PEO & Employer Of Record Germany
Infotree Global Solutions provides Employer of Record services to clients in Germany. It helps clients with hiring in Germany as a part of their business expansion. Clients are facilitated with payroll management in Germany without establishing any branch. Our team supports you with recruitment management using Infotree Global’s Germany employer of record in compliance with the local labor laws. With us, you can hire a team and have them on board in a hassle-free way. Backed by our dedicated in-territory expert, you can strategically hire in a new location like Germany for your global business endeavors without worrying about legal complexities.
Establishing a business or hiring in Germany-Here is all you need to know about different factors associated with hiring in Germany
Table of Contents
• Hiring in Germany
• Setting up Payroll in Germany
• Payroll and Tax in Germany
• Employee Entitlements
• Setting up a Subsidiary in Germany
• Germany Employment Compliance
• Germany Visas and Work Permits
• Benefits of Germany Hiring Outsourcing
• Why Infotree Global Solutions?
Hiring in Germany
If you want to hire in an unknown country like Germany, it is important to learn about labor laws and cultural norms. Managing your new employees in Germany can bring worries if you are not familiar with German employment law. For every company planning business operations in Germany, it is important to understand the legal requirements including recruiting and onboarding staff. It is vital to get through the complexities of country laws and you must abide by them. Using a PEO can help you sail through the legal complications without hassles. An employer of record Germany ensures that every employment contract fulfills the specified requirements adhering to the labor laws.
Setting Up Payroll in Germany
As a booming European market, Germany seems to be the perfect location for your business expansion. Before hiring employees, it’s necessary to make yourself aware of local labor laws and payroll regulations. It helps you stay compliant, avoid heavy fines, and decrease downtime. There are certain rules for payroll and taxation in Germany. It depends on whether your organization employs foreign staff or local German employees.
While setting up payroll, you need documentation for new employees having various details and certificates. It includes New Employees’ ID or passport, residence permit or visa (whichever applicable), tax ID number & tax bracket, social security number, certification of membership of a health insurance fund, Marriage certificate, divorce ruling where applicable, and Bank details (IBAN & BIC code).
The major concerns for a foreign company that requires to adhere to tax laws in Germany include:
• Individual income tax (IIT) for employees
• Social and health insurance costs
• Payroll tax
• Sales tax
• Accident insurance
• Withholding tax
• Business tax
• Permanent establishment
Payroll and Tax in Germany
The country has its local tax laws that can be confusing to someone new to the location. Before working on payroll, it is important to attend to individual income tax (IIT) for workers’ sales & payroll tax, business, and withholding tax, and social and health insurance expenses.
You’ll also hold the responsibility to make contributions to the German Social Security System, which includes five different areas:
• Health insurance
• Pension insurance
• Accident insurance
• Nursing care insurance
• Unemployment insurance
These contributions are divided equally among your employees- apart from accident insurance as it will be totally covered by the employer. Besides employee salaries, employers need to contribute around 20.7% to the social security system. In Germany, the corporate income tax is around 29.65%. As it operates under a progressive income tax scheme and the tax rate lies between 0% to 45% based upon employee earnings.
German income tax rates 2021
|Less than 9.744 euros||0%|
|9.744 – 57.918 euros||14% to 42%|
|57.919 – 274.612 euros||42%|
|More than 274.613 euros||45%|
Germany’s minimum wage is €9.35 (approx) per hour, which is considered the fifth-highest in Europe. The average working time for employees varies between 35 to 50 hours in a five-day week. The daily working time should not exceed eight hours of up to 10 hours if necessary. Working on Sundays and public holidays is prohibited. If an employee is working for 6 months then they are entitled to 24 days’ vacation a year. The employee can avail of six-week paid sick leave provided that he should present a medical certificate. However, this term is not specified in the offer letter. Female employees are granted a maternity leave of 14 weeks. During the pregnancy and after four months of childbirth, termination of an employee is not permissible unless the public authorities have granted their prior consent under exceptional circumstances.
Employees are entitled to parental leave for up to three years (until the child has reached the age of 3 years). In this scenario, the employer may not terminate the worker, and employees can legally work part-time during parental leave. The employer may not terminate the employee, and employees have a legal right to work.
Setting up a Subsidiary in Germany
According to the states, Germany ranks at 114th position in ease of starting a new business. However, it can take up to six months to properly get started there but with Employer of Record services, you can expect it sooner than you think. There are a number of financial filling to be done that include various important details. When setting up a company in Germany in any popular city like Frankfurt, Berlin, or Munich new business owners should consider a number of factors like the industry and type of business, the nationality of individuals, and existing trade policies. Companies entering Germany must determine how to go about it. Whether they should use their own available resources or hire an EOR to manage payroll and employment tasks. However, if a company is willing to set up an office quickly with a feasible cost, it is better to have a Germany Employer of Record services.
Due to the complexity of employment rules and labor laws, it becomes vital to have the local legal counsel to ensure total compliance with laws. An employer of record does the drafting or local contracts for international workers besides employing and managing their legal responsibilities. It does sponsor your employees on the work permits and complies with local employment law to run their monthly payroll. Besides, it takes charge of employees’ withholding needs for pensions and benefits, documenting termination, probation leave requests.
Germany Employment Compliance
If you wish to start business operations in Germany, it is a legal requirement to have an employment contract. It should specify all the terms of employment such as remuneration, benefits, and termination. An offer letter and employment agreement in Germany should have a clear mention of the salary and compensation amounts in Euro than an international currency.
A general employment contract should contain the necessary information like name and address, date of commencement, term, trial period, and location of work, Job description, and remuneration, working hours, holiday, and others. Often, besides the employment contract, few special regulations may also apply known as collective bargaining agreements regulated by trade unions or employer associations. When a company signs a contract with a Germany employer of record, they ensure that the contract should represent the interest of the employees.
Few federal statutes, court rules, and industrial practices govern the German employment law. The Civil Code describes the employment relationship whereas the Works Constitution Act outlines cooperation between both parties. The act on Collective Agreements further authorizes collective bargaining. Collective bargaining is always preferred over job agreements, and hence, works councils have a vital role in labor relations in the country. Germany also describes data protection regulations associated with payroll. Though you can have personal data and details for employment purposes that data should be protected. Employees should be paid using the FTAM protocol that stands for File Transfer and Access Management.
Germany Visas and Work permits
Germany, being a land of possibilities has many renowned corporates and companies. There are a variety of visas available, adding confusion while deciding on the one. If you have a plan of expanding business endeavors globally, you should be familiar with the work visas in Germany. However, using an EOR can prove beneficial as it guides you about the visa requirements.
Non-EU citizens except citizens of Australia, Canada, New Zealand, Israel, Japan South Korea, and USA need to apply for a German National Residence Permit at the German Embassy or Ministry before entering the country. It takes up to 6 weeks to get an appointment. Once the application is filed, it requires 6-12 weeks more. The application is forwarded to the local Foreigners Authorities where the worker will stay in Germany.
Germany’s Residence Permit Types
For those employees who are not European Union (EU) or European Economic Area (EEA) citizens, they can go for a residence permit that goes well with their purpose of work or study in-country for a period of more than 90 days.
Type of resident permits in Germany are:
• Temporary residence permit
• Blue Card
• EC long-term residence permit
• Permanent settlement permit
Most people finding jobs in Germany will get a temporary residence permit with one-year validity. It can be further renewed based on the employment situation, nationality, and profession. You can consult with an immigration legal authority in case the employment situation changes.
Benefits of Germany Hiring Outsourcing
When you plan to take your business global, taking the first step right is important else it may affect your strategic moves. By hiring an outsourcing company, you get a fully-compliant solution that fulfills the local licensing laws. Being compliant with Data Compliance laws, it follows the laws as governed. Besides, they protect their clients and their staff details.
Establishing a subsidiary in Germany is crucial and complex as German labor law has robust worker protections. These require a great understanding of local best practices which is why employer of record Germany is important. They handle HR issues, calculate payroll and taxes in compliance with local laws to avoid legal hassles. All that is done without setting up a foreign branch that is in a seamless way.
Why Infotree Global Solutions?
Are you looking for an easy, legal, and tax-compliant solution to hire in Germany? Let Infotree Global assist you to manage payroll and other legal formalities quickly. Serving as Germany best employer of record, we ensure that you remain compliant with country laws and your staff gets paid on time.
With our Germany employer of record services, we put your worker on our locally compliant payroll in Germany and designate the employee to work exclusively for your company. Our platform eases off you with hiring employees overseas with the least time and expenses. Besides, we take care of expense reports, tax issues, and other legal things while setting up the employees’ local benefits. It assures you stay relaxed instead of worrying about administrative issues.
If you need a professional employer organization in Germany, look no further and contact us for hiring and payroll services.