With its mix of emerging and booming economies, political
uncertainty and extreme contrasts in business customs, European
jurisdictions can never be categorised as one homogeneous
With such contrasts economically, politically and in business
customs, European jurisdictions can never be categorised as one
homogeneous whole. However for regional and global HR and payroll
managers there are some commonalities. Let's take a closer look
at HR and payroll in Germany.
Social security system
German employers and employees make
monthly contributions towards a mandatory social security system
that provides pension, health, unemployment benefits and nursing
The maximum annual salary on which
health and long-term care contributions can be levied is
€50,850 per year. For unemployment and pension contributions
the maximum annual salary is €64,800 per year (East Germany)
and €74,400 per year (West Germany).
Contribution (% of salary) for 2016
Contribution (% of salary) for 2016
7.300% + x
Long-term care fund
1.175% (Employees with
1.425%* (Employees without child)
Employment contracts can be of a
fixed (maximum period of two years per employee) or indefinite
The German Civil Code states either
the employee or the employer can terminate an employment contract
by giving a notice of at least four weeks to the 15th or to the end
of the calendar month.
- It ranges from one to three months for employees who have
worked for two to eight years.
- Employees who are dismissed for reasons of redundancy are
generally entitled to a severance payment of at least 50% of one
month's salary per year of service, up to 12 months'
Foreign nationals belonging to the
European Economic Area (EEA, comprising the EU, Iceland,
Liechtenstein and Norway) are in general not required to hold a
residence permit or a work permit to live and work in Germany.
Exceptions still apply to Romania/Bulgaria and Croatia as well as
new EU countries.
Foreign nationals not belonging to
the EEA are required to obtain a residence permit and a work permit
to live and work in Germany.
Work permits are issued taking into
account the local labour market conditions and the availability of
German or EU nationals to fill the position.
A foreign national must first apply
for a three-month entry visa at the German Consulate in his/her
The employer is required to
simultaneously submit a work permit application, since the visa
request is referred by the Consulate to the local authorities of
the foreign national's intended place of residence.
Foreign nationals belonging to
Andorra, Australia, Canada, Israel, Japan, Monaco, New Zealand, San
Marino and the US can enter Germany as visitors and can
subsequently apply for residence and work permits.
By law, employees working five days
per week are entitled to a minimum paid annual leave of 20 days,
while those working six days per week are entitled to a minimum
paid annual leave of 24 days.
Employees are entitled to a paid sick
leave for six weeks, subject to the submission of a doctor's
certificate; thereafter the health insurance will cover the salary
payments (around 80%).
There is a statutory minimum wage of
€8.50 per working hour in Germany.
Overtime payment regulations are
regularly stated in collective and company bargaining agreements.
Employers can choose to give time off instead of additional pay to
employees for working overtime.
Employment in Germany is governed by several legislations.
The Civil Code: Governs employment
The Works Constitution Act: regulates
co-operation between employers and employees
The Collective Agreements Act:
governs collective bargaining agreements.
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