Employer of Record in Germany

What is an Employer of Record in Germany?

An Employer of Record (EOR) in Germany is a strategic partner that acts as the legal employer for your employees residing in Germany. The EOR takes on all employment responsibilities and liabilities on your behalf, handling payroll, benefits, taxes, and regulatory compliance.

By partnering with an EOR, you can hire employees in Germany without the need to establish a local entity or navigate complex labor laws.

General Information

• Currency: Euro (EUR)
• Employer Taxes: Unknown
• Payroll Frequency: Monthly
• Employee Costs: 31.825%
• Capital: Berlin
• Fiscal Year: 1 January – 31 December

Main Aspects of the Labour Code

Minimum Wage

General: The Minimum Wage Act (Mindestlohngesetz – MiLoG) established the national hourly minimum wage at 12.41 EUR, effective January 1, 2024.

In 2023, the earnings cap for mini-jobs is set at 520 EUR, while for midi-jobs, it is 2,000 EUR. (A mini-job in Germany is a type of employment where the employee earns a limited monthly income, enabling them to work fewer hours without being subject to taxes).

However, industry-specific collective bargaining agreements often stipulate varying minimum wage rates.

Payroll in Germany

Payroll in Germany operates on a monthly cycle, with salaries typically disbursed on or around the 25th of each month. This standardized payment schedule ensures employees receive their wages consistently and on time. Employers are responsible for calculating gross pay, deducting income tax, social security contributions, health insurance, and other statutory charges before issuing the net salary. Maintaining accuracy and timeliness in payroll processing is essential for legal compliance and employee satisfaction in the German labor market.

13th Salary

In Germany, it is customary for employers to provide a 13th-month salary payment, typically disbursed with the December paycheck.

Working Hours

General: The standard working week in Germany consists of 40 hours, with employees typically working 8 hours per day. The work week may be extended to a maximum of 48 hours, with up to 10 hours per day, provided that over a period of six months or 24 weeks, the average working time does not exceed 8 hours per day.

Overtime: Overtime work in Germany must adhere to the maximum working hours outlined in the employee’s contract or collective agreement.

There are two common types of overtime:

Überstunden: This type of overtime encompasses any hours worked beyond the contractually agreed-upon hours. Überstunden is legally permissible and usually requires compensation, either through additional pay or time off.

Mehrarbeit: This refers to working hours that exceed the legal maximum of 48 hours per week, as defined by the Working Hours Act. Typically, this means working more than 8 hours per day across a 6-day work week. However, this limit can be extended to up to 10 hours per day, provided that the employee’s total working hours average 8 hours per day over a six-month period.

Leave

Annual Leave (Vacation):

The statutory minimum entitlement for annual leave in Germany is 20 working days per year for employees working a regular 5-day week, and 24 working days per year for those working a regular 6-day week, as mandated by the Bundesurlaubsgesetz (Federal Holidays Act).

This entitlement to paid vacation is known as Urlaubsanspruch. The specific number of vacation days (Urlaubstage) is typically outlined in the employment contract or collective agreement (Tarifvertrag), depending on the industry.

Many collective agreements enhance this entitlement to 30 working days. Additionally, employees working in dangerous or high-risk environments often qualify for extra leave days.

Public Holidays

Public holidays that fall on the weekend are usually lost.

Sick Days

Eligible employees in Germany, who have been employed for at least four weeks before taking sick leave, are entitled to sick pay at 100% of their regular income for up to six weeks. This is known as Entgeltfortzahlung bei Krankheit oder Kur. After this six-week period, the health insurance fund (Krankengeld) takes over, providing between 70% and 90% of the employee’s regular salary, depending on their insurance plan. This benefit can be received for up to 78 weeks within a three-year period if the incapacity is due to the same illness, starting from the first day of sickness.

Employees are required to notify their employer of their incapacity for work and the expected duration as soon as possible. If the illness lasts longer than three days, the employee must submit a doctor’s certificate no later than the following working day. Starting in 2023, these incapacity certificates are digital and are transmitted electronically by the doctor to the employer.

Maternity Leave

A pregnant employee in Germany is entitled to 14 weeks of paid maternity leave under the Mutterschutzgesetz (MuSchG), which can be extended to 18 weeks in cases of complicated or multiple births.

Maternity leave is divided into two periods:

1. Prenatal Leave: The employee is required to take a minimum of 6 weeks off before the expected due date.
2. Postnatal Leave: The remaining 8 weeks must be taken after the birth of the child.

The maternity payment is covered by the public health insurance fund and is calculated based on the average net wages earned in the three months prior to the pregnancy. The public health insurance pays a maternity benefit (Mutterschaftsgeld) of up to 13 EUR per day. If the employee’s daily net wage exceeds this amount, the employer is required to pay a grant (Zuschuss zum Mutterschaftsgeld) to cover the difference. For employees with private health insurance, the state covers a portion of the payment, up to a maximum of 210 EUR.

Paternity Leave

Paternity leave falls under the parental leave.

Parental Leave

New parents in Germany are legally entitled to unpaid parental leave, known as Elternzeit, and must request this leave in writing at least seven weeks before the intended start date.

Parental Leave Overview:

• Duration: Parents are entitled to up to 36 months of parental leave, which includes the 8 weeks of postnatal leave.
• Sharing Between Parents: This leave can be shared between both parents. However, at least 12 months of the leave must be taken within the first three years of the child’s life.
• Flexible Use: With the employer’s permission, the remaining leave can be used at any time between the child’s second and seventh birthday.
• Part-Time Work: During parental leave, parents may also opt to work part-time, up to 30 hours per week, provided they have received prior approval from their employer.

Other Leave

Depending on the collective agreement, employees in Germany may be entitled to additional types of leave, which can be negotiated between the employer and employee. One such leave type is family care time under the Pflegezeitgesetz.

Family Care Time (Pflegezeit):

• Duration: Employees are entitled to up to 10 days of unpaid leave to care for a seriously ill family member or to address a family emergency.
• Eligibility: This leave is designed to provide time for employees to assist with urgent care needs or emergencies involving close family members.

These provisions can vary based on the specific collective agreement in place, so it’s important for employees to review their agreements and discuss their options with their employers.

If you’re planning to live, work, or travel to Germany, it’s essential to choose the right type of visa based on your purpose and the length of your stay. Germany offers several visa categories, each tailored to specific needs.

Business Visa

Foreign nationals who are not from visa-exempt countries and need to enter Germany for business purposes—such as attending meetings, conferences, or negotiating contracts—must apply for a business visa. This visa is typically valid for stays of up to 90 days.

Work Visa

A German work visa is necessary for non-EU nationals who intend to engage in formal employment in Germany. The validity of this visa aligns with the employment contract, and it can be granted for a period of up to four years. This visa type is essential for those planning to work long-term in Germany and must be applied for at the nearest German embassy or consulate prior to arrival.

Work Permits in Germany

Germany does not issue separate standalone work permits. Instead, the work visa serves as the legal authorization for employment. In order to legally work in Germany, foreign nationals must secure this visa in advance.
At Brain Source International, we act as your Employer of Record in Germany, overseeing every aspect of the work visa process. From coordinating with your employees to submitting required documentation, we ensure the visa process is smooth, fast, and fully compliant with German laws. Our local knowledge minimizes risks and accelerates your hiring timeline.

Employer of Record in Germany with Brain Source International

Brain Source International specializes in providing EOR services, making it easier for companies to manage their workforce in Germany. They ensure compliance with German labor laws, which can be complex due to the country’s stringent regulations regarding employment contracts, workers’ rights, and social security contributions.

Benefits of Using an Employer of Record in Germany with Brain Source International:

1. Compliance with Local Laws: Germany has specific employment laws that must be followed, including working hours, employee benefits, and termination procedures. Brain Source International ensures full compliance, reducing the risk of legal issues.
2. Payroll and Tax Management: The company handles payroll processing and ensures that all tax obligations are met according to German standards. This includes managing income tax, social security contributions, and other mandatory deductions.
3. Focus on Core Business Activities: By outsourcing the administrative and legal responsibilities of employment to Brain Source International, you can focus on growing your business in Germany without the burden of HR management.
4. Flexibility with Independent Contractors: If your business model relies on independent contractors, Brain Source International can help you navigate the complexities of German labor laws, ensuring that these contractors are properly classified and managed.
5. Quick Market Entry: Using an EOR service allows for a faster market entry since you don’t need to establish a legal entity in Germany. This is particularly beneficial for companies testing the market or expanding rapidly.

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