Establishing and running Germany payroll outsourcing
With the largest economy in Europe, an excellent location in the center of the continent, and strong links with the rest of the region, Germany is a fantastic place to do business and an attractive country for expansion.
However, with the country’s unique set of employment laws and administrative procedures, hiring and establishing a Germany payroll outsourcing system can be a difficult process. It can take longer than expected to get up and running, leading to a potential loss of income.
At Horizons, we specialize in providing payroll outsources to organizations aiming to expand into Germany. Our services are perfect for any organization, whether or not you have already registered an entity in Germany.
Why choose the Horizons payroll solution?
If you have an entity
If your organization already has a registered entity in the country, then we can provide everything you need to build and run a Germany payroll outsourcing system. We will help you navigate the complex laws, establish your payroll, and handle any ongoing administration.
This service is an excellent choice for large-scale organizations and those looking to build a long-term presence in Germany.
If you don’t have an entity
If your organization does not have a registered entity in the country, then we can provide a full outsourcing service to establish and run your Germany payroll responsibilities. With our tailored service, you can use our German PEO to act as your employer of record for your in-country hires.
This solution is excellent for any organization looking for a flexible, low-risk, and rapid route into Germany.
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Germany payroll guide
Withholdings and taxes in Germany
There are various taxes and withholdings that may be applicable to your employees in Germany, so it is important you understand the implications of your specific situation.
Germany operates a progressive tax system where higher earners pay a higher rate. The income tax rate varies between 0% and 45%. There is also an additional surcharge in some regions of Germany.
The corporate tax rate is 15%, plus a surcharge which results in a total rate of 15.825%.
Both employees and employers are also required to contribute to the country’s social security, which covers things like pensions, healthcare, and so on. Employers also need to fund accident insurance. In total, employer contributions are likely to be around an extra fifth of each employee’s salary.
| General Pension | 9.3% |
| Unemployment Insurance | 1.25% |
| Health Insurance | 7.3% |
| Nursing Care Insurance | 1.525% |
| Accident Care Insurance | 1.18% |
| Total Employer Cost | 20.56% |
| Pension | 9.3% |
| Health Insurance | 7.3% |
| Unemployment Insurance | 1.25% |
| Nursing Care Insurance | 1.525% |
| Total Employee Cost | 19.37% |
| Up to 9,000 Euros (€) | 0 |
| 9,000-55,961 € | 14% |
| 55,961-265,327 € | 42% |
| Over 265,327 € | 45% |
Entitlements and terminations in Germany
We strongly recommend that all relevant entitlements and termination terms are laid out in a formal contract of employment, with details about things like sick leave/pay, vacations, severance, and so on. This will help to keep things as simple as possible and reduce the chance of disagreements.
An example of legal entitlements for employees in Germany is that employees cannot usually be asked to work on Sundays or public holidays. Also, certain types of employees, such as people with disabilities, are protected from dismissals in many cases.
How to set up and run Germany payroll outsourcing
There are a number of quite complex procedures to follow when setting up your own Germany payroll system. You may need to establish a German entity, open a German bank account, register with various authorities, and follow Germany’s unique set of employment laws.
An alternative to this is to utilize Germany payroll outsourcing options such as Horizons’ German PEO. We can handle all of your Germany payroll administration, setup, and ongoing management. Our employer of record service offers the use of our German subsidiary to act as employer of record for your hires, helping you run a German payroll even if you don’t have an entity in the country.
Manage payroll in Germany
Whether it’s EOR service or just payroll management, Horizons’ employment experts can help you get started in 24h.
