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Hiring Remote Workers in Germany: A Guide for US Employers

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Hiring Remote Workers in Germany

Working Style

United States employers will generally find that most Germans can speak English in a working capacity. However, there are still some key differences in working styles that will be useful to know. Knowing these differences will assist in creating a friendly and cohesive working relationship. 

Similarly to the US, German workers are also very punctual with their work meetings. US employers will find that German workers will contact their US employers if they are running late, but will most likely be on the earlier side. Time is also told more in a 24 style, e.g. 14:00 instead of 2:00 pm. Furthermore, most German workers will not like to engage in small-talk and instead dive straight into business matters. German working culture also refers to others on a last-name basis at least initially, so the US employer may also prefer to refer to their German employees to show consciousness of their working week. Professional titles are also significant in Germany, so if your employee has a title such as Doctor, it may be conceived as rude to not refer to them as such. The working relationship will probably enhance if the US employer doesn’t ask too many personal questions at first, as German employees generally prefer to keep their working and personal lives separate. 

The US work structure is relatively flat, and the US employer should keep in mind that German employees are used to a more hierarchical structure, to the extent that a German employee might find it unusual to talk to someone of a higher rank in a business context. However, German employees do expect clear communication, and for decisions such as deadlines to be made collectively. German culture will prioritize the collective over the individual, and feel responsible for their colleagues as well as themselves. This cultural difference is in contrast to the US working culture, where decisions tend to be made on a more independent basis, and employers recognize accomplishments towards specific employees as opposed to a group’s effort. 

What is the time difference between Germany and the US east and west coast?

The west coast is 9 hours behind Berlin and New York is 6 hours behind Berlin. 

How is this commonly dealt with? 

It is easier for the east coast to communicate with their German employees than the west. 9 am in New York is 3 pm in Germany, which means that there will be at least two hours cross-over. 

However, 9 am in Los Angeles is 6 pm in Germany, so the US employer will need to wake up earlier to communicate with their employees, or the German employee may start their workday later to be still working at the time. It will be essential to set clear working and communication times with your German employee, as the working culture does not expect employees to check or respond to emails once they have clocked off for the day.

What are the typical working hours in Germany?

In the US, the standard working hours are 47 hours per week, Monday to Friday. Germany retains similar working hours at 40 hours a week. A full-time employee is allowed to work 8 hours a day, six days a week, but most employees will work only Monday to Friday. 

How do you interview remote workers in Germany?

Interviewing remote workers in Germany is similar to interviewing any other remote employee. US employers can choose between calling them or utilizing video call applications such as Zoom or Skype.

Are German resumes different from American resumes?

German resumes (and most European resumes) will have details that applicants usually omit in a US resume, such as age, a photo, gender, family status, and ethnic background. German resumes are generally more detailed than a US resume. A US employer will also find that a German resume places emphasis on organizations worked and positions held, and not as much on the skills they have accumulated. 

Is making an offer to an employee in Germany different from hiring in the US?

Making a job offer in Germany is different from the US primarily because a contract is an expected requirement. The US employer must provide the main contractual terms in writing within a month of employment commencing. These terms must include the names and address of both the employer and employee, the starting date, the place of work, the nature of the activity involved, the pay, the working hours, annual leave, the notice period, and a reference to any relevant collective bargaining, works or service agreements.

There are also two types of contracts that a US employer can offer. Usually, the employment period is indefinite. However, a US employer may instead choose to offer a fixed-term contract. This contract can last for two years maximum. After two years, if the US employer wishes to retain the employee, they must then enter into an indefinite contract.

Paying Remote Employees in Germany

Do German employees get paid differently than US employees?

In Germany, the employer is responsible for the employer and employee social security contributions. They are also responsible for registering their employees under the social insurance system. 

How often do German employees get paid? Can we pay bimonthly?

Employers pay German employees on a monthly basis, and it is unusual to pay employees on a bimonthly basis.

What are some common benefits that foreign employers offer remote employees in Germany?

Remote work inherently provides many benefits, including increased productivity, shorter (if any) commute times, flexible work scheduling, and more savings for the employer and employee. 

Many foreign employers provide additional allowances to their employees such as payment of business expenses, internet and telecom allowances, and the ability to work from a co-working space if so desired.  

Can employers pay a stipend for expenses?

US employers can pay a stipend to their German employees, but risk having this income taxed by German authorities. If the US employer wants to ensure that this does not occur, the processing of such expenses has to be processed by the employer as an actual expense reimbursement. More information can be found in our article on taxes and expense reimbursements in Germany.

For information specific to travel reimbursement, please click here.

At Shield GEO, we provide our remote employees with a health and wellbeing allowance which primarily goes towards health insurance. We also provide our employees with a stipend for their internet expenses and pay for a co-working space, if they choose to use one.  

How is work equipment provided to remote employees in Germany? 

Employers can provide their employees with all the equipment they need to do their job, provided it is genuinely for work usage. Providing working equipment is particularly beneficial as Germany has strict laws on dividing private and business matters on work devices. Furthermore, by providing equipment specifically for work, upon the end of employment, the contract can stipulate for the employee to return the device. 

For example, at Shield GEO, we ensure our remote employees have the correct equipment to complete their day-to-day tasks efficiently. We provide our employees with a laptop, keyboard and mouse, and a headset for conferencing. At our employee’s primary place of work, we also provide a monitor, desk, ergonomic chair, and desk lamp.

Payslip Explained  

PTO (Annual Leave) & Holiday Entitlements  

How much PTO do remote employees in Germany get?  

According to German law, the employee is entitled to a minimum of 20 days PTO. This leave usually lapses by the end of the year, but upon agreement, this leave can extend to March 31st the following year. PTO is based on a five-day working week, and your employee will have 25 days PTO if they work a six-day week.  

Can we offer unlimited PTO in Germany? 

Germany already allows for a significant amount of holidays from a US employer’s perspective. Because of the statutory PTO, the concept of unlimited PTO is not common in Germany. The US employer can offer more than the 20 days PTO (which is not uncommon in German working culture), but they legally cannot provide less.

Do I have to track PTO?  

A US employer will need to track PTO as there is a set amount of annual leave days prescribed by the government. Tracking PTO is further encouraged because even though annual leave expires at the end of the year, this is only if the employer reminds the worker of the unused time, asks them to take the leave and the employee refuses. The US employer is encouraged to remind their employees in writing to avoid any potential disputes.

Annual leave also has to be paid out if the employer terminates the agreement, which is another reason why tracking is essential.

Sick Leave 

In Germany, if an employee is ill and unable to work, the US employer must continue to pay the salary as long as the employee provides respective sick notes written by a doctor. After six weeks, if the employee is still unable to work, the employer’s obligation to pay the salary ceases and is taken up by the health insurance.

Culturally, compared to the US, taking sick leave is less frowned upon, and sick leave may even be granted if an employee falls ill during their PTO.

What are the national public holidays in Germany?

The national public holidays in Germany are New Year’s Day, Good Friday, Easter Monday, Labor Day, Ascension Day, Whit Monday, Day of Germany Unity, Christmas Day, and Boxing Day. The US employer must note that there are also other public holidays depending on which state their German employee resides. 

How many paid public holidays are there per year? 

German employees legally must not work on a public holiday. Furthermore, unlike the US, if a public holiday falls on a Sunday, this public holiday does not extend to the next working day (Monday). The only nationally paid public holiday is on October 3rd, the Day of German Unity. Most German states also regulate and consider holidays such as Christmas as a public holiday.

Ultimately, according to German legislation, ‘For working time which is lost as a result of a public holiday, the employer must pay the employee the wages which he would have received without the loss of working hours.’  Therefore, the actual amount of paid public holidays will differ by state, and when the public holiday falls each year.

What happens if my employee works on a German public holiday?

A US employer cannot make their German employee work on a public holiday by law.

Social Security in Germany 

In Germany, social security contributions cover health insurance, nursing care insurance, pension insurance, unemployment insurance, and accident insurance. Though both employer and employee similarly pay most contributions, only the employer will contribute to accident insurance. Though summarised below, for more information on Germany’s 2020 social security laws, please click here.

Does the employer have to pay SS? What does it cover?  

The employer has to pay social security and is responsible for registering their employee into the Social Security Scheme. Employers will usually pay half of the health and pension insurance. Germany also enacts long-term nursing care/disability insurance, which is also compulsory. The contributions are 3.0% (though this is higher for employees without children, and has a cap of up to 4,687.50EU) and the employer will pay half. This insurance covers the long-term care your employee may need and can help ease the burden on the employee’s carers. This insurance also covers institutional care depending on the circumstances of the employee. Unemployment insurance is also financed by social security and requires 2.4% of the gross monthly salary (divided between the employer and employee).

Only the employer contributes to accident insurance, which covers work-related accidents and occupational diseases. This percentage is calculated on the base wage and the risk categories related to the employee’s role.

There are four additional cost components on the employer’s side:

  1. Insolvency charge
  2. Long-term sick leave insurance
  3. Maternity leave contribution
  4. Statutory accident insurance

Does the employee have to pay SS? What does it cover?  

As stated above, the employee’s social contributions include health, pension, unemployment, and long-term nursing care insurance. The employee usually pays half of the required percentage, but the employer is the one who arranges this. Therefore, in the employee’s pay, they will receive their salary with the deductions already taken out. 

What is the 401K equivalent for remote employees in Germany?   

The social security system covers the 401K equivalent in Germany, under pension insurance. The pension insurance is 18.6% of the gross monthly salary, with a ceiling of 6,900EU in Western Germany and 6,6450 in Eastern Germany. 

The difference between the US and Germany is that 401K is a private scheme in the US. Still, in Germany, as employees are paying a high amount into the social security equivalent, employees often stick to this option only. 

Do German employees need health insurance? What does it usually cost?  

Public medical insurance is included in the employee’s social security, and employees are compulsorily insured if their regular gross income exceeds 450EU per month. Employees that annually earn less than 62,550EU must enroll in this scheme. The contribution percentage of the gross salary is 14.6% (as of 2020) alongside an additional contribution which depends on the insurance company used. The employer and employee usually split this payment.  

If an employee earns more than the 62,550EU, they may choose to opt-out of the compulsory scheme and select private health insurance instead. An employee can claim for their US employer to pay what they would have had to pay in the public health insurance.

Terminating Remote Workers in Germany

Are there probation periods in Germany?

There is no legal requirement for a probation period in Germany. Though the law does not regulate probation periods, it should generally not exceed nine months.

There is the concept of dismissal protection under the German Termination Protection Act. This protection for employees only starts after six months of employment. After six months, if the termination is not justified, it is considered legally ineffective. Therefore, the US employer can view the first six months of employment as a ‘waiting period’.

Is there ‘at will’ termination in Germany?

There is no ‘at will’ termination in Germany, and the US employer must follow strict laws. Terminating outside of an employment contract’s probation period is extremely difficult, and the employee must have shown a socially justified reason, such as acting against the company’s standards or performing very poorly. The German employee, if terminated without cause, has the option to challenge the dismissal in court and claim continued employment if they believe the dismissal to be unfair. The US employer may consider an alternative such as offering a settlement agreement during the termination process, to avoid this from occurring.

Termination processes in Germany are relatively simple if the end of employment is mutual.

Do you have to pay for severance in Germany? 

Generally, there is no requirement to pay severance in Germany, but the US employer may need to pay their German employee compensation depending on the reason for termination.

For example, if the dismissal is because of operational reasons or business needs, the employee has a right to severance payment (as long as they do not bring the case to court within three weeks). Severance payment in this instance is only a valid right if the employer states in the notice that the employee’s dismissal is because of business needs or urgent operational reasons and that the employee has the right to receive severance upon accepting the dismissal.

The US employer may also offer a form of payment to induce the employee to accept the termination, especially if a dispute arises.

If a dispute leads to court proceedings, the court may dissolve the employment on the condition that the employer pays severance. This outcome is unique because usually the only remedy an employee has is reemployment, and is rare to occur. 

Is it difficult to terminate an employee in Germany?

As mentioned above, Germany does not have ‘at will’ termination like the US, so termination will naturally seem to be more difficult. Generally, as long as there is a justified reason, termination is not overly complicated. It is undoubtedly more straightforward for the employee to terminate a contract, and the best-case scenario for the US employer, if they would like to terminate without a just cause, is to arrange a mutually agreed termination. 

Like any European country, the employment termination laws center around protecting the employee.

 

 

 

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