How to hire employees in Germany

Struggling to navigate Germany's complex hiring landscape? Uncertain about legal requirements and cultural nuances? Our comprehensive guide provides expert insights and strategies to streamline your hiring process, ensuring you attract top talent effortlessly.
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Germany's talent pool is exceptionally skilled, particularly known for strengths in engineering, manufacturing, and technology. This expertise is cultivated through a rigorous educational system and a comprehensive apprenticeship program, making German workers among the best in fields like automotive and machinery.

The efficiency and organization of the German labor market provide businesses with a reliable source of top-tier talent. Combined with a solid economic framework and favorable business regulations, Germany is an attractive location for companies aiming to expand internationally.

Germany's rich mix of technical skills and stable economic environment positions it as a strategic choice for companies looking to tap into advanced expertise and innovation.

How to hire employees in Germany

What you need to know before hiring employees in Germany

Job market in Germany

Germany's job market presents a complex yet promising landscape, shaped by the nation's strong economic foundations and current employment trends. As of 2024, Germany maintains its status as an economic powerhouse in Europe and continues to be one of the largest economies globally, characterized by significant contributions to international trade and a robust GDP.

  • Germany remains a leading economy globally with a GDP of €3.867 trillion in 2022, ranking among the world’s top five.
  • The unemployment rate has fallen to 3.01% in 2023, one of the lowest in the European Union, indicating a stable job environment.
  • Key growth sectors include technology, engineering, healthcare, and renewable energy, driven by Germany's commitment to innovation and sustainability.
  • With ongoing advancements in digitalization and automation, the IT industry offers numerous opportunities for professionals.
  • Ranked third globally on the Global Remote Work Index (GRWI) with a score of 0.842, Germany excels in cybersecurity, economic stability, infrastructure, and social safety, making it an ideal location for remote work.

Germany Hiring Trends

In 2024, Germany's hiring landscape reflects a mix of traditional strengths and responsive adaptations to new workforce trends. Here are some key hiring trends supported by data and observations:

  • German companies are increasingly recognizing the importance of aligning corporate values with those of their potential employees, particularly younger generations. Surveys show that more than 60% of young professionals in Germany are attracted to employers that demonstrate a strong commitment to social and environmental issues, influencing hiring practices to focus on company culture and values.
  • There's a significant push towards integrating more advanced technologies within the workplace. This is not only in response to the ongoing digital transformation but also due to the acute need for efficiency and innovation in the face of global competition and local labor shortages.
  • The adoption of flexible working arrangements continues to grow, with many companies in Germany making hybrid models a standard offering. This trend is driven by data indicating that a substantial portion of the workforce prefers this flexibility, enhancing job satisfaction and employee retention rates.
  • To address ongoing skilled labor shortages, particularly in sectors like IT, engineering, and healthcare, Germany has refined its immigration policies to attract and retain skilled workers from around the world. This includes easing bureaucratic hurdles and enhancing integration programs, making Germany an attractive destination for international talent.
  • In response to inflationary pressures and the competitive global job market, German companies are revising their compensation strategies. This includes not only increasing wages but also enhancing benefits packages to include more comprehensive health care, retirement plans, and professional development opportunities to attract top talent.

How to hire employees from Germany

1. Set up an entity in the country

Establishing a legal entity in Germany is paramount for businesses seeking substantial expansion or enduring presence. This enables direct employee oversight and lasting financial advantages. 

The procedure entails choosing a business form such as a GmbH (Limited Liability Company) or AG (Public Corporation), registering with the local trade office (Gewerbeamt), and acquiring a tax identification number (Steuernummer). 

Yet, this undertaking can be intricate and expensive, necessitating a profound grasp of German labor regulations and adept management of HR and payroll, underscoring the significance of meticulous preparation or professional assistance.

2. Hire independent contractors

Hiring talent as contractors involves contracting individuals or firms for particular tasks or projects, offering significant flexibility for short-term or specific project requirements. However, accurately classifying workers is essential to prevent legal issues and potential penalties. Moreover, contractors may not demonstrate the same level of commitment or loyalty as full-time employees, a critical consideration within this hiring framework.

3. Partner with an EOR in the country

Employing an EOR service such as Gloroots presents a simplified route to accessing the German market, circumventing the complexities associated with establishing a legal entity. This method substantially reduces liabilities and is cost-effective. Collaborating with an EOR ensures compliance with German labor laws, tax obligations, and regulations, effectively mitigating legal risks and maintaining a compliant business operation.

Compliance risk while hiring in Germany

When hiring in Germany, compliance with strict labor laws, data protection regulations, and contractual obligations is essential. Misclassification of workers, adherence to collective bargaining agreements, and ensuring correct social security and tax payments are crucial. Employers must also manage work permits and visa requirements for non-EU employees.

Key Aspects of Germany Labor Law

Employment Contract:

In Germany, it's common for employment contracts to be written down, though it's not strictly required by law. The Documentary Evidence Act requires employers to provide a detailed written statement of employment terms within a month of starting the job. This should cover everything from the job description and salary to working hours and how the job can be ended. While these specifics might vary depending on collective agreements or individual contracts, there are legal minimums like minimum wage and holiday entitlement that all employers must stick to, ensuring basic protections for all employees.

Working Hours:

In Germany, the typical work week consists of 40 hours, spread over 8 hours per day. The maximum work week is limited to 48 hours, or 10 hours per day, provided that the average working time over a period of six months or 24 weeks does not exceed eight hours daily.

Overtime:

Overtime work must adhere to the limits specified in the employee’s contract or collective agreement. 

There are two main types of overtime in Germany: Mehrarbeit and Überstunden. Mehrarbeit occurs when an employee works beyond the standard 48-hour week limit or 8 hours per day over a 6-day week, as defined by the Working Hours Act. This can extend to 10 hours per day, provided the average workday does not exceed 8 hours over a six-month period.

Überstunden refers to any hours worked beyond what is agreed in the employment contract. These hours are legally allowed and typically require compensation.

Minimum Wage:

As of January 1, 2024, the Minimum Wage Act (Mindestlohngesetz - MiLoG) established a national minimum hourly wage of 12.41 EUR in Germany. For 2023, the earnings threshold for mini-jobs is set at 520 EUR per month, and midi-jobs at 2,000 EUR per month. Mini-jobs allow individuals to work limited hours with earnings below a specific amount each month, tax-free.

Additionally, numerous industry-specific minimum wage rates are determined through collective bargaining agreements.

Payroll laws in Germany

In Germany, salaries are usually disbursed on a monthly basis, typically around the 25th of each month.

Employment benefits in Germany

Leave Policies in Germany

  • In Germany, the Federal Holidays Act (Bundesurlaubsgesetz) mandates a minimum annual leave of 20 working days for employees with a regular 5-day workweek and 24 working days for those on a 6-day workweek.
  • This paid vacation entitlement, known as Urlaubsanspruch, is typically specified in the employment contract or collective bargaining agreement (Tarifvertrag), depending on the industry.
  • Often, collective agreements provide for up to 30 working days of vacation, and those employed in hazardous or high-risk jobs may receive additional leave.

1. Paid Time Off:

In Germany, salaries are usually disbursed on a monthly basis, typically around the 25th of each month.

2. Public Holidays:

In 2024, Germany has a total of 19 public holidays.

3. Sick Days:

Employees who have been with their employer for at least four weeks are entitled to receive full pay during sick leave for up to six weeks, known as Entgeltfortzahlung bei Krankheit oder Kur. After this period, the health insurance fund compensates between 70% and 90% of their regular salary, depending on the coverage level of the employee's insurance, for up to 78 weeks over a three-year period for the same illness, starting from the first day of absence.

Employees must notify their employer about their inability to work and the expected duration as soon as possible. For illnesses extending beyond three days, a medical certificate is required and must be submitted by the next business day. Starting in 2023, these certificates for work incapacity are issued digitally and sent directly by the doctor electronically.

4. Maternity Leave:

Under the Mutterschutzgesetz (MuSchG), pregnant employees in Germany are entitled to 14 weeks of paid maternity leave, which increases to 18 weeks for complicated or multiple pregnancies. The leave is split into two phases: at least six weeks before the due date and eight weeks after the birth. Maternity benefits are provided by the public health insurance fund, paying up to 13 EUR per day. If an employee’s net daily wage is higher, the employer covers the difference. For those with private insurance, the state may pay up to a maximum of 210 EUR.

5. Paternity Leave:

Paternity leave is included as part of parental leave.

Public Health Insurance 

In Germany, public health insurance (Gesetzliche Krankenversicherung) is part of a compulsory system covering the majority of the population. It provides comprehensive medical care, including doctor visits, hospital stays, and prescriptions. Contributions are income-based and shared between the employer and employee. The system operates on the principle of solidarity, ensuring that services are accessible to all, regardless of individual health risks or earnings. Additionally, family members without their own income can be covered at no extra cost.

Filing tax in Germany

Income Tax:

In Germany, the income tax rates are tiered according to income levels, beginning with a 0% rate for lower incomes. For example, single filers earning between 10,908 EUR and 62,809 EUR are taxed at 14%, and the rate increases progressively up to 45% for incomes exceeding 277,826 EUR. Married couples filing jointly see doubled income thresholds for these rates. For a complete overview of Germany's tax rates and brackets, check out our detailed guide.

Other Tax and Social Security Contributions:

In Germany, both employers and employees contribute to various social security and insurance funds, with rates depending on the salary and specific insurance plans. For example, health insurance contributions are 7.30% plus an additional rate based on the employee's chosen fund, capped at a monthly salary of 5,175.50 EUR. Pension insurance is set at 9.30%, applicable to salaries up to 7,550 EUR monthly (7,450 EUR in eastern states). The total payroll burden for employers can reach up to 20.82%, while employee contributions vary between 21.225% and 31.825%, depending on additional factors such as childcare responsibilities. For a comprehensive understanding of Germany's payroll contributions, including detailed rates and caps, read our in-depth guide.

Business culture in Germany

  • Timeliness is crucial in German business culture, with punctuality for all professional commitments seen as a sign of respect and reliability.
  • Interactions in the business environment are formal, where addressing colleagues with their full title and surname is the norm until more familiar terms are invited.
  • Germans are known for their direct communication style, favoring clarity and honesty, and often prefer to address issues directly without much small talk.
  • Detailed planning and methodical organization are central to German business practices, with a strong emphasis on thorough analysis and documentation for decision-making.
  • Decision-making processes often aim for consensus, involving detailed discussions to consider all viewpoints before reaching a collective agreement.

Top sectors to hire from in Germany

Financial Services

With Germany being a key financial hub in Europe, this sector offers robust employment opportunities. In 2022, business confidence in the financial services sector has been high, indicating a stable and growing field. This sector is crucial for anyone looking to engage with the economic backbone of Germany.

Information Technology Services

The IT services sector in Germany has shown remarkable growth, with increasing revenues that boost business confidence. The integration of digital solutions across various industries makes IT services a lucrative sector for hiring, especially given the ongoing digital transformation in the country.

Tourism and Hospitality

Germany's status as a popular tourist destination makes the tourism and hospitality sector a significant employer. The industry not only supports jobs in direct services such as hotels and travel but also stimulates employment in associated areas like food and beverage, and entertainment.

Healthcare Services

As urbanization continues, there is a growing demand for healthcare services in cities. This sector not only provides essential services but also drives employment in both direct health care roles and ancillary services like administration and technology integration.

Telecommunications

With over three-quarters of the population living in urbanized areas, there's a consistent demand for enhanced telecommunications services. This sector supports a variety of technical and customer service roles, essential for keeping the population connected and business operations smooth.

Top cities to hire from Germany

Berlin:

As the capital of Germany, Berlin is a dynamic hub for startups, tech companies, and creative industries. It's known for its vibrant culture and relatively low cost of living compared to other major European capitals, which attracts a young, innovative workforce.

Munich:

Renowned for its strong economic performance, Munich is home to numerous high-tech companies, particularly in automotive, engineering, and software industries. It also boasts a high quality of life and excellent educational institutions, making it an attractive city for top talent.

Frankfurt:

As one of Europe's major financial centers, Frankfurt is the go-to city for talent in finance, banking, and professional services. The presence of the European Central Bank and numerous financial institutions makes it a pivotal market for hiring in the financial sector.

Hamburg:

Germany’s gateway to the world, Hamburg has a strong logistics and trade sector due to its large port, the third-busiest in Europe. It also has a growing presence in media and industrial sectors, providing a diverse range of job opportunities.

Hire in Germany  compliantly with Gloroots

Gloroots, as an Employer of Record (EOR) in Germany, offers a streamlined solution for these challenges. Our EOR platform accelerates candidate onboarding, ensuring swift operational initiation while adhering to local and global compliance standards. Designed for companies of all sizes, it simplifies payroll management, benefits administration, and tax handling, thus bypassing the need for a local entity. This allows companies to focus on building a remote team in Germany efficiently. For more information on how Gloroots can facilitate your Germany hiring needs, please contact us.

Frequently Asked Questions 

1. What are the key legal considerations when hiring in Germany?

In Germany, it's important to understand the robust labor laws that protect employees. Employers must adhere to regulations concerning contracts, minimum wage, working hours, dismissal protection, and social insurance contributions. Additionally, data protection laws (GDPR) are stringent, requiring careful handling of employee information.

2. How does the recruitment process typically work in Germany?

The recruitment process in Germany often begins with a detailed job description to attract suitable candidates. It's common to involve several interview stages, including phone screenings, in-person interviews, and sometimes assessment centers, particularly for larger companies. Background checks and reference verifications are standard before finalizing an employment offer.

3. What should employers know about the social security system in Germany?

 Employers in Germany are required to register employees with the social security system, which includes health insurance, pension insurance, unemployment insurance, and accident insurance. Contributions are split between the employer and the employee. It's essential for employers to maintain accurate records and ensure timely payments into these schemes.

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