Hiring your workforce in Germany
Germany hiring guide
In order to operate a German workplace, businesses need to recognize the following:
- It is common for international businesses based in Germany to use English as their day-to-day language, particularly in international hubs such as Berlin, Munich and Frankfurt. Nevertheless, it is worth recognizing that German is still the work language for the majority of businesses in Germany.
- Communication style. Often the German communication style is considered more ‘direct’ than in other countries. In addition, expressing significant emotion at work is frowned upon and there is relatively little small talk in the office environment;
- Punctuality. A saying often employed in Germany is that ‘Five minutes early is on time. On time is late’. As well as being important to turn up to work, meetings and interviews on time, it is important for all involved to stick to the agenda in meetings;
- Respect. The German workplace puts a significant emphasis on the use of formal titles and styles of address. For example, individuals should be referred to as ‘Frau Schmidt’ or ‘Herr Schmidt’, and not by their first names. In addition, the informal style of address ‘Du’ is generally for friends and family only. In general, it will be expected in the workplace that an individual use the formal ‘Sie’ form instead. Note that in some informal workplaces, these rules may be relaxed somewhat;
- Greetings. When meeting someone for the first time, shaking hands is customary. Hugs and kisses are generally not appropriate in the workplace;
Recruiting in Germany
Once the decision to acquire and hire staff in Germany has been made, it is essential to consider some of the following factors :
- Whether to establish a local entity. The most common form of incorporated legal entity in Germany is the ‘Gesellschaft mit beschränkter Haftung’, commonly known as the ‘GmbH’. The is broadly equivalent to a limited liability company in the United States. While these are relatively straightforward to set up, there are a few hurdles associated with this form of business. For example, a minimum of €25,000 in share capital must be provided to establish a GmbH. An alternative for many businesses will be to engage a global Professional Employer Organization (global PEO), or an umbrella company. These entities can employ staff to work for your business on your behalf;
- Pay and Benefits. Coming up with an appropriate pay package for Germany should recognize the relatively high personal income taxes (up to 45 percent) in that country;
Partner with a Germany-based recruitment firm. Engaging a global expansion firm with extensive networks for hiring in Germany is an important tool for accessing the best staff for your business outpost in Germany.
Compliant hiring in Germany
Whether hiring in Germany directly through a GmbH or using a German PEO & Employer of Record solution, in order to ensure full compliance with the law in Germany, you need to take into account:
- Employment contracts. While employment may be permanent or fixed term, it is a requirement that all employees be engaged under an employment contract;
- Leave. While 20 working days paid vacation leave is the statutory minimum, 25 or 30 days is more common. Employees are entitled to 6 weeks of paid sick leave (and 12 weeks in special circumstances);
- Tax and social security contributions. Employers are required to make substantial compulsory deductions and contributions for tax, social security, health insurance and unemployment insurance;
The existence of the ‘Work council’ or ‘Betriebsrat’. These entities, which are set up in companies of more than five employees, represent and act for employees. They can be distinguished from unions in that they represent only the employees in a particular business, rather than an entire industry. They have significant legal powers for hiring in Germany and can significantly slow down planned moved from employers (e.g., restructuring).