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Employing in Germany

At a glance

Employment in Germany

Foreign companies that employ workers in Germany face several challenges and must adhere to the legal and regulatory framework that is in place. Most notably there are regulations depending on the type local entity they have incorporated. In some cases, using an outsourced employer will make the process smoother, and it is recommended to use professional legal services as well. Our guide explains German policies on leave, termination and payment of benefits.

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Payroll & Tax in Germany

Complying with local payroll and tax requirements is essential for a company doing business in Germany. Issues such as tax rates and withholding, health insurance and social security are all essential in ensuring a seamless human resources operation. Many companies will consider outsourcing these administrative tasks to a GEO (Global Employment Organization).

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Immigration / Work Permits in Germany

Foreign workers are required to have the proper visas and work permits in Germany, as established by immigration laws. This often requires incorporation and licensing prior to sponsoring work permits for employees, which can be a problem if your company is trying to enter the country quickly.

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Incorporation

There are several business structures available for incorporation in Germany, and each has advantages and disadvantages. In some cases it will depend upon the type of industry that you are in, and the scope of planned business activity. Our guide has a comparison of the time and cost for incorporating standard company structures in Germany.

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GEO Solutions or DIY Employment in Germany?

Companies entering Germany must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities.  A GEO or German Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a German entity established that can run payroll.

A DIY approach will typically be delayed until there is a properly incorporated company ready to run payroll and may be a costly option.  Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Germany

Payroll Germany
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please get in touch with us for a quote

 
Grossed income Tax Rate (%)
$0-$8,354 0
$8355-$52,881 14%
$52,882-$250,730 42%
$250,731+ 45%
Tax Returns Supplied

Yes

Corporate Tax Requirements

15%

Employers Social Security and statutory contributions

Employers social security in Germany is extensive and made up of 4 elements.

Pension insurance (Rentenversicherung): 9.45% (charged on earnings up until EU 71400)

Unemployment insurance (Arbeitslosenversicherung): 1.5% (charged on earnings up until EU 71400)

Health insurance (Krankenversicherung): 7.3% (charged on earnings up until EU 48600)

Invalidity/Long-term care insurance(Pflegeversicherung): 1.175% (charged on earnings up until EU 48600)

Employees Social Security and statutory contributions

Total Estimate is 12.5% (there are caps) and is made up of; 18.9% Old Age Pension and 3% Unemployment Insurance (capped at earnings up to Euro 71,400). Split equally between the employee and employer.

Health Insurance is compulsory if the employees wage is less than Euro 53,550. Employee/Employer split 14.6%. Contributions are paid up to earnings of Euro 48,600. Employee also has to pay 0.9% surcharge to a max of Euro 36.45 a month.

If the employee earns more than Euro 4,462.50 a month then they must contribute to a Private Health Insurance plan, pay the full premium and their employer reimburses them for half the premium up to the max they would receive through the compulsory scheme.

Nursing care/invalidity insurance is compulsory and is levied at 2.35% split equally between employer and employee. Childless employees pay an addition 0.25%.

Insurance requirements

Our local entity covers Professional Indemnity Insurance.

Corporate Income Tax Rate

29.65%

Payroll Tax

n/a

Sales Tax

19%

Withholding Tax

Divident Withholding Tax 25%

Interest Withholding Tax 25%

Royalty Withholding Tax 15%

Can be reduced based on relevant tax treaties

Work Permits
Can Sponsor Work

Yes for both Blue Card/Resident Permits and Skilled Worker Visas/Resident Permits

Work Permit cost

Euro 2500

Work Permit processing time

8-12 weeks depending on the type of work permit and nationality of the applicant

Work Permit process

The process depends on the type of permit / visa and the nationality of the applicant.

For a standard work permit or Arbeitserlaubnis the process is as follows:

Non-EU citizens (except nationals of Australia, Canada, Israel, Japan, New Zealand, South Korea and USA) must apply in person for a German National Residence Permit (Aufenthaltserlaubnis) at the German Embassy (Deutsche Botschaft) / Consulate in their  country of residence before they can enter Germany. To obtain an appointment can take up to 6 weeks. Once the application is lodged in the appointment it takes 6-12 weeks as the application is sent to the local Foreigners Authority (Ausländerbehörde) where the employee will reside in Germany.

The Aufenthaltserlaubnis is normally issued in conjunction with an entry visa and valid for 3 months. This typically allows the employee to enter Germany and start work – this right will be explicitly stated on the Aufenthaltserlaubnis.

The German local Foreigners Authority (Ausländerbehörde) and Federal Employment Agency (Bundesagentur für Arbeit) must still confirm that the work concerned is suitable and that the employee will not disadvantage the employment of local German or EU employees. This may also involve the local Chamber of  Industry and Commerce (Deutscher Industrie- unde Handelskammertag). After these checks are completed the work permit is granted.

The following documents are required

Passport copy
Copy of Diplomas
CV
Health insurance certificate ( Has to be recognized by German)
Job description in German
Local Employment contract with dates and annual salary (Original German version)
Residence address (in home country)
Place of work (in Germany)
Address of intended residence in Germany
Further documents may be required by different embassies.
Letter from End client may be requested

Can Work Permit be processed in country

Yes but depends on the nationality.

Switch Business Visa to Work Permit?

No. However for some nationalities, you can switch from an Entry Visa to Work Permit.

Can Spouse work on dependent visa?

Yes.

Business Visas
Can do Business Visa

Yes.

Business Visa Cost

Euro 500.

Business Visa processing time

Depends on the Consulate but generally 5-10 days.

Others
Can supply private health care

Yes

Can assist opening bank accounts

Yes

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