An Employer of Record (EOR) in Germany acts as the legal employer for your company, handling all employment-related tasks without the need to establish a local subsidiary. This allows companies to hire German employees quickly and compliantly.

By partnering with an EOR, businesses can tap into Germany’s rich talent pool while navigating the complexities and risks associated with local compliance and employment laws.

The EOR assumes the role of the official employer, managing essential tasks such as payroll management, tax compliance, benefits administration, and HR obligations. They ensure adherence to local regulations, generate employment contracts, manage employee onboarding, and provide robust support for smooth operations.

Additionally, EORs in Germany offer expertise in understanding cultural nuances, managing payroll taxes, and delivering localized support to both companies and their workforce. This enables businesses to concentrate on their core operations and growth activities while leaving the administrative and legal responsibilities to the EOR

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Using global EOR services in Germany will help companies navigate critical German labor and employment laws. For instance, any company hiring in Germany must know that the German labor law can be found across multiple documents, including, German Civil Code, various federal legislation, case law exemplars, and collective bargaining agreements, work council agreements, and employment contracts. Hence, companies must know where to find the individual labor laws to ensure compliance. 

Further, German Labor and employment law also dictates a sick pay along with minimum wage, bonuses, and supplemental pay. The law requires employees to be paid 100% of their salary or wages by their employer during the first six weeks of sickness.

Navigating German laws, complying with them, and handling payroll, benefits, insurances, taxes, etc. can be overwhelming for an employer. Here, Gloroots’ Germany EOR services can ensure quick set up and expansion in the country compliantly.

By partnering with Gloroots, companies can onboard employees faster and also offer them localized benefits and insurance plans from the Gloroots platform to retain talent. In short, you can streamline operations and keep up with the changing compliance scenario with Gloroots as your trusted EOR partner in Germany.

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EOR pricing method in Germany typically includes an uplift percentage added to the employee's gross salary. The uplift covers statutory costs such as employer social security contributions, payroll taxes, and any other statutory payments. It also accounts for administrative and management fees related to the EOR services. The exact uplift percentage varies depending on the EOR provider and the complexity of the services rendered, and it can range from 20% to 50%.  

EOR pricing in Germany can vary depending on the number of employees, the scope of services required, and the specific EOR provider. When considering EOR services in Germany, get custom pricing quotes to evaluate and make the best choice for your business.

Gloroots’ pricing model is simple and provides optimum investment value. We manage admin tasks and legal compliances associated with employment. Gloroots offers a live dashboard that helps you track your Germany workforce expenses in real time. It also offers HR support and benefits management to the employees hired through EOR.

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Key Metrics For Foreign Employers

Germany has had a long tradition for nurturing talent with scientific acumen which has fuelled robust innovation in the field of automotives, robotics, automation and renewable energy. Thanks to progressive policies in education, industrial development, Germany ranks 8th in the Global Innovation Index. With a strong economy, advanced infrastructure, a favorable business environment, employee-friendly labor, Germany has a well-rounded employment landscape.

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Source: The Global Talent Competitiveness Index 2023

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Through the Gloroots' Recrew platform, you can discover amazing talent in Germany and grow your team effectively.

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Growing a team means hiring the right employees at the right time and for the appropriate positions. Employers in Germany must have a local legal organization and use local resources to handle compliance, payroll, tax, and benefits management. The complexity of employment regulations in Germany makes compliance with employment laws demanding.

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With Gloroots’s Global Employer of Record (EoR) service, you can let Gloroots do the heavy lifting of payroll, tax, benefits, and compliance and concentrate on what matters to you most: your employees and company growth.

EMPLOYMENT CONTRACT

When hiring an employee in Germany, it is advisable to have a comprehensive employment contract that is signed by both parties. German law distinguishes between fixed-term and permanent employment contracts, including sub-categories such as freelancer agreements and intern contracts.

The minimum requirements for an employment contract in Germany include:

• Names and addresses of the employer and employee
•  Start date and duration (for fixed-term contracts)
• Workplace(s)
• Brief description of the work
• Salary information
•  Payment methods and payday
• Working hours
• Annual leave entitlements
•  Notice periods for termination
• References to collective agreements

Additionally, employment contracts in Germany often cover topics such as probation periods and overtime. Even in cases where a written contract is not provided, it is still mandatory to communicate the essential terms and conditions of employment to the employee in writing. German employment contracts are typically detailed and comprehensive, ensuring clarity and protection for both parties involved.

This might sound overwhelming, but it doesn't have to be. Gloroots eliminates these barriers for you. With Gloroots' Employer of Record offering, hiring and managing employees globally is a piece of cake.

Get an overview of what you need to know when hiring in Germany. Contact us.

Overtime:

The payment of overtime is determined by the terms specified in the employee's individual employment contract or the provisions outlined in a collective bargaining agreement. In situations where the employment contract does not address overtime, employers are prohibited from requiring employees to work overtime unless there is an emergency. Overtime work can be either compensated with additional pay or offset by granting extra time off.

Minimum Wage:

As of October 2022, Germany implemented a national minimum wage of EUR 12.00 per hour, which will continue to be in effect throughout 2023. The next scheduled increase is anticipated to occur in 2024.

Annual Leave:

The legal minimum annual leave entitlement in Germany is 20 days for a five-day working week, or 24 days for a six-day working week. However, it is common for employers to provide between 25 and 30 paid vacation days per year.

Typically, employees are required to use their annual leave within the same calendar year, although some employers may allow carryover into the following year. According to German law, any remaining paid leave from the previous year must be used by March 31.

Additionally, Germany observes eleven official public holidays, with some federal states having their own specific public holidays that companies must adhere to.

Maternity Leave and Paternity Leave

Female employees who are pregnant are eligible for 14 weeks of fully paid maternity leave, consisting of six weeks before and eight weeks after childbirth. In certain circumstances, such as premature birth, the maternity leave period can be extended up to 18 weeks.

While there is no specific paternity leave, fathers have equal rights to parental leave as mothers. This allows them to take time off to care for their child.

Sick Pay

In case of illness or injury, employees receive their regular salary for up to six weeks. After this period, sick pay is reduced to 70% of their normal gross salary and is covered by the statutory health insurance.

For sickness-related absences lasting more than three consecutive days, employees are required to provide their employers with a medical certificate. Since January 2023, these certificates are issued and submitted electronically by the treating physician. Employers can access the necessary information directly from the health insurance fund.

INCOME TAX 

Income tax rates are progressive in Germany; different rates apply to different income brackets. A solidarity surcharge of 5.5% is imposed on income exceeding EUR 17,543.

Other Taxes and Social Security contribution

Employment Termination and Severance:

Termination Process:

In Germany, employers have the flexibility to terminate an employee based on valid grounds. For employees who have been with the company for more than six months, termination must be "socially justified" and can be based on various reasons, including:

1. Person-related reasons, such as long-term illness.

2. Termination with the consent of the employee through a termination agreement.

3. Conduct-related reasons, such as repeated breaches of employment terms after prior warning or serious misconduct.

4. Operational reasons, such as company shutdown or economic downturns.

These are some of the justifications that employers can use when terminating an employee in Germany, ensuring that the termination is legally valid and reasonable.

Notice Period:

The length of the notice period required by law for employers in Germany varies based on the employee's length of service. Employees who have been employed for less than 9 months are entitled to a minimum notice period of four weeks. For employees with over 20 years of service, the notice period can extend up to 7 months.

Severance Pay:

Severance compensation is relevant when an employer ends a work contract suddenly, mirroring the amount an employee would receive if notified in advance. If a termination occurs due to company operational shifts, the employer is typically required to offer severance pay, often equating to two weeks of regular salary for each year worked.

Probation Periods:

During the initial phase of an employment relationship, the probationary period in Germany can last up to 6 months. Within this period, the statutory notice period can be shortened to a minimum of 2 weeks, unless other regulations, such as a collective bargaining agreement, stipulate otherwise. It is important to note that during the probationary period, the employer can terminate the employee without providing a specific reason. The termination is considered valid unless it is deemed immoral or against faith.

Global hiring requires navigating employment laws to ensuring compliance with payroll processes, data protection regulations, and more. Setting up infrastructure abroad and staying updated on evolving compliance requirements can be overwhelming. 

Gloroots simplifies the process of cross-border hiring by offering a centralized solution. The EOR solution handles everything – from onboarding, payments, administrative activities, to tax compliance, and more. Our in-market expert team absorbs all employment and payroll related risks by providing compliant employment contracts, timely payments, and tailored benefits. In short, Gloroots, lets you focus on finding the right talent while we handle the complexities.

Growing a team means hiring the right employees at the right time and for the appropriate positions. Employers in Germany must have a local legal organization and use local resources to handle compliance, payroll, tax, and benefits management. The complexity of employment regulations in Germany makes compliance with employment laws demanding.

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With Gloroots’s Global Employer of Record (EoR) service, you can let Gloroots do the heavy lifting of payroll, tax, benefits, and compliance and concentrate on what matters to you most: your employees and company growth.