Germany

Germany PEO & Employer of Record Services

WeHireGlobally (WeHG) provides tailored International PEO and Employer of Record (EOR) solutions in Germany, enabling businesses to seamlessly enter the German market or hire local and expat employees without the need to establish a legal entity.

With WeHG’s solution, you can begin operations in Germany within days, saving both time and money. WeHG hires employees on your behalf, ensuring full compliance with local labor laws while allowing you to retain operational control. Legally, the employees will be on WeHG’s local payroll, working exclusively for your business.

This streamlined approach reduces administrative complexities, minimizes risk, and allows companies to focus on growth while WeHG manages payroll, onboarding, benefits, tax filing, and employment termination. Partner with WeHG for efficient workforce management and fast market entry in Germany.

Germany fast facts

Population, million: 83,02
Land area: 357,168 km²
Capital: Berlin
Local currency: EUR

Hiring, Negotiating and Doing Business in Germany

The employment relationship is governed and regulated by:

• Statutory laws.
• The employment agreement.
• Collective agreements (if any), such as works agreements with the works council or collective bargaining agreements with the union.

Necessity of written employment contract

If the employment is for a fixed term, this must always be agreed in writing. Should the parties fail to do so, the employment agreement shall be deemed to have been concluded for an unlimited period of time.

There is no legally fixed form for a contract of employment. Nonetheless, it is highly advisable to define certain points, such as:

• The description of the location and activity;
• The date of appointment and notice periods (in the case of fixed-term employment contracts the duration of the contract);
• The daily or weekly working time;
• Arranging of a probationary period;
• The level of the wage (gross) and possible bonuses;
• Vacation entitlement;
• Non-disclosure agreements or non-compete obligations;
• Contractual penalties

Different forms of engagement: employment, contracting, work with private entrepreneur

Generally, workers can be categorised as follows:

• Dependent workers in an employer-employee relationship (employee).
• Independent workers (self-employed contractors, such as freelancers and consultants).

An employee is someone who performs services under an employment agreement, under the direction and supervision of the employer.

An independent worker performs services on the basis of a service agreement and assumes the sole risk for his business. Even where a contract specifically describes a worker as an independent worker, that worker can still, in fact, be an employee given the circumstances of their employment relationship, and can still be entitled to the same rights as an employee.

German Employment Contract

Employment agreements

It is legally required to have a locally compliant employment contract in Germany. The contract should spell out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in Germany should always state the salary and any compensation amounts in Euro rather than a foreign currency.

The legal framework for fixed-term employment contracts is set by the German Part-time and Fixed-term Employment Act (Teilzeit- und Befristungsgesetz; ”TzBfG”). As its title indicates, this act has two subjects: part-time work and fixed-term work. Regarding fixed-term work, the act differentiates between fixed-term employment contracts with a “valid reason” (mit Sachgrund) and contracts without such a “valid reason” (ohne Sachgrund).

A fixed-term employment contract without “valid reasons” is subject to some restrictions. In short, the employer may only extend such a fixed-term contract a maximum of three times and may not exceed the duration of two years in total. These restrictions and other important rules will be discussed in detail as the golden rules in the following article.

Fixed-term employment contracts with “valid reasons” are – for example – contracts that are entered into to hire employees as temporary replacements for others on parental leave or to cover increased workloads during a special temporary project. In practice, however, most fixed-term employment contracts are not based on “valid reasons” in the meaning of the TzBfG (sachgrundlose Befristung).

Germany working hours

The workweek is defined as the 6 days of Monday-Saturday. The working hours during normal workdays may not exceed eight hours and therefore 48 hours per week. The workday can be extended under certain circumstances to ten hours. Night work is only allowed for eight hours per working day. On-call work that requires the employee’s presence at the workplace also counts as working time and in some cases as overtime. On-call work in the form of constant availability, for example stand-by work, on the other hand, does not count as working time. Work on Sundays and public holidays is generally prohibited.

A working day of more than six, but no more than nine hours, requires a scheduled 30 minute rest break. This can be may be split into two breaks of 15 minutes. A 45 minute break is required after six hours of work in the case of a working day of more than nine hours. At the end of the working day, there must be an uninterrupted rest period of a minimum of 11 hours.

Overtime

Employees working hours may not exceed eight hours per day and 48 hours per week. They may be extended to up to ten hours per day provided the hours worked additionally are balanced out by free time within six months.

Overtime has to be compensated for with additional time off. An overtime bonus is possible but it is not legally specified. Overtime bonuses have to be paid only when required by individual contracts or in applicable collective labor agreements.

Vacation leave in Germany

In Germany the minimum holiday/vacation entitlement is 24 working days a year. This is based on a working week of six working days (excluding Sundays). The German system distinguishes between working days (Werktage) and office days (Arbeitstage). Since office days are generally only from Monday to Friday, the four-week minimum vacation amounts to 20 office days. Employers regularly grant more than the minimum vacation. Between 25 and 30 days per year is common practice.

German Maternity Leave

In Germany, pregnant women are exempt from work during the six weeks leading up to their due date, unless they explicitly choose to work. After childbirth, mothers are strictly prohibited from working for a mandatory eight-week period. If there are medical concerns regarding the mother’s or unborn child’s health, employers may be required to cease employment earlier, based on an individual maternity protection period supported by a medical certificate.

During maternity leave, women receive maternity pay equal to their average monthly remuneration over the three months preceding the leave. This ensures financial stability while protecting maternal and child health.

German Severance Laws

Termination of Employment

Termination notices in Germany must always be provided in writing to be legally valid. Failure to comply with this requirement renders the notice invalid.

Notice Periods

The statutory notice period varies based on the duration of employment. For probationary periods (up to six months), the notice period is two weeks. For permanent employees, it starts at four weeks and increases with seniority, reaching up to seven months after 20 years of service. Some employment or collective bargaining agreements may specify longer or shorter notice periods. Employers cannot unilaterally provide payment in lieu of notice; the notice period must be honored.

Severance Payments

Germany has no statutory severance payment laws. However, severance is often negotiated under social plans, collective bargaining agreements, or during termination settlements to avoid legal disputes. In practice, severance is commonly calculated at approximately 50% of the monthly salary per year of service, but the actual amount can vary based on the specifics of the case or employer practices.

This framework ensures fair practices while providing flexibility for employers and employees navigating termination and severance agreements.

German Tax

Personal income tax

In addition to this there is the “solidarity surcharge” of 5.5% of the tax, to cover the continuing costs of integrating the states of the former East Germany.

Germany allows a variety of deductions that can lower taxable income. Deductions are granted for circumstances such as children under 18 (or under 27 if still attending school and without earnings), specified insurance premiums, charitable and political contributions to German entities up to certain limits and unavoidable extraordinary expenses above a certain limit (such as illness).

Health Insurance Benefits in Germany

If an employee is not able to perform their contractual duties because of a physical or mental incapacity or illness, he or she can take time off from work. The employer must, however, be informed immediately. If an absence for illness extends over three consecutive days, the employee must submit a doctor’s note to the employer.

German law requires that employees be paid 100 percent of their salary or wages by their employer during the first six weeks of sickness. Under certain circumstances, this six-week period can be triggered more than once a year.

If an employee again falls ill due to the same underlying illness, the six-week period will start again if six months have passed since the end of the last sick leave, or if one year has passed since the beginning of the first sick leave. If the underlying cause of illness is a new one, the six-week period automatically starts again.

Following the six-week period, employees are entitled to statutory/private insurance sickness benefits. The sickness allowance amounts to 70% of an employee’s normal pay. The maximum period for payment of this allowance is 78 weeks.

Additional Benefits in Germany

13,14th salary

Not a legal requirement. Many employers pay 13 monthly payments a year, which is normally paid out in December for Christmas or split between summer and Christmas. In some management positions, you might even get a 14th salary.

German Holidays

Germany celebrates nine national public holidays as well as additional public holidays that vary by state:

• New Year
• Good Friday
• Easter Monday
• Labour Day
• Ascension
• Whit Monday
• Day of German Unity
• Christmas
• St. Stephen’s Day

Why Choose WeHireGlobally?

WeHireGlobally (WeHG) eliminates the complexities of managing international teams, allowing businesses to focus on their core goals. We handle onboarding, payroll processing, benefits administration, tax compliance, and employment termination with precision and expertise. Our Employer of Record (EOR) solution empowers companies to efficiently manage their global teams while mitigating administrative burdens, reducing costs, and minimizing legal risks. With WeHG, you gain the flexibility to expand globally without the need to establish costly local entities, ensuring a seamless and compliant workforce management experience.

Q&A section

1. What makes Germany an attractive destination for global hiring?

Germany boasts a highly skilled workforce, strong economic stability, and a robust infrastructure. With expertise in engineering, IT, and manufacturing, the country offers businesses access to top-tier talent and opportunities for global expansion.

2. What are the key benefits of using an Employer of Record (EOR) in Germany?

An EOR streamlines hiring by handling compliance, payroll, and benefits while ensuring adherence to German labor laws. It eliminates the need to set up a local entity, saving time and costs for businesses.

3. How does German maternity leave differ from other countries?

German maternity leave includes six weeks before birth (optional) and eight weeks after birth (mandatory), with maternity pay equivalent to the mother’s average salary. Additional protection periods may apply based on medical conditions.

4. What are the notice period requirements for terminating employees in Germany?

Notice periods range from two weeks during probation to up to seven months after 20 years of service. Employers must comply with these notice periods, as payment in lieu of notice is not permitted.

5. Is severance pay mandatory in Germany?

Germany does not have statutory severance pay, but severance is often negotiated through social plans, collective agreements, or legal settlements, typically amounting to 50% of monthly salary per year of service.