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Doing Business in Germany

About Germany

Known for its highly developed political framework, its strong economic stability and its commitment to a high standard of quality, Germany has garnished a reputation of not only being a leader in Europe, but also in the world. With the largest economy in Europe and the 5th largest in the world, Germany has a large amount of influence on the global economy. Furthermore, due to its stability, many businesses opt for Germany as an ideal location to do business.

Why start a business in Germany

There are a number of reasons to do business in Germany. With the German economy traditionally driven towards manufacturing, a large scope of opportunity exists for industries at the forefront of technology. Providers of high-end commercial and financial services can also benefit and excel in the backdrop of the German environment.

The Legal System in Germany

Germany’s highest source of law is their constitution, which is also known as the “Basic Statute” (Grundegesetz). As the constitution is the highest law in the land, any acts that conflict with the constitution will be deemed void. The German government and other authorities have the power to issue decrees, guidelines, and other pronouncements, which may vary in the level of authority.

The judicial system is mainly decentralized, which means cases are held locally at smaller courts and appeals are made to higher courts, which cover a greater area. There are courts that deal with specific matters such as civil, tax or labor courts. The highest court in the land is the Constitutional Court in Karlsruhe, which only deals with constitutional matters.

Public Holidays in Germany

  • New Year’s Day
  • Good Friday
  • Easter
  • Easter Monday
  • Labor Day
  • Ascension Day
  • Whit Monday
  • German Unity Day
  • Christmas Day
  • 2nd day of Christmas

**Note: There are various other holidays that are state and territory specific.

Business Entities in Germany

There are a range of different business entities from which an investor can choose when planning on setting up a business in Germany. The entity type is generally selected according to the needs, size and future plans of the business. The most common types of business entities are:

  • Limited Liability Company (GmbH) – this is the most common type of business entity and is mainly for small to medium sized business.
  • Limited Partnership Company (KG) – this type of entity consists of two or more partners, where at least one partner has unlimited liability.
  • General Partnership Company (OHG) – with this kind of entity all partners are fully liable for the debts of the partnership.
  • Joint Stock corporation (AG) – this is the entity that is generally chosen by large public companies in Germany. The minimum share capital for this type of entity is €50,000 and the company must have at least 1 shareholder.

Working hours in Germany

There are no minimum stipulated working hours according to German law, however a minimum number of working hours may be contractually agreed between employers and employees. On the other hand, the maximum number of working hours should not exceed 10 hours per day. The law further states that working hours cannot exceed 8 hours per day for a period of 6 months.

Leave days in Germany

Workers in Germany are entitled to a minimum of 24 annual paid leave days, based on a 6-day work week. Generally, for office jobs that have a 5 day work week, employees are entitled to a minimum of 20 days of vacation. The full vacation benefits only begin after an employee has worked with a company for 6 months. If the employee has been terminated within the first 6 months or within the first half of the calendar year, the employee will only be entitled to 1/12 of the prescribed annual vacation entitlement for each month the employee has worked.

Healthcare in Germany

All employees who receive a salary in Germany are required to have health insurance. Depending on an employee’s income, if they fall within a certain income bracket then it is compulsory for that employee to join a state health care scheme. For those who do not fall within the bracket they are able to opt for private health insurance which may give the employee additional benefits.

Public Healthcare

For those who earn less than €59,400 a year, automatically you will be enrolled into the statutory health insurance scheme. If you earn above than €59,400 a year, you are able to be enrolled onto the statutory health insurance scheme, however this may end up being more costly than opting for private health insurance.

Contributions for health insurance are deducted by the employer before payment is made to the employee. These contributions will cover most of the medical expenses. Patients over the age of 18 will be required to pay some sort of fee in order to cover some of the costs. For example, they will be required to cover 10% of costs at a pharmacy (with the minimum contribution being €5 and €10 being the maximum).  

Private Healthcare

If your annual salary is greater than €59,400, then you are able to opt for private health insurance or to enroll in the statutory health insurance scheme. As stated above, it may be more costly for such persons to opt for statutory health insurance. Self-employed people are also eligible to apply for private health insurance.

INS Global in Germany

INS Global is a leading Professional Employer Organization that provides assistance to all businesses who want to operate in a different country. As a leading global PEO, we are able to provide assistance if you are looking to employ staff in another country, whether you are looking for the right talent or whether you simply want to invoice clients in another country. Contact INS Global today and let our experts take care of all your business needs.

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