Hire employees in Germany

With an international reputation in terms of technological advance, science and automation processes, Germany is home to a large pool of highly-qualified workers, especially in sectors like computer science and engineering. The country’s stable and productive economy promotes innovation and research and the overall good command of English eases communication processes when hiring an international team of skilled workers.

When hiring an employee in Germany, it is mandatory to provide a detailed employment contract which has to be signed by both parties. In general, German law distinguishes between fixed-term and permanent employment contracts. Furthermore, there are several sub categories such as freelancer agreements and contracts for interns.

The minimum requirements for an employment contract include:

• name and address of both employer (full company name and representative) and employee

• start date and duration (the latter only in case of a fixed-term contract)

• workplace (if the employee will have several workplaces, this needs to be detailed in the contract)

• short description of the type of work

• information on salary, bonuses, payment method, payday and other aspects that relate to remuneration

• working hours

• annual leave entitlements

• notice periods in case of employment termination

• references to regulations under collective law such as collective agreements

It is common for employment contracts to also contain information on probation periods, overtime etc. In general, employment contracts in Germany tend to be rather detailed and long.

Probation Period

Before signing the employment contract, both parties have to agree on a probation period. In no case should the probation period exceed six months. During this time, the notice period for terminating the employment is shortened to two weeks.

Working Hours and Breaks

Employees in Germany typically work between 38 and 40 hours per week. 48-hour weeks are possible under certain conditions but should not exceed a six month period. A normal working day is eight hours, extendable to a maximum of ten hours.

After six hours of consecutive work, employees must have a 30-minute break which can be either paid or unpaid.

Overtime

Overtime payment is subject to the outlines of the individual employment contract or the regulations set by a collective bargaining agreement. If the contract does not provide for overtime, employers are not allowed to request overtime work unless there is an emergency. Overtime work can either be paid or compensated by additional time off.

Employers in Germany pay their employees on a monthly basis. Payday details are subject to what has been agreed in the employment contract. Most employees receive their wages on the last day of the month or the first day of the following month. However, it is also possible to pay employees by the middle of each month.

Minimum Wage

As of January 2022, German employees get paid an hourly minimum wage of EUR 9.82. In July 2022, the minimum wage will reach a total of EUR 10,45 per hour.

Sick Pay

When employees are unable to work because of sickness or injury, they receive their normal pay for a total of six weeks. Employees who are absent from work for longer than three consecutive days due to sickness are required to provide their employers with a doctor’s note.

After six weeks, sick pay is reduced to 70% of their normal gross salary and is provided by the statutory health insurance.

Bonuses

In Germany, it is common practice for employers to pay their employees a 13th salary as a yearly bonus.

Employees and employers in Germany are subject to the following tax and social security contribution rates (February 2022):  

Taxes

Employers

15%

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• 15% corporate tax rate

• 8.75% – 20.3% municipal trade tax

• 19% VAT

Employees

up to 45%

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Individual income tax rates are progressive:

• EUR 9,984 – EUR 58,596: 14% – 42%

• EUR 58,596 – EUR 277,825: 42%

• Above EUR 277,825: 45%

• 5.5% solidarity surcharge on annual income exceeding EUR 96,409

• Additional church tax may apply (8%-9%)

Social security

Employers

around 21%

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around 21% of employee’s salary including:

9.3% pension

1.2% unemployment insurance

7.3% health insurance

1.525% care insurance (1.7% for employees without children)

around 1.3% accident insurance (depending on industry)

0.12% insolvency charge

Employees

around 19.3%

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around 19.3% of employee’s salary including:

• 9.3% pension

• 1.2% unemployment insurance

• 7.3% health insurance

• 1.525% care insurance (1.7% for employees without children)

As Germany forms part of the PAYE system, employers are responsible for calculating and withholding the appropriate tax rates from the monthly salary. The withheld amount must then be forwarded to the German tax authorities no later than the 10th of the following month.

Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).

Annual Leave

The statutory minimum annual leave entitlement is 20 days (based on a five-day working week). If the employee’s standard working week comprises six days, the minimum paid annual leave is 24 days. However, it is common practice among employers to grant between 25 and 30 paid vacation days every year.

In general, employees have to take their annual leave within the respective year but some employers allow their workers to carry unused leave over into the following year. According to German law, paid leave days dating from the previous year have to be used until March 31.

In addition, Germany counts eleven official public holidays – plus a number of public holidays which apply only in certain federal states – which must be observed by companies.

Maternity Leave and Paternity Leave

Pregnant female employees are entitled to 14 weeks of fully paid maternity leave: six weeks before and eight weeks after giving birth. In some cases, e.g. premature birth, maternity leave can be extended to 18 weeks.

There is no paternity leave as such but fathers have the same entitlements to parental leave as mothers.

Parental Leave

Both mother and father are entitled to take parental leave until their child is three years old. The total amount of parental leave is 36 months for both parents – for the mother, the count starts with the end of maternity leave.

Parental leave benefits are paid by Social Security for twelve or 14 months. Parental leave must be officially requested at least seven weeks prior to the planned start date. Alternatively, parents can request part-time work during this time.

After having completed six months of service, employees in Germany are generally protected from dismissal. Employers thus need a good reason for employment termination which could be based on:

• the employee’s personal situation (e.g. long-term sickness)

• the employee’s conduct (e.g. violation of labour agreement)

• business-related aspects (e.g. liquidation)

Termination by mutual agreement or by default as specified in the employment contract is also possible.

When dismissing an employee, companies have to respect certain notice periods which depend on the employee’s length of service. In no case can notice periods be shorter than four weeks:

• more than two years of service: one month’s notice

• two to five years of service: two months’ notice

• five to eight years of service: three months’ notice

• eight to ten years of service: four months’ notice

• ten to twelve years of service: five months’ notice

• twelve to fifteen years of service: six months’ notice

• fifteen to twenty years of service: seven months’ notice

Resigning employees also have to respect a minimum notice period which should be specified in the employment contract.

Unless the dismissal is due to operational changes, severance pay is not a legal requirement. However, employees might be entitled to severance pay under collective bargaining agreements. If that is the case, severance pay generally amounts to 50% of the employee’s monthly salary multiplied with his or her years of service.