Expanding Your Business: Payroll in Germany

Payroll in Germany

Germany offers companies great opportunities for international growth with one of the largest economies in the world, a sophisticated business infrastructure, and perfect location in the heart of Europe. 

There are challenges with doing business and managing payroll in Germany. There is a complicated tax system, several required tax payments during the year, and up to 14 different types of taxes imposed on businesses. Many local regulations that require additional certifications depending on the type of industry and company. 

Germany Labor Laws

What is the minimum wage in Germany?

The national minimum wage is EUR 12.00.

Employer Contact Obligations

Written contracts are not mandatory to begin a job, but a document with work conditions must be put in writing no later than one month after the employee start date.

Work Week Requirements

Work hours are regulated by the Hours or Work Act. Regular full-time employees cannot exceed 8 hours per day. There is a 10-hour limit, including overtime, as long as the eight-hour rule is maintained over a six-month period.

Minimum Working Age

Minimum working age is 15 years. In the case of light work, minors over 13 are allowed to be employed, with the consent of a legal guardian.

Severance Requirements

Employees are entitled to severance pay due to operational termination, termination by the judgement of a court, immoral or extraordinary dismissal as determined by a court.

Germany Payroll Requirements

Payroll Taxes

There is a progressive income tax rate ranging from 0-45%. 

There are two additional taxes applied to all incomes. Solidarity surcharge of 5.5% of the income tax and Church tax of 8-9% of the income tax – levied if the taxpayer is a member of a church.

Payroll Tax Due Dates 

The tax year ends on December 31, and tax declarations must be made by May 31 each year.

Monthly and yearly reporting of social security and Benefits in Kind are required. Monthly and annual reporting obligations include social security and withholding tax statements, statutory accident insurance and more.

Social security statements must be completed and submitted for each employee on a monthly basis. These contributions are typically due by the third business day of the following month.

Pension Policies

Pension contributions are paid by the employee and the employer, with each paying half of the contribution. Some workers have additional pension schemes administered by their employer and private savings plan.

Germany Leave Requirements

Workers in Germany are entitled to a minimum of 24 working days of leave per year. Annual leave can be transferred to the next year but must be taken by March 31 of the following year.

Sick leave is regulated under the Continued Remuneration Act. This requires employers to provide employees with 6 weeks of paid sick leave for each illness that results in the inability to work.

If a sick leave lasts longer than six weeks, the employee receives a sickness allowance through health insurance in the amount of 70% of most recent salary. 

Payment for Absences

In accordance with the labor laws of Germany, the following rules apply to payment for absence due to regular illness.

• Employer paid six (6) weeks salary.
• After six (6) weeks, health insurance will take over sick leave payments.
• Employers with less than 30 employees can request a reimbursement from the health insurance.

Maternity Leave

Female employees are entitled to 14 weeks of paid maternity leave (6 weeks prenatal leave and eight weeks of postnatal leave).

Holidays in Germany

When planning to hire in India, it's crucial to be aware of the official holidays when employees may not be available for work.

• January 1 – New Year’s Day
• March 29: Good Friday
• March 31: Easter Monday
• May 1 – May Day
• May 26 – Ascension Day
• June 6 – Whit Monday
• October 3 – Day of German Unity
• December 25 – Christmas Day
• December 26 – Boxing Day

Easily Hire and Pay Employees in Germany

Is Germany in your hiring or expansion plans? Paylocity can help. Our cloud-based platform helps you navigate the waters of international payroll.

And don’t sweat complicated compliance — our hybrid service model includes a U.S.-based team and in-country experts in Germany to help when you have questions.

Want to learn more? Request a demo today!