One of the most complicated aspects of expanding into a new country is managing labor law compliance. Since every country has different regulations, every country presents a new challenge. German labor law is no exception. If you plan to expand into Germany, here’s a basic guide to understanding German labor law.
Like many nations, German labor law general favors employees. The laws governing them include several statues:
- The Civil Code
- The Working Time Act
- The Part-time and Limited-time Act
- The Minimum Wage Act
- The Federal Vacation Entitlement Act
These laws, along with any collective bargaining agreements, are the basic protections for German employees.
Working Hours and Overtime
The Working Time Act stipulates the number of hours a person can work in a regular working day. In Germany, an employee can only work eight hours a day, Monday through Saturday, for a maximum of 48 hours per week. An employee can work up to 10 hours a day if the average number of hours per day does not exceed eight over 24 weeks. To extend beyond requires specific agreements and approval by the appropriate authority.
The law requires employees receive a 30-minute break when working between six and nine hours. Working more than nine hours a day requires at least a 45-minute break. Breaks can be divided into several 15-minute periods, but the employer decides when they can be taken. Some collective bargaining agreements stipulate timing and distribution of breaks.
Sick Leave and Vacation Entitlement
Employees receive paid vacation days in relation to the number of days they work per week. For example, employees who work six days a week receive a minimum of 24 days of paid vacation. If they work five days a week, they receive 20 days of paid vacation. As an employee works fewer days per week, vacation entitlement decreases as well. Typically, employees receive five to six weeks of paid annual vacation.
Law provides workers a minimum of six weeks of paid sick leave. This period applies to a single illness. If the sickness happens repeatedly from the same underlying cause, the six week period may start over if six months have elapsed after the end of the first sick leave or if one year has elapsed since the beginning of the first sick leave. Employees are required to present a medical certificate stating their inability to work due to illness and the expected period of absence. Employers with fewer than 30 employees may apply to have some sick leave expenses reimbursed by the government.
Taxes and Deductions
Employers deduct taxes and social insurance payments from their employee's paychecks. The amount of deductions depends on income and includes taxes and social insurance payments. Both employees and employers pay social security taxes, which are calculated from gross pay. An employee’s income tax rate ranges between 14-45 percent depending on income.
Employee Classification
It is important to note, most of these laws affect employees and not contractors. Employers may be tempted to classify their workers as contractors to avoid the heavy obligations that employers face. However, this is a risky, costly situation that should be avoided at all costs. The local government will look at the work performed to determine the status of the employment relationship. If the worker is misclassified and deemed as an “employee”, the employer must pay all back taxes, withholdings, and benefits.
---
If you're planning to hire employees in Germany, reach out to us today. Our team of experts can help you streamline the hiring process and compliantly hire employees in Germany.
Topic:
Compliance
