Germany Payroll Outsourcing, Payroll Software and Employer Of Record (EOR) services.
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GERMANY
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There are no specific work permits available in Germany that allow foreign nationals to begin or continue working there. The only option for a foreign individual to work in Germany is with a work visa, which you may apply for at the German embassy or consulate closest to you.
Types of Visas:
- Business – For foreign nationals who wish to visit Germany for business reasons. Valid for up to 90 days.
- Work – For foreign nationals wanting to work in Germany. Valid for the period of an employment contract and up to 4 years.
PAID TIME OFF
Annual Vacation
The required minimum paid leave is 24 days for employment contracts with a six-day work week and 20 days for contracts with a five-day work week. In Germany, the majority of full-time workers receive 25 to 30 days of paid leave per year. The amount of time used for holidays or sick leave does not affect paid leave.
Sick
If an employee can get a medical certificate from their doctor, they are entitled to at least six weeks of paid sick time.
The employee will start receiving illness benefits from their health insurance provider after six weeks. The employee is entitled to reimbursement at a rate of 70% of gross pay (up to the social security cap) but not more than 90% of net pay.
Maternity
Prenatal leave lasts for six weeks and postpartum leave lasts for eight weeks, both at full pay. Mothers are granted 12 weeks of paid leave in the event of multiple births.
Up to three years of unpaid leave are allowed for either parent to stay at home with their child. Parents are free to decide whether to work full-time or part-time during their parental leave, up to 32 hours a week. Premature newborns’ parents are granted extended parental leave.
Paternity
Up to three years of unpaid leave are allowed for either parent to stay at home with their child. Parents are free to decide whether to work full-time or part-time during their parental leave, up to 32 hours a week. Premature newborns’ parents are granted extended parental leave.
Family
Up to three years of unpaid leave are allowed for either parent to stay at home with their child. Parents are free to decide whether to work full-time or part-time during their parental leave, up to 32 hours a week. Premature newborns’ parents are granted extended parental leave.
National Holidays
Employees in Germany are entitled to nine paid public holidays.
Other Paid Time Off
N/A
STATUTORY EMPLOYEE BENEFITS
Unemployment
Employer: 1.5% of monthly covered payroll.
The maximum annual earnings used to calculate contributions are €78,000 (E–€69,600).
Employee: 1.5% of monthly covered earnings.
The maximum annual earnings used to calculate contributions are €78,000 (E–€69,600).
Must be competent, available for, and actively looking for work. Must have at least 12 months of covered work in the previous two years.
The eligibility for unemployment benefits may be suspended for up to 12 weeks under specific circumstances.
Depending on the length of the covered work time and the insured’s age, 67% (or 60% without children) of their net monthly income is compensated for six to 24 months. Unemployed individuals older than 58 with at least 48 months of covered work are eligible for the benefit, which is provided for up to 24 months.
Workers Compensation
Employees: none.
Self-employed person: contributions vary depending on assessed degree of risk.
Employer: contributions vary depending on the assessed degree of risk.
Must be examined for a work-related illness or injury. Accidents that happen on the way to and from work are protected.
Temporary disability benefit: From the day the disability started until recovery or the granting of a transition payment, whichever comes first, 80% of the insured’s most recent gross earnings up to their most recent net income is paid (in most cases, the employer pays for the first six weeks). The benefit is granted for up to 78 weeks if recovery is not predicted and occupational rehabilitation is not feasible.
The minimum yearly income used to determine benefits for insured individuals who are 18 years of age or older is €21,924.
The accident insurance fund has a range of maximum yearly earnings from €64,680 to €109,620 that are utilized to determine payments.
Permanent disability benefit: 66.7% of the insured’s gross yearly income in the year prior to the onset of the disability is provided in the event of total disability (evaluated loss of earning capacity of 100%).
Social Security
The majority of employer contributions are tax-free.
- 18.6% of your yearly salary is covered by pension insurance, up to a limit of EUR 84,600. (EUR 81,000 in the new federal states). Both the employer and the employee must pay a payment of 9.3% each.
- Insurance against unemployment: 2.4%, up to an annual income cap of EUR 84,600 (EUR 81,000 in the new federal states). Everyone pays a 1.2% payment, which is split between the company and the employee.
- Health insurance: 14.6%, with a yearly income cap of EUR 58,050. Both the employer and the employee must pay a payment of 7.3% each.
- 3.05% (3.4% for childless people starting at age 23) of your yearly salary up to a maximum of EUR 58,050 is covered by long-term care insurance. The employer is responsible for 1.525% of the contribution, while the employee is responsible for 1.525% (1.875% for those without children beginning at age 23).
- Employer payments to the work accident program are based on the industrial sector and accident risk.
- Only the employer is responsible for paying the insolvency payment, which is 0.09% up to an annual income cap of EUR 84,600. (EUR 81,000 in the new federal states).
Retirement
18.6% of your yearly salary is covered by pension insurance, up to a limit of EUR 84,600. (EUR 81,000 in the new federal states). Both the employer and the employee must pay a payment of 9.3% each.
Health
Health insurance: 14.6%, with a yearly income cap of EUR 58,050. Both the employer and the employee must pay a payment of 7.3% each.
PRIVATE EMPLOYEE BENEFITS
Workers Compensation
Private workers compensation is available.
Retirement
There are private retirement schemes available.
Health
Private healthcare is available.
Insurance
Private life insurance is available.
PERSONAL INCOME TAX
Tax Year
In Germany, the tax year runs concurrently with the calendar year, which runs from January 1 to December 31.
Tax Tables
| Taxable income range for single taxpayers ( in EUR ) | Taxable income range for married taxpayers ( in EUR ) | Tax rate (%) | ||
| Over | Not over | Over | Not over | |
| 0 | 10,347 | 0 | 21,264 | 0 |
| 10,632 | 61,971 | 21,264 | 123,942 | 14 to 42* |
| 61,971 | 277,825 | 123,942 | 555,650 | 42 |
| 277,825 | and above | 555,650 | and above | 45 |
Taxation Method
Germany has progressive tax rates.
Double Taxation
Double taxation agreements (DTAs) between Germany and several nations exist.
Residence Requirements
A person is regarded as a tax resident if:
- They live permanently in Germany,
- they visit more than 183 days a year, or
- Germany is where their main interests lie.
A person is regarded as a tax resident in Germany and is subject to German income tax on their global income if they satisfy any of these requirements.
Only income earned in Germany is liable to German income tax for non-residents.
Payroll Calendars
The payroll schedule in Germany usually revolves around a monthly pay period.
Rebates & Tax Credits
There are no other substantial tax credits or incentives for individuals in Germany.
Health Insurance
Health insurance: 14.6%, with a yearly income cap of EUR 58,050. Both the employer and the employee must pay a payment of 7.3% each.
Unemployment
Employer: 1.5% of monthly covered payroll.
The maximum annual earnings used to calculate contributions are €78,000 (E–€69,600).
Employee: 1.5% of monthly covered earnings.
The maximum annual earnings used to calculate contributions are €78,000 (E–€69,600).
Must be competent, available for, and actively looking for work. Must have at least 12 months of covered work in the previous two years.
The eligibility for unemployment benefits may be suspended for up to 12 weeks under specific circumstances.
Depending on the length of the covered work time and the insured’s age, 67% (or 60% without children) of their net monthly income is compensated for six to 24 months. Unemployed individuals older than 58 with at least 48 months of covered work are eligible for the benefit, which is provided for up to 24 months.
Social Security
The majority of employer contributions are tax-free.
- 18.6% of your yearly salary is covered by pension insurance, up to a limit of EUR 84,600. (EUR 81,000 in the new federal states). Both the employer and the employee must pay a payment of 9.3% each.
- Insurance against unemployment: 2.4%, up to an annual income cap of EUR 84,600 (EUR 81,000 in the new federal states). Everyone pays a 1.2% payment, which is split between the company and the employee.
- Health insurance: 14.6%, with a yearly income cap of EUR 58,050. Both the employer and the employee must pay a payment of 7.3% each.
- 3.05% (3.4% for childless people starting at age 23) of your yearly salary up to a maximum of EUR 58,050 is covered by long-term care insurance. The employer is responsible for 1.525% of the contribution, while the employee is responsible for 1.525% (1.875% for those without children beginning at age 23).
- Employer payments to the work accident program are based on the industrial sector and accident risk.
- Only the employer is responsible for paying the insolvency payment, which is 0.09% up to an annual income cap of EUR 84,600. (EUR 81,000 in the new federal states).
PAYROLL ELEMENTS
Income
Germany Payroll Outsourcing, Payroll Software and Employer Of Record (EOR)
Every resident is subject to taxation on their international income. Only income with German sources is taxed for non-residents.
Income from commerce or business, independent professions, employment, capital investment, rent, royalties, and other sources are all included in the definition of taxable income (as defined by tax law).
Taxable income is the entire income after all deductions from each category, which may then be further lowered by one-time deductions or, within certain parameters, by actually paying specific costs that are allowed by tax law.
Bonuses
A bonus or commission scheme is an optional extra on top of pay. In Germany, payment of the 13th or 14th month’s wage is not required.
Allowances
Qualifying families will get a monthly child benefit for dependent children, depending on factors including residence status, child age, and maybe social security status. This works out to be EUR 219 for each of the first two kids, EUR 225 for the third kid, and EUR 250 for the fourth and every subsequent kid.
For determining the taxable income, the aforementioned advantages and bonus payments are weighed against a potential tax break from the EUR 4,194 lump sum deduction of the child allowance for each parent, leaving only the aforementioned benefits and bonus payments as options.
Benefits in Kind
In Germany, giving employees benefits in kind is governed by labor law. Non-cash benefits, such as benefits in kind, are given to employees in addition to their normal pay or compensation. This is however not mandatory and generally taxable.
Investment Income
Income from capital investment, rent, royalties, and other sources are all included in the definition of taxable income (as defined by tax law).
Retirement Funding
18.6% of your yearly salary is covered by pension insurance, up to a limit of EUR 84,600. (EUR 81,000 in the new federal states). Both the employer and the employee must pay a payment of 9.3% each.
Health Insurance
Health insurance: 14.6%, with a yearly income cap of EUR 58,050. Both the employer and the employee must pay a payment of 7.3% each.
Risk Insurance
Not mandatory.
Taxable Income
Gradually increasing rates of income tax are imposed on higher income levels. The whole amount of income (from all sources of earned and invested income), less any applicable deductions and allowances, is subject to taxation.
Allowable Deductions
Taxes and social security contributions
Loan/advantages repayments
Voluntary deductions
PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS
Payroll Taxes
Employee compensation must be paid by employers after deducting any owed income taxes. The deducted sums are transferred on a regular basis—typically monthly—to the tax office. The real deductions are deducted from the gross salary while taking into consideration the employee’s marital status, family situation, and other personal factors. You can download the required personal information from a government database. The payroll tax deduction is, for the employee, a prepayment on the income tax owed upon the completion of their yearly income tax return. As a result, the payroll tax is a WHT rather than an expense for the company.
Unemployment
Employer: 1.5% of monthly covered payroll.
The maximum annual earnings used to calculate contributions are €78,000 (E–€69,600).
Employee: 1.5% of monthly covered earnings.
The maximum annual earnings used to calculate contributions are €78,000 (E–€69,600).
Must be competent, available for, and actively looking for work. Must have at least 12 months of covered work in the previous two years.
The eligibility for unemployment benefits may be suspended for up to 12 weeks under specific circumstances.
Depending on the length of the covered work time and the insured’s age, 67% (or 60% without children) of their net monthly income is compensated for six to 24 months. Unemployed individuals older than 58 with at least 48 months of covered work are eligible for the benefit, which is provided for up to 24 months.
Social Security
The majority of employer contributions are tax-free.
- 18.6% of your yearly salary is covered by pension insurance, up to a limit of EUR 84,600. (EUR 81,000 in the new federal states). Both the employer and the employee must pay a payment of 9.3% each.
- Insurance against unemployment: 2.4%, up to an annual income cap of EUR 84,600 (EUR 81,000 in the new federal states). Everyone pays a 1.2% payment, which is split between the company and the employee.
- Health insurance: 14.6%, with a yearly income cap of EUR 58,050. Both the employer and the employee must pay a payment of 7.3% each.
- 3.05% (3.4% for childless people starting at age 23) of your yearly salary up to a maximum of EUR 58,050 is covered by long-term care insurance. The employer is responsible for 1.525% of the contribution, while the employee is responsible for 1.525% (1.875% for those without children beginning at age 23).
- Employer payments to the work accident program are based on the industrial sector and accident risk.
- Only the employer is responsible for paying the insolvency payment, which is 0.09% up to an annual income cap of EUR 84,600. (EUR 81,000 in the new federal states).
Workers Compensation
Employees: none.
Self-employed person: contributions vary depending on assessed degree of risk.
Employer: contributions vary depending on the assessed degree of risk.
Must be examined for a work-related illness or injury. Accidents that happen on the way to and from work are protected.
Temporary disability benefit: From the day the disability started until recovery or the granting of a transition payment, whichever comes first, 80% of the insured’s most recent gross earnings up to their most recent net income is paid (in most cases, the employer pays for the first six weeks). The benefit is granted for up to 78 weeks if recovery is not predicted and occupational rehabilitation is not feasible.
The minimum yearly income used to determine benefits for insured individuals who are 18 years of age or older is €21,924.
The accident insurance fund has a range of maximum yearly earnings from €64,680 to €109,620 that are utilized to determine payments.
Permanent disability benefit: 66.7% of the insured’s gross yearly income in the year prior to the onset of the disability is provided in the event of total disability (evaluated loss of earning capacity of 100%).
ADMINISTRATION
Income
Gradually increasing rates of income tax are imposed on higher income levels. The whole amount of income (from all sources of earned and invested income), less any applicable deductions and allowances, is subject to taxation in Germany.
Payroll Taxes
Employee compensation must be paid by employers after deducting any owed income taxes. The deducted sums are transferred on a regular basis—typically monthly—to the tax office. The real deductions are deducted from the gross salary while taking into consideration the employee’s marital status, family situation, and other personal factors. You can download the required personal information from a government database. The payroll tax deduction is, for the employee, a prepayment on the income tax owed upon the completion of their yearly income tax return. As a result, the payroll tax is a WHT rather than an expense for the company.
Unemployment
Employer: 1.5% of monthly covered payroll.
The maximum annual earnings used to calculate contributions are €78,000 (E–€69,600).
Employee: 1.5% of monthly covered earnings.
The maximum annual earnings used to calculate contributions are €78,000 (E–€69,600).
Must be competent, available for, and actively looking for work. Must have at least 12 months of covered work in the previous two years.
The eligibility for unemployment benefits may be suspended for up to 12 weeks under specific circumstances.
Depending on the length of the covered work time and the insured’s age, 67% (or 60% without children) of their net monthly income is compensated for six to 24 months. Unemployed individuals older than 58 with at least 48 months of covered work are eligible for the benefit, which is provided for up to 24 months.
Social Security
The majority of employer contributions are tax-free.
- 18.6% of your yearly salary is covered by pension insurance, up to a limit of EUR 84,600. (EUR 81,000 in the new federal states). Both the employer and the employee must pay a payment of 9.3% each.
- Insurance against unemployment: 2.4%, up to an annual income cap of EUR 84,600 (EUR 81,000 in the new federal states). Everyone pays a 1.2% payment, which is split between the company and the employee.
- Health insurance: 14.6%, with a yearly income cap of EUR 58,050. Both the employer and the employee must pay a payment of 7.3% each.
- 3.05% (3.4% for childless people starting at age 23) of your yearly salary up to a maximum of EUR 58,050 is covered by long-term care insurance. The employer is responsible for 1.525% of the contribution, while the employee is responsible for 1.525% (1.875% for those without children beginning at age 23).
- Employer payments to the work accident program are based on the industrial sector and accident risk.
- Only the employer is responsible for paying the insolvency payment, which is 0.09% up to an annual income cap of EUR 84,600. (EUR 81,000 in the new federal states).
Workers Compensation
Employees: none.
Self-employed person: contributions vary depending on assessed degree of risk.
Employer: contributions vary depending on the assessed degree of risk.
Must be examined for a work-related illness or injury. Accidents that happen on the way to and from work are protected.
Temporary disability benefit: From the day the disability started until recovery or the granting of a transition payment, whichever comes first, 80% of the insured’s most recent gross earnings up to their most recent net income is paid (in most cases, the employer pays for the first six weeks). The benefit is granted for up to 78 weeks if recovery is not predicted and occupational rehabilitation is not feasible.
The minimum yearly income used to determine benefits for insured individuals who are 18 years of age or older is €21,924.
The accident insurance fund has a range of maximum yearly earnings from €64,680 to €109,620 that are utilized to determine payments.
Permanent disability benefit: 66.7% of the insured’s gross yearly income in the year prior to the onset of the disability is provided in the event of total disability (evaluated loss of earning capacity of 100%).
Statutory Benefits
All employees are entitled to time off, including on paid public holidays.
Employee Benefits
All employees are entitled to time off, including on paid public holidays.
LEGISLATION
The German constitution
The Labor Code
STATUTORY BODIES
- Federal Ministry of Labor and Social Affairs (Bundesministerium für Arbeit und Soziales)
- Federal Employment Agency (Bundesagentur für Arbeit)
- Labor Court (Arbeitsgericht)
- Works Council (Betriebsrat)
- Social Insurance Institutions (Sozialversicherungen)
