Looking for a PEO and EOR service provider in Germany? You've knocked on the right door! Hiring and employment in Germany can be complex as a foreign employer. We're here to guide you. EuroDev is the leading provider of EOR & PEO solutions in Europe. We partner with North American businesses who want to expand their business into Europe, and thus Germany. Germany is a popular destination for many North American businesses. What should be taken into account when employing or hiring in Germany? 

How it works - PEO in Germany & EOR in Germany

An Employer of Record (EOR) or Professional Employer Organization (PEO) is a company or organization that is legally responsible for paying employees, including dealing with employee taxes, benefits & insurances. As the EOR/PEO of your European or German employees, we provide you with tailored payroll, HR and compliance services. Through this construction, we decrease all the complications such as compliance issues, setting up a foreign establishment and setting up employment contracts in a different language. 

Benefits of a PEO in Germany & EOR in Germany

  • Expand without an entity 
  • Flexible and cost-effective solution to outsource payroll and HR functions for international expansion 
  • In compliance with foreign local laws & regulations 
  • Minimizes employment liabilities and risks 
  • Reduced risk, as the risks of being an employer fall almost completely on the employer of record 
  • Let's you focus on your core business 
  • You manage your employees 
  • PEO/EOR takes care of registration and contact with local authorities 

Employment Contracts Germany

One of the first things that an employment contract will outline is whether it is for a fixed term or for an indefinite duration (Befristete und unbefristete Arbeitsverträge). In Germany, the majority of contracts are indefinite as they provide more certainty for both the employer and the employee. Generally, fixed-term contracts can be renewed a maximum of three times and can only last for a duration of two years. There are exceptions. If there is a justification for a longer term for example, it may be possible for the fixed-term contract to be for more than two years.

A German PEO service provider will support you with the set-up of a local employment contract.

Employment Termination Germany - Notice Period Germany

Germany has no legal concept of “at-will” employment like in the US, and generally has fairly strict legal requirements and procedures that employers must fulfill before successfully terminating employees. The minimum notice given to all employees is:

  • four weeks for less than two years of employment;
  • one month for employment between 2–4 years;
  • two months for employment between 5–7 years;
  • three months for employment between 8–9 years;
  • four months for employment between 10–11 years;
  • five months for employment between 12–14 years;
  • six months for employment between 15–19 years;
  • seven months for service of more or equal to 20 years.

As the German PEO and/or EOR provider is the formal employer of your employees in Germany, they are also responsible for terminating the contract while applying the applicable German terms.

Social Security Tax Germany

Workers within Germany are required by law to pay social security contributions on their gross salary and all earnings in Germany. The following rates (2020) have to be applied against the gross salary, with the ceilings indicated.

Type of Insurance Paid by employer Paid by employee Total
Pension 9.3% 9.3% 18.6%
Unemployment 1.2% 1.2% 2.4%
Health* 7.3% 7.3% 14.6%
Nursing** 1.525% 1.525% 3.05%
Total Percent 19.325% 19.325% 38.65%

Average Salary Germany & average employer costs Germany

In 2019, the average annual wage in Germany was $ 53.637,80. This is a lower than the average annual wage in the United States: $65.835,58. As an employer, the actual employer costs are around 19% to 20% higher than the gross annual salary. Based on a $65.835,58 annual salary, the employment costs would be $78.673,52

To learn more about the average salaries in Europe and the actual employment costs in Europe, we invite you to read this article on Costs of hiring European employees.

Working hours Germany

The standard workweek is five days, eight hours per day, although a six day workweek is possible. An employee may not work more than 48 hours in one week. Daily hours can be extended to 10 hours per day, provided that the employee does not work an average of more than 40 hours per week over a 24 week period. Overtime is normally compensated with paid time off or with a higher hourly rate, but the exact rules for a given employer are normally set by contract or collective agreement. Board members and some management level employees are often not paid overtime.

Paid vacation leave Germany

Employees whose work week is normally five days are entitled to 20 days of paid vacation per year. Employees who work six days per week are entitled to 24 days per year. The full vacation entitlement starts after an employee has been on the job for six months. To learn more about the average paid vacation days in Europe and how Germany compares to the rest of Europe, we invite you to read our blog on paid vacation days Europe.

Public Holidays Germany

In Germany, there are 10 public holidays:

  1. New Year's Day
  2. Good Friday
  3. Easter Sunday
  4. Easter Monday
  5. Labour Day
  6. Ascension Day
  7. Whit Monday
  8. German Unity Day
  9. Christmas Day
  10. 2nd Day of Christmas

Maternity and Paternity Leave Germany

If you become pregnant while working in Germany, you are legally entitled to fourteen weeks' maternity leave (at least six weeks before and eight weeks after childbirth). You are entitled to eighteen weeks' leave in the event of a premature birth, multiple births, or if your child is found to have a disability.

Learn more about PEO and EOR in other European countries:

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Interested in European expansion? Exciting! I am looking forward to discussing your European HR needs.

Monique Ramondt Sanders

Executive Vice President | HR Outsourcing