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Establishing your business in Germany
One of the most important tasks a company must complete to get up and running in Germany is to apply for an employer number from the tax and social security authorities. This eight-digit number will be attached to the company’s name, address and type of business, and will enable the company to hire staff and complete their social and health insurance registration. Alongside this, applications should also be made for a tax number and accident insurance. Expect these processes to take around six weeks in total.
Opening a German bank account isn’t compulsory, but it can be useful to have one for receiving any tax reimbursements. It should also be noted that the financial year runs in line with the calendar year.
Employment Law in Germany
Germany has a clearly-defined Employment Law, within which there are many requirements that concern payroll. All employees have the right to belong to a union or work council, and they are also able to negotiate collective bargaining agreements.
The Employment Law also enshrines the maximum working time limit of 48 hours per week; employees can work up to ten hours on individual days as long as their overall average over a six-month period doesn’t exceed eight. There is no legally defined structure around overtime pay in Germany, although any overtime worked must be recorded by employers, and compensation for overtime work may be determined in conjunction with work councils or collective bargaining.
Probation periods are also not legally defined in Germany, although providing a six-month probation with a two-week notice period is commonplace. Statutory notice periods start at one month after two years of employment, rising in stages according to the length of service, if the employer terminates the contract. If the employee terminates their contract, the notice period is four weeks irrespective of length of service.
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Why become an Employer in Germany
With such a strong economy and great links on the global stage, Germany is an excellent place to do business for incoming international companies. But as this guide demonstrates, it isn’t without its own characteristics and compliance requirements from a payroll perspective.
That’s where TopSource Worldwide comes in. We can help you make sure that right from the start of your German operations, you pay every employee accurately and on time, time after time. Our payroll and employer of record services aren’t limited to the German market either, with full coverage across other European countries such as France and Spain.