Velocity Global’s Germany PEO (Professional Employer Organization) solution simplifies and expedites your international expansion—without setting up an entity. With streamlined employee onboarding, International PEO is the fastest and most flexible global expansion method available.
When you utilize International PEO for your expansion into Germany, Velocity Global becomes your Employer of Record. This means we compliantly hire and onboard international employees on your behalf. Whether you bring on one employee or an entire team, you maintain complete employee oversight while our experts handle all global payroll, compliance, and risk mitigation considerations.
Table of Contents
Germany Fast Facts
Currency: Euro (€)
Population: 83.7 million
Economy: $3.95 trillion
Top Sectors: Services, production industries, construction, agriculture, forestry, and fisheries
- The only federally-mandated holiday in Germany is The Day of German Unity. All other holidays are state-mandated. The federal states’ legislation observes nine holidays nationwide.
- New Year’s Day
- Good Friday
- Easter Monday
- Ascension Day
- Whit Monday/Pentecost Monday
- Labour Day
- Day of German Unity
- Christmas Day
- St. Stephen’s Day
Hiring Considerations in Germany
Expanding into any foreign market requires research and due diligence to understand the country’s economic, social, and political climate. Germany is no different. As the world’s 15th-largest economy, the United States’ top trade partner, and a talent resource for U.S. tech companies, Germany offers a unique global expansion environment.
Benefits of hiring in Germany:
- Germany remains one of the easiest countries in which to do business, according to the World Bank’s 2019 Ease of Doing Business Report. It is also the sixth-most promising market for tech firms considering global expansion, according to the 2020 State of Global Expansion™ Report’s Global Expansion Tech Index™. While Germany boasts a booming technology sector, it remains a prime location for businesses across many sectors.
- Europe’s top economy and the world’s fourth-largest, Germany sits at the center of a dense transportation network. Its well-connected roads, railways, and airports make transporting goods elsewhere inthroughout Europe simpler than many other nations on the continent.
- Home to Europe’s largest population, Germany’s government is one of the world’s most politically, socially, and economically stable nations, according to the Fund For Peace’s 2019 Fragile States Index. Companies can expect a business-friendly environment backed by a resilient and dynamic economy and robust public services.
Challenges when expanding into Germany:
- While Germany is a top international destination for growing businesses, navigating tax structures presents challenges. Teams Companies must anticipate paying nine tax payments annually, totaling more than 200 hours of work.
- Additionally, bBusinesses must plan for more than 50 days to complete the property registration process. This process involves an extract from the land registry, notarized transfer agreement, a pre-emption of rights waiver with the local municipality, and a transfer tax.
Cultural nuances and must-knows for doing business in Germany:
- Arrive at meetings on time. Germans hold punctuality in high regard and arriving late to scheduled meetings is considered rude. Introduce yourself and your colleagues to the meeting’s most senior member first.
- Maintain eye contact while shaking each attendee’s hand at the start and end of a meeting.
- Defer to direct managers in regards to decision-making, as Germans respect hierarchy. Messages and questions largely follow a chain of command when needed, and is a respected process.
- Respect and address people’s titles, both in-person and with digital communication such as emails. This approach includes doctors and professors.
- Dress conservatively, especially if meeting for the first time. Some industries may follow less strict dress guidelines (startups, for example), though it is best to err on the side of caution.
Employment Contracts in Germany
Minimum wages and salaries:
- Germany’s minimum wage is €9.35 per hour, the fifth-highest in Europe.
- Probation periods are not required, but are allowed and fairly common, usually lasting no longer than six months. However, German law states that they should expire after no more than nine months.
- Both contractual and discretionary bonuses are possible in Germany. 13th-month pay is customary, though more closely resembles an annual bonus.
Termination and severance considerations:
- Employers must give employees between one and seven months’ notice of termination and provide the notice in writing, requiring the employee’s signature, or their authorized representative’s signature. German Civil Code outlines notice period minimums based on years of employment with a single employer:
Years of Employment
Less than two years
Two to four years
Five to seven years
Eight to nine years
10 to 11 years
12 to 14 years
15 to 19 years
20 or more years
- Pay in lieu of a notice period is permitted only if the employee agrees; they may not, as this approach negatively affects an employee’s access to social security benefits.
- Dismissal without notice is rare, and may only occur in extraordinary circumstances where the employer-employee relationship cannot reasonably continue.
- German law does not require severance pay, though it is allowed. However, the right to statutory pay exists only in certain cases, such as severance pay in lieu of an immediate termination notice.
Paid Time Off & Benefits
- Expectant mothers receive special protections against dismissal prior to giving birth, and may work the final six weeks before birth only if they agree. They may not work for eight weeks after giving birth. Mothers with early or premature delivery may not work for 12 weeks after giving birth.
- Mothers receive, at minimum, their average pay over the previous 13 weeks or three months of employment.
- Fathers may apply for parental leave as well. Both parents can apply for up to 24 weeks’ leave at any point between birth and the child’s eighth birthday.
Vacation and annual leave:
- Minimum annual leave entitles employees to 24 days paid leave, though some collective agreements stipulate 30 days’ leave.
- Employees with four or more weeks of employment with their employer receive six weeks of their full, employer-paid wage. If sickness extends beyond six weeks, statutory or voluntary private insurance pays for up to 78 weeks of leave.
Average workweek hours:
- German employees may legally work up to 48 hours per week, or eight hours per day in a six-day workweek, though the average workweek is between 36 and 40 hours.
- Ten-hour days are permitted so long as the average working hours do not exceed eight hours over 24 weeks.
- There is no legal definition of overtime in Germany, leaving the definition up to employers. Individual employment contracts may include overtime requirements. However, some jobs may require overtime to complete tasks that cannot wait (i.e., meeting a strict deadline).
Nursing Care Insurance
Severely Handicapped Fund
19.93% + Fixed Cost
*Maximum contribution: €623.10 per month
**Maximum contribution: €331.24 per month
***Maximum Contribution: €83.75 per month
****Maximum Contribution; €69.20 per month
Burden for $100,000 salary: 18.63%
Choose Velocity Global
Breaking into foreign markets is a considerable undertaking. But working with an experienced global expansion partner organization like Velocity Global affords a quick, compliant expansion to capitalize on new opportunities in Germany. Velocity Global’s International PEO (Professional Employer Organization) solution streamlines global expansion and, as your Employer of Record, oversees your risk mitigation, payroll, and compliance concerns, so stay focused on moving the needle.
International PEO provides the maximum flexibility your firm needs to pursue short-term projects, hire a single employee, or build a brand-new team abroad. When compared to entity establishment, your firm saves up to 60% and begins operating in Germany 90% faster.
Ready to take the first step to growing your presence in Germany? Let’s make it happen.