This is fine if you are based in Germany and have capital behind you. But…
Can you test the German market without incorporating?
Yes, you can! The alternative is to hire your staff through an intermediary.
This is a labour leasing arrangement that would work for you.
Like most things in Germany, the leasing of employees has been looked at, defined and legislated for. The resultant Labour Leasing Act governs the act of employee leasing in Germany, including:
Today, we are focusing on the option of using a PEO service, also known as an Employer of Record or labour leasing provider, in Germany.
The first thing you must know is that the leasing of labour in Germany is regulated and can only be carried out by a licensed firm. There is a Ministry of Labour that issues these licences and they also police the arrangements to ensure compliance.
Assuming your provider holds an AuG license (Arbeitnehmeruberlassung then you can hire and lease your candidate subject to some restrictions. Although it’s complex, a good provider will be able to steer you through the key points without issue. A couple of notable points are:
What does that mean for PEO services in Germany? Simply – it limits it. After 18 months you and your business will need to be positioned to either withdraw or establish a presence in Germany.
Doing business in Germany is quite unique.
The Germans are renowned for ‘efficiency’ and rules. Employing and working there is no exception. The German system contains a comprehensive set of rules and procedures for almost any situation.
Be aware that non-compliance is not an option, it is treated extremely seriously. A comment from our German lawyer stated: ‘You would rather have trouble with the (Russian) Mafia than the German authorities.’
With this backdrop in mind, let’s look at the positives of such an approach.
A clear set of rules are to be welcomed, with regulated employment processes, termination and notice periods clearly defined and a robust payroll process, the system provides absolute certainty and clarity to the rules of engagement between employer and employee.
Do it by the book – that is the simplest way to describe working in Germany.
There will be a rule that defines how something is done – do it that way. There is very little scope for alternative interpretation or deviation from the rules. They have generally been extensively defined for most situations and so the process must be followed. They are also generally policed and enforced by specific German bodies.
This is our quick guide to hiring in Germany – an overview of Professional Employment Organisation (PEO) and labour leasing services.
If you are looking for a German PEO or incorporate directly, we are happy to help. Feel free to contact us on sales@topsourceworldwide.com.