employment with two weeks' notice or notice period agreed in the employment agreement. This probationary period is known as a Probezeit, allowing both parties to assess if they are a good fit for each other.
When it comes to vocational training in Germany, the probationary period is limited by law to a minimum of one month and a maximum of three months.
Employers and employees must agree in writing about the length of the probation period before beginning employment. Both parties, in writing, must also approve any extension of the probation period.
Germany provides extensive discrimination protections for workers. You must adhere to the General Act on Equal Treatment (Allgemeines Gleichbehandlungsgesetz) to remain compliant with employment law in Germany.
The following forms of discrimination are prohibited in the workplace:
Discrimination based on race, ethnicity, national origin, or religion.
Discrimination based on gender, sexual orientation, age, or disability.
Discrimination in recruitment, hiring, promotions, and termination of employment.
Harassment or bullying in the workplace based on any of the above grounds.
The Federal Anti-Discrimination Agency (Antidiskriminierungsstelle) provides support for good practices in organizations to ensure that anti-discrimination laws are followed.
According to the International Labour Organization (ILO), there is no trade union law in Germany, but trade unions are still allowed and recognized by the government.
In Germany, employees have the right to join a union of their choice and participate in collective bargaining agreements.
Unions play an important role in German politics and help workers with issues such as wages, working hours, and other rights. Unions also provide legal advice for workers who need assistance with employment-related issues or disputes.
It is important to note that while union membership is not mandatory, the influence of trade unions in Germany is significant. Employers should respect and account for the views and rights of union-member employees.
Collective bargaining agreements are a common practice in Germany and covers around 52% of employment relations in the country.
The collective bargaining system in Germany is more centralized than it appears at first glance. Industries and regions act as bargaining leaders, meaning that they have a large influence on the terms of collective agreements.
Drug testing of employees is permissible in Germany under certain circumstances. However, the legality of drug testing depends on various factors, including the type of job, the reason for the test, and the method used for testing.
Random drug testing of employees is generally not allowed in Germany, but an employer can ask an employee for a drug test before employment. The employer will only get to know if the employee is “fit to work” and will not be informed of the actual test results (whether positive or negative).
In all cases, you must conduct drug testing in accordance with privacy and data protection laws and treat the results confidentially.
The German social security system has five components:
Long-term care insurance
Generally, the employer's share of social security contributions amounts to approximately 21% of the employee's gross salary.
It is also compulsory to insure employees in Germany, which is done through statutory German accident insurance institutions. These institutions are incorporated under public law.
The funding for Germany's accident insurance comes solely from employers. Upon contacting the responsible organization, you will receive a notification specifying the amount of your contribution.
In Germany, written employment contracts are mandatory by law. Furthermore, on June 23, 2022, the German legislature passed legislation incorporating the EU directive on transparent and predictable working conditions into existing German law. You must ensure that your employment contracts comply with the new regulations.
These changes are part of the German Nachweisgesetz (Evidence Act). It requires employers to provide employees with additional information regarding the terms and conditions of employment and a wet signature for the employment agreement in some cases.
Effectively managing the offboarding of employees is essential for any organization. Offboarding can promote a smooth transition for both the employee and the company and, when carried out properly, can be a rewarding experience for all parties involved.
By understanding the employee offboarding requirements in Germany, you can also ensure that you comply with German labor laws.
At-will employment does not exist in Germany. Under German laws, either the employer or employee can terminate an employment relationship, but through the termination options provided by the German labor code. It’s common to end the employment relationship by agreement. The consequences of dismissals must be declared clearly and unambiguously, as they can have severe implications for both the employer and the employee.
Terminating an employee in Germany is a complex process that requires careful consideration of the relevant laws and regulations. You are usually required to provide written notice to the employee within two weeks of the termination date. An authorized person must sign the notice.
Employees on probationary periods are usually entitled to two weeks' notice of termination. You must provide those beyond the probation period with at least four weeks prior warning.
You must also consider any applicable collective bargaining agreements or other contracts that may affect the termination process. However, if there is a serious breach of duty, dismissal without notice may be possible.
Terminated employees in Germany are not entitled to severance pay. However, this is common practice in a mutual termination. As per the German Kündigungsschutzgesetz (KSchG), there is no legal requirement for employers to provide severance payments upon termination of employment.
However, depending on the situation and termination type, employees may coordinate with the German work council and negotiate a severance payment.
When hiring employees and contractors in Germany, it is important to understand the regulations that differentiate the two.
In Germany, the difference between an employee and an independent contractor is not defined by a single law. It is determined based on various factors, which include both legal regulations and court rulings from German labor and administrative courts.
Employees work under the direction and control of their employer, whilst contractors operate as self-employed individuals, and are often hired to provide specific services. Independent contractors have more independence and control over their work. The key difference between employees and contractors in Germany is that employees are subject to the provisions of an employment agreement, while contractors may not be.
Contractors also do not have these same protections as employees under German law. Contractors may be subject to different terms and conditions than those for employees, including different pay rates and fewer benefits. It is important to note that contractors may still be entitled to certain rights under German law, depending on their circumstances.
You can hire employees on fixed-term contracts as long as the limitation in time is justified by reasonable cause. Reasonable cause exists, particularly when there is a need for temporary staff due to a specific project or task.
A fixed-term contract offers a multitude of advantages to both employers and employees. It allows you to evaluate an employee's performance during a project before committing to a permanent arrangement.
In Germany, you must adhere to strict labor regulations that protect employees' rights. This includes ensuring that all employees are properly classified and paid according to their job duties and responsibilities.
Misclassification of workers in Germany can have serious consequences. If found guilty, you are responsible for retroactive liability for taxes and social security contributions. You can even be liable for fines and face criminal penalties. The threshold for intent is relatively low, so you must be vigilant in your avoidance of employee misclassification risk in Germany.
The best way to avoid employee and contractor misclassification in Germany is to work with a global employment services provider like Remote, who can classify your workers correctly and help you stay compliant with local employment laws.
Germany is renowned for its exceptional workforce but requires employers to comply with various regulations as part of the hiring process. Figuring out the complexities of German employment laws and hiring requirements can be a daunting task. Yet, you still need to comply with these regulations to avoid legal repercussions while hiring in Germany.
Partnering with a company like Remote can significantly simplify the process of expanding hiring efforts into new countries, including Germany. Remote offers various services that can handle hiring, payroll, benefits management, employee onboarding, taxes, and more. This allows businesses to focus on other important aspects of operations.
In its 2023 Spring Report, G2 has crowned Remote as a threefold winner. Remote is ranked no. 1 in G2's categories of multi-country payroll, contractor management, and contractor payments software solutions.
Remote’s reliable global employment services allow you to hire, pay, and manage your German employees while reducing the risk of compliance issues. With expertise in setting up a global compensation plan, international payroll, and global benefits, Remote can assist with every step of your hiring process in Germany.
Do not let compliance in Germany be a burden. Let Remote make it easier for you to build and expand your German workforce. With Remote's expert team by your side, you can confidently take the first step toward expanding your business into the country.
To get a sense of how much it would cost you to hire a German employee on a full-time contract, use our free Employee Cost Calculator. For detailed information on hiring in Germany, check out our Germany Country Explorer page.
Working Time Act (Arbeitszeitgesetz)
Minimum Wage Act (Mindestlohngesetz)
Dismissal Protection Act (Kündigungsschutzgesetz)
Occupational Health and Safety Act (Arbeitsschutzgesetz)
General Act on Equal Treatment (Allgemeines Gleichbehandlungsgesetz)
Regulations on parental allowance and parental leave (Gesetz zum Elterngeld und zur Elternzeit)
Co-determination Act (Mitbestimmungsgesetz)
Act on Temporary Agency Work (Arbeitnehmerüberlassungsgesetz)
The Federal Anti-Discrimination Agency (Antidiskriminierungsstelle)
German Evidence Act (Nachweisgesetz)
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