Global PEO Services (GPS) helps companies hire employees in Germany without establishing a legal entity. All human resources, benefits, payroll, and tax needs for the employees are managed by our German PEO, while the new hires and headquarter teams focus on your business goals. Using a Germany PEO is the fastest and most efficient way to develop a workforce in Germany.
When hiring employees in Germany, establishing a subsidiary or branch office is not always the best route, as it’s often a lengthy and expensive process. Hiring via a Professional Employer Organization (PEO), or Employer of Record (EOR), is a faster and often more effective option – especially when starting up in a new country.
Global PEO Services hires the employees on your behalf, legally contracting them through our subsidiary in accordance with Germany labor laws. As a result, the burden of compliance is on us and the employees can begin work for your company in a matter of days. PEOs/EORs provide you with a streamlined option for hiring employees, testing markets, and responding to growing business needs in Germany. With Global PEO Services, you get control without taking on legal entity liabilities, contractor risks, or sacrificing on talent or speed to market.
Germany - Country Overview
Germany has the largest economy as well as the largest population in Europe. The capital city, Berlin, is also its biggest city. After World War II, Germany faced an economic crisis but is now the global center of industrial and technological innovation.
Federal Parliamentary Republic
Employment Contracts in Germany
A written contract is the most common type of contract in Germany. However, written agreements are not mandatory for employment for an indefinite period. Nevertheless, employers should provide contracts in Germany.
Some of the details typically mentioned in the written employment contract in Germany include:
- Work classification and a brief job description
- Salary, bonuses, and any other extra payments
- Work hours, annual leave, and termination notice periods
- Reference to collective bargaining and other agreements
- and more
The different types of employment relationships are:
- Permanent Employment – Unless specified in the employment contract, employment in Germany is deemed indefinite.
- Fixed-Term Contracts – Per German law, fixed-term contracts should not exceed two years and four years for new businesses. Employers can renew fixed-term agreements up to 4 times (including the first contract), provided the total period does not exceed two years.
- Temporary Employment – Temporary employees in Germany can be hired through an agency for a maximum of 18 months, according to the amended Temporary Employment Act.
In Germany, a probationary period typically lasts up to 6 months, and either party may terminate the relationship with two weeks’ notice.
Working Hours in Germany
The Hours of Work Act states that work hours may extend up to a maximum of 10 hours per day if an employee does not exceed an average of 8 hours per working day over six calendar months.
Employee Leave in Germany
Employees in Germany are entitled to the following leaves:
- Annual leave – Per the Federal Holiday Act (Bundesurlaubsgesetz), employees who work six days a week are allowed at least 24 working days of leave. The paid vacation period varies with age for young workers.
- Maternity leave – Per the Federal Parents Education and Parent Allowance Act, employees are allowed up to 3 years of parental leave for their natural or adopted child and care for a newborn until they become three years of age. Both parents can claim this at the same time or separately.
- Sick leave – The Sick Pay Act (Entgeltfortzahlungsgesetz) governs sick pay leave, and employees get paid sick leave of 6 weeks for each illness that causes them to be unable to work.
- Parental leave – Per the Federal Parents Education and Parent Allowance Act, employees are allowed up to 3 years of parental leave for their natural or adopted child and care for a newborn until they become three years of age. Both parents can claim this at the same time or separately.
- Family-related leave – Per the amended Family Nursing Care Statute, taking part-time family nursing care leave does not necessitate the employer’s approval.
The following are the statutory national holidays observed in Germany:
- January 1 – New Year’s Day
- April 2 – Good Friday
- April 5 – Easter Monday
- May 1 – May Day
- May 13 – Ascension Day
- May 24 – Whit Monday
- October 3 – Day of German Unity
- December 25 – Christmas Day
- December 26 – Boxing Day
Employee Termination in Germany
The German Civil Code governs the termination of an employment contract, which states that an employee may terminate the employment relationship with a 4-week statutory notice effective on the 15th or the end of a calendar month. If the employer wants to conclude the employment contract, the notice period varies per the length of the employment connection.
Global Mobility in Germany
Germany is part of the Schengen Borders Agreement, together with 25 other European countries.
There are typically two categories of visas:
- Short-term stays (Schengen visa) – Short-term visas are for stays of up to 90 days, and people are not permitted to work. Generally, these visas are not extendable. Individuals will often require a visa that is valid throughout the Schengen area.
- Long-term stays – Long-term visas are for individuals who plan to stay for more than 90 days or plan to work.
Citizens of the European Union, Japan, the Republic of Korea, Canada, the United States of America, Switzerland, Israel, New Zealand, and Australia can apply for a work permit after entering Germany without a visa. Citizens of other countries must apply for and get a work permit from their home country before entering the country.
For Non-EU Nationals, there are three types of work-related residence permits:
- Specialist professional
- General employment
Employee Benefits in Germany
The Social Security Code VI (SGB VI) has the primary regulations for statutory pensions. In addition, the Company Pension Act (BetrAVG) is the principal applicable law for occupational pension schemes.
Social insurance, often known as social welfare, is a government-mandated insurance program that provides financial help to the elderly, disabled, injured, and unemployed.
Some examples of social insurance programs are:
- Dependents’/Survivors Benefit– The pension amount is a proportion of the deceased spouse/partner’s full statutory pension and is determined by the surviving spouse’s income. Dependent children are entitled to an orphan’s pension until 18 years and can be extended until 27 if they are still studying.
- Life and Disability Insurance/Benefit – Victims of work-related accidents or illnesses are entitled to occupational accident insurance injury compensation until they can work and receive payment.
- Unemployment Insurance – An employee is entitled to receive unemployment benefits if a job was held for a minimum of 12 months in the previous three years before the unemployment.