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Hiring in Germany
Employee background checks in Germany
Hiring options in Germany
Language requirements in Germany
Corporate presence requirements and payroll setup in Germany
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Access to top-tier global talent presents tremendous opportunities for any growing company. However, hiring internationally holds a host of challenges, including onboarding, payroll management, employee benefits, and adherence to tax regulations.
That is why modern and agile companies are turning to the Employer of Record (EoR) service to bypass all these hurdles. With an EoR solution, you can hire talent anywhere in the world without the hassle of setting up a legal entity. If you want to hire talent in Germany, for example, you can simplify and streamline the entire process by leveraging employer of record services.
In this guide, we will provide the necessary information for you to compliantly hire, manage, and pay talent in Germany, covering topics such as hiring options, employee background checks, and how to leverage employer of record services for your international recruitment efforts.
In Germany, hiring an employee requires a thorough understanding of the labour laws and regulations that employers must adhere to. Here are some guidelines employers must keep in mind when hiring an employee in Germany:
The cost of hiring a new employee in Germany can vary depending on factors such as salary, social contributions, and taxes. Calculating the recruitment costs comprehensively can provide insight into the total expenses associated with hiring a new worker. Salary is the primary cost you will incur when hiring a new employee in Germany. To attract a highly skilled talent, you must determine a competitive salary that aligns with industry and market standards.
Apart from the direct costs associated with hiring an employee, recruitment expenses should also be taken into account. This may include expenses related to advertising job openings, conducting candidate interviews, and conducting background checks. These costs can vary depending on factors such as the recruitment method and the level of the position. Taking these factors into consideration helps you assess the financial implications of your expansion efforts in Germany.
In Germany, it is common for employers to hire employees on a trial basis, known as a probationary period. While trial or probation periods are common in Germany, they are not mandatory.
Employers can choose whether or not to include a probationary period in the employment contract. During this period, both the employer and the employee have the opportunity to assess the fit of the working relationship and decide whether to continue the employment.
The maximum duration of a probation period in Germany is six months. However, the specific duration can be determined through mutual agreement between the employer and the employee, and it can vary depending on various factors, such as the nature of the job and the industry.
The probationary notice period is generally two weeks. This shorter notice period allows for more flexibility in terminating the employment relationship if it is not working out during the trial or probation period.
Employee background checks are legal in Germany. The processes and regulations governing background checks in Germany are subject to stringent data privacy laws, including the Federal Data Protection Act (BDSG) and the General Data Protection Regulation (GDPR). These laws mandate the protection of personal data and privacy rights, which require employers to obtain explicit consent from the candidate before conducting a background check.
When conducting employee background checks in Germany, employers should focus on collecting information that is directly relevant to the job position in question. This typically includes the candidate’s name, date of birth, current address, and social security number. Gather only the information necessary to assess the candidate’s qualifications and suitability for the role.
The following are the common background checks performed on employees in Germany:
It is essential to handle and store candidate data securely throughout the background check process. Companies hiring an employee in Germany must implement robust data protection measures to prevent unauthorised access or loss of personal information. Moreover, background check records must be retained only for a reasonable period as required by German law and dispose of them securely once they are no longer needed.
For countries within the European Economic Area (EEA), including the EU, Iceland, Liechtenstein, Norway, and Switzerland, individuals do not require additional residence and work permits when seeking employment in Germany.
However, for employees from countries outside the EEA, a residence and work permit are necessary. Germany also offers EU Blue Card for highly skilled non-EEA nationals to gain access to employment and residency in Germany. Eligibility is contingent on a university degree and a job offer meeting specific income threshold requirements.
Meanwhile, nationals of certain countries, including the United States, the United Kingdom, Israel, and Japan, may have access to fast-track procedures, which can streamline the immigration process and facilitate their entry into the German workforce.
Employers should be aware of the various hiring options they can explore to ensure a smooth and successful recruitment process. Here are some key hiring options that employers must know:
By understanding and using these various hiring options in Germany, you can effectively attract and retain top talent, foster workforce flexibility, and build a strong and capable team to drive your business towards success.
There are no statutory requirements; employees are often open to English agreements or policies. In cases of litigation, the courts will request official translations.
The language level requirement to work in Germany varies depending on the industry and the specific job requirements. In general, a minimum level of B1 language proficiency is often required for many industries. This level of proficiency allows individuals to communicate effectively in everyday work situations, including basic conversations, reading job-related documents, and writing simple emails. Jobs in the hospitality and customer service sectors, such as hotel staff or restaurant workers, for example, might require a lower proficiency level ranging from A1 to B1.
On the other hand, some sectors, such as the healthcare industry, may require a higher level of language proficiency, such as B2 or higher, due to the critical nature of their work and the need for effective communication with patients, colleagues, and regulatory authorities.
When it comes to engaging employees in Germany, foreign companies can do so without having a local corporate presence. However, it is important to consider factors related to doing business and corporate tax implications.
To ensure compliance with employment and payroll requirements, registrations with tax and social security authorities are necessary. Regarding employee earnings, withholdings are applied. Social security withholdings are determined based on a gross monthly income ceiling. For the states of the former West Germany, this ceiling is 7,300 EUR, while for the states of the former East Germany, it is 7,100 EUR. Typically, the employer and the employee split these withholdings equally.
In addition to social security withholdings, wage tax must also be considered. This tax is calculated based on a progressive tax rate, which can range from 14% to 45%. To ensure compliance, it is important to accurately calculate and deduct the appropriate wage tax amount from employees’ earnings.
Corporate governance in Germany covers various laws and regulations that govern the conduct and responsibilities of companies and their directors. The legal framework for corporate governance in Germany includes:
Meanwhile, here are some significant developments under corporate governance in Germany that you must know:
There are different ways to set up payroll in Germany, depending on the needs and resources of the employer. Here are a few common approaches:
As you expand into new markets, understanding country-specific laws and regulations is crucial to ensure compliance. That is where CXC excels. With our extensive experience in the global employment space, we can help you find, hire, manage, and pay workers anywhere in the world — all while ensuring full compliance. Through our comprehensive Employer of Record (EOR) solution, you can skip the hassle and expense of setting up legal entity and go straight to growing your business.
Speak to our team today and learn how we can support your global expansion efforts in more than 100 countries worldwide.
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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