Germany has the largest economy in the EU and also ranks as the fourth largest worldwide. Economic strength and education makes hiring in Germany ideal for companies looking for overseas expansion.
The German market is known for its political and economic stability. Many countries suffered severe financial losses due to the COVID-19 crisis. However, Germany’s GDP loss was one of the smallest among countries in Europe.
If you’re a foreign company looking at Germany, you should know the many strict labor laws in place for hiring practices. It can be tricky to navigate these rules and ensure compliance throughout the hiring process.
In this article, we lay out the steps involved in hiring workers in Germany. We also explore the details and costs of the process, and available remote work options.
Hiring in Germany: The Basics
Before publishing a job notice or recruitment ad, you need to understand the kind of worker you are looking for and the role they will fill.
Once you have a specific vision of the talent you want to find, you can utilize both offline and online resources to find potential employees. Foreign employers in Germany should be familiar with the local work culture and best practices to maximize the efficiency of the interview process.
For example, in Germany, being on time and direct communication are more important indicators of professionalism. Respecting a candidate’s time is key to gaining their trust and making a good impression.
After selecting the best candidate(s) for your company, you must write up an employment contract that meets the required standards in Germany. For non-EU/EEA workers, you will also need to apply for an entry visa and a work permit before they can begin work.
Germany has a legal minimum wage, and in 2022 the hourly minimum wage will be 12 euros.
Hiring in Germany: Time and Cost Estimates
The entire hiring process in Germany can take anywhere from several weeks to months before completion.
Background checks, multiple interviews, work permits, and other paperwork results in a lot of waiting time and delays. Furthermore, the cost of hiring in Germany can be steep when considering advertising fees, travel costs, employee benefits, insurance, etc.
A research paper published in 2013 that studied firm-level recruitment found that the average cost of hiring was 4700 euros or eight weeks of salary. This number has only increased over the years.
Hiring in Germany Without an Entity
Before you bring new hires into your company, you must have a local branch or separate legal structure in Germany. This can cost a lot by itself in terms of time and money.
However, several options are available to operating and hiring legally in Germany without an entity.
Hire Independent Contractors
These workers are not subject to the same laws and are not entitled to the same benefits as employees.
One risk associated with this decision is the heightened danger of errors in the contract or hiring process. In this case, you can be in danger of misclassifying the contractor, resulting in high fees and fines.
File for an AUG License
This allows for temporary or fixed-term employment without you needing to have an established entity.
There is a long list of requirements a company must consider before applying for this license. This type of solution is only appropriate for a limited time when contractors are free to operate. While it’s a low-cost solution for your short-term goals, it can become quite complicated in the long run.
Otherwise, you can partner with a global PEO (Professional Employer Organization) or EOR (Employer of Record). In Germany, PEO service providers can handle all the local aspects of employment compliance on your behalf. A German PEO partner can take care of all payroll needs including benefits like health insurance and unemployment insurance.
By saving time spent organizing social security contributions, national public holidays, maternity leave, and income tax payments, you can work on tasks directly related to growth.
They can do this while keeping you fully compliant and in as little as 48 hours.
With a PEO, you can also hire foreign workers and ensure that all your employees are paid on time and accurately.
How Can I Work Remotely in Germany?
The rise in remote work in the past few years is undoubtedly a result of the limitations brought on by the global pandemic. A 2022 survey covering 9,000 companies showed that 24.9% of German workers still worked from home in some capacity.
Many companies find that remote work improves workforce retention and offers exciting new opportunities. Companies taking advantage of remote work can enjoy a broader range of benefits. These include a wider range of employee skills, and the availability of quicker setup in overseas markets.
However, the status of remote employees in Germany remains uncertain across the board. As of now, Germany does not have any legal regulation in place for remote work. Work from home, full-time or part-time, must be negotiated according to each employee’s contract.
The German labor minister expressed a desire to change legislation regarding work from home making it an option for all employees after the pandemic.
INS Global offers fully international employment outsourcing solutions. Professional Employer Organizations (PEO) and Employer of Record (EOR) services can hire and provide HR functions overseas on your behalf. INS Global gives you access to the tools and systems you need to hire confidently in Germany or 80+ other countries worldwide.
When hiring remote workers overseas, INS Global has the experience and expertise to help you.
Contact our team of INS Global advisors to learn more.