Country facts
The Federal Republic of Germany is a member of the European Union and the Eurozone, the UN, the Group of Seven, the G20, NATO and the OECD.
Its nominal GDP in 2021 was 4.319 trillion USD, which makes it the fourth largest economy in the world. Its Human Development Index is at 0.947, which is categorized as very high, with a global ranking of 6th.
Capital
Berlin
Currency
Euro (EUR)
Languages spoken
German
Population size (2020)
83,24 million
Ease of doing business (world bank ranking)
22
Cost of living index(2021)
70,62
Payroll frequency
Monthly
VAT – standard rate
19%
GDP – real growth rate(2020)
-4,57%
Employing in Germany
To enable running a local payroll in Germany companies must register the new business with the local municipality’s authorities. These include:
- Local Trade Office (Gewerbeamt)
- Trade Register (Handelsregister)
- Local Tax Office (Finanzamt)
- Relevant Professional Chamber
- Employer's Liability Insurance Association (Berufsgenossenschaft)
Although registration with the Trade Office automatically leads to the Tax Office, Trade Register and Employer’s Liability Insurance Association being informed, it is generally recommended to follow up on this as a company too, to ensure registrations are complete.
A local tax number (Steuernummer) is issued to the company once registered with the Tax Office. Similarly, a registration in the relevant Employer’s Liability Insurance Association leads to the company acquiring a membership number (Unfallversicherungsnummer) once its first employee is hired. It is also obligatory to register for an operation number (Betriebsnummer) at the job agency (Agentur für Arbeit).
These three (Steuernummer, Unfallversicherungsnummer and Betriebsnummer) are all required for correct communication and payments with respect to the company’s social security obligations.
Trade union (Gewerkschaft) membership is constitutionally protected in Germany and collective agreement are in most cases obligatory.
German employees must, by law, be given a written employment contract that mentions key components of the employment relationship. This includes:
- Parties to the contract
- The employee’s work tasks
- Gross salary and benefits
- Annual leave
- Entitlement
- Start date of employment
- Working location
- Notice periods
Usually, terms and conditions based on Collective Bargaining Agreements’ frameworks are also included.
The employer must register all new employees for social insurance. Such registration, (with a health insurance company) has to be completed within six weeks of the employee being hired.
Employers are also responsible, on behalf of the employee, for the continued collection of a so called “capital formation savings payment” (Vermögenswirksame Leistungen), which should be run through the payroll. The employee chooses what insurer he/she wants to use for this.
New employees must also be registered with Germany’s Electronic Payroll Tax Deduction Characteristics (known as ELStAM) before the first payroll is run.
List of Public Holidays - 2024 (national)
| Date | Holiday Name |
|---|---|
| 1 January | New Years Day |
| 29 Mars | Good Friday |
| 1 April | Easter Monday |
| 1 May | Labour Day |
| 9 May | Ascension day |
| 20 May | Whit Monday |
| 3 October | German Unity Day |
| 25 December | Christmas Day |
| 26 December | 2nd Day of Christmas |
Minimum wage
The Minimum Wage Act (Mindestlohngesetz- MiLoG) sets the National Minimum wage as 9.60 Euro / h, which is to be increased to 9.82 Euro / h on 1st January 2022 and to 10.45 Euro / h on 1st July 2022. On top of this many different minimum rates are applied due to sector-specific collective bargaining agreements.
Salary payouts
In Germany, salaries are typically paid out on a monthly basis, and usually on the 1st or 15th of month. Note that there is an additional 13th month pay period.
Taxes in Germany
Learn how employment taxes and statutory fees affect your payroll and your employees’ paychecks in Germany.
Employer
Corporate income tax rate: Ca 22.83 – 36.83%
Corporation tax (Körperschaftsteuer) starts at a rate of 15%, with a so called solidarity surcharge added at 5.5% of this amount, which corresponds to a total rate of 15.825%. On top of this are the local trade taxes, depending on the municipality the company is located in, which varies between 7% and 21%.
Health insurance: 7,30%
Pension insurance: 9,30%
Unemployment insurance: 1,20%
Long-term care insurance (employees aged 23 or older) : 1.525%
Insolvency Charge : 0.12%
Total employer cost: 19.45%
Employee
Health insurance : 7.30%
Pension Insurance% : 9.30%
Unemployment Insurance : 1.20%
Care Insurance (employees aged 23 or older) : 1.525%
Long-term care insurance (employees aged 23 or older) : 1.525%
* (effective once the employee reaches 23 years of age and is increased to 1.775% for employees with no children
Total cost for employee. 19,33%
About Internago
Internago offers subsidiary management, HR and international payroll services combined with international payroll software and professional business advisory services.