Its central location, membership to the European Union (EU), and strong industrial sector make Germany one of the most attractive countries to expand into in Europe. In this post, we provide information on employing a worker in Germany.
Capital GES created this postcard series to help businesses that are considering expansion and hiring global staff. In this postcard series, members of our sales and business development team provide helpful tips on international employment. Below, we answer questions in relation to employment law in Germany.
Germany Overview
Germany is considered the largest economic power in Europe. Its central location, membership to the European Union (EU), and strong industrial sector make it one of the most attractive countries to expand into in Europe. Germany provides many opportunities for investors in not only its robust automobile sector, but also in mechanical engineering, chemical, electronics, knowledge-based sectors, and high-tech start-ups.
Employing a worker in Germany – Employment Laws to know
However, expanding into Germany can be time-consuming and complex. Therefore, it is best to seek the right advice before expanding your business and hiring staff. Below, we look at the most common questions asked by clients regarding employment law in Germany.
1. Contracts
Can I trial a worker using a fixed-term employment contract, as I am not sure whether it will work out in the long-term?
Germany is a country where fixed-term contracts can only be issued in cases where a valid reason—such as a maternity cover, replacement due to sickness, or a time-based project—exists. Fixed-term contracts may be extended a maximum of two times and may not exceed any more than 24 months. Any fixed-term contract that exceeds 24 months needs justification or it will be deemed by law to be an indefinite contract. To ensure your worker stays fully compliant in Germany, it is best to discuss your contract options with a local partner.
2. Termination Rules and Costs
What do I need to know about termination and severance pay in Germany?
Terminations in Germany are extremely complex and specific advice should be sought in every instance. In Germany, dismissal is allowed for a serious cause. In all other cases, a valid justification must be given, or the termination might be classed as an “unfair dismissal” if challenged in a labour court. As terminations are complex, it is best to seek advice before you make any decisions.
3. Statutory Employee Benefits
What are the statutory employee benefits in Germany?
This is a common question we are asked by both workers and clients. See below for information on the three most common employee benefits; paid holiday leave, parental leave, and sick pay.
Paid Holiday Leave
Statutory paid leave entitlement in Germany is 24 days per year for a six-day working week or 20 days in the case of a five-day working week. It is not uncommon for employees to be granted five or even six weeks paid annual leave.
Maternity, Paternity, and Parental Leave
Maternity Leave
In Germany, mothers are granted 14 weeks paid maternity leave. Maternity leave starts six weeks before the birth, and this leave is paid at full salary by the employer. While the salary is paid by the employer, it is reimbursed by the statutory health fund. The post-natal (remaining eight weeks) allowance is paid from the statutory health fund or Federal Insurance Office (depending on whether the employee is a member of the statutory health insurance). If the employee’s net remuneration of the last three months exceeds the maternity allowance, the employer must pay the difference to the employee. The employer may be able to recover certain amounts from the authorities.
Paternity
There is no statutory paternity leave in Germany. However, fathers are entitled to parental leave (Elterngeld Plus).
Parental
In Germany, statutory parental leave, known as Elterngeld, entitles parents to a combined 14 months of paid parental leave. Neither parent is allowed to take less than two months or more than 12 months leave. For either parent, pay is 12-14 months at 65% of salary which is capped at €1,800 per month. This leave is paid by the state.
Single parents with sole custody can take the whole 14 months.
Parents have the option to choose between Elterngeld Plus (parental allowance plus) and the basic parental allowance. Elterngeld plus extends the parental leave from 14 to 28 months by claiming only half the monthly allowance than full parental leave. Parental leave continues to be available for a maximum of three years, can be claimed by either male or female employees, and is granted without pay.
Sick Pay
In Germany, an employee is entitled to sick pay. Sick pay is equal to regular remuneration and paid by the employer for the first six weeks, on the condition that the employee has been employed at least four weeks.
Following the six-week period, employees are entitled to statutory/private insurance sickness benefits from the health insurance fund for a maximum of 78 weeks within a three-year period (for an incapacity caused by the same illness or disability). This sickness allowance amounts to 70% of the employee’s normal pay.
How Capital GES Can Help You Expand and Employ Workers in Germany
If you are a business that is looking to expand internationally and hire staff in Germany, Capital GES can help.
Capital GES provides many employment services such as managing the worker’s onboarding, HR, payroll, and taxes. To establish what services you require, contact us at sales@capital-ges.com or phone +41 32 732 9700, and a member of our team will be in touch.
