How to Expand Your Business by Hiring in Germany

How to Expand Your Business by Hiring in Germany

How to Expand Your Business by Hiring in Germany

April 17, 2023


Picture of INS Global



Picture of INS Global



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Key Takeaways

  1. Germany is not only a manufacturing leader, but also dominant in the world of tech and startups
  2. The German VET system encourages skill training and vocational talent in young people
  3. Hiring through an EOR reduces the chance of misclassification errors and payroll mistakes


Germany has the 4th largest GDP in the world, and their consumer market is the biggest in Europe. It’s known for being a leader in both manufacturing and automobile industries. Furthermore, it has a skilled workforce and a strong vocational training system. However, there’s a lot you need to know about hiring in Germany to ensure secure expansion.

Here, we highlight potential disadvantages you should be aware of. We also explain the hiring process to ensure that no compliance mistakes are made. That way you can recruit new employees quickly and smoothly.


The Top Four Reasons Why You Should Hire in Germany


A Strategic Location for Trade and European Talent


Germany borders nine countries and sits in the heart of central Europe. This one fact along attracts trade partners and professionals from all over the continent. It is also the country that hosts the most international trade fairs.

Germany also has a strong economy that offers stability and security to businesses and employees. This makes it an attractive destination for both job seekers and companies to set up their operations. The country is also a great place to conduct research and development with a large, highly educated workforce.

Lastly, the country is home to one of the most comprehensive and efficient legal systems. This can help protect employers from unfair labor practices and other issues.


Incentives for R&D and Innovation


Additionally, Germany contains a wide variety of industries, from automobile manufacturers to chemical suppliers. This diversity makes it possible for companies to find the right fit for their needs.

As of 2020, companies that conduct research can receive up to 1 million euros a year in tax incentives. If a company is researching on its own, it will also be eligible for tax subsidies for up to 25% of salaries and wages.


Vocational Training Resulting in Skilled Workers


The VET system (Vocational Education and Training) introduces skill training and apprenticeship opportunities to young people and students across Germany. This allows them to gain valuable work skills and reduces the transitory period between studies and work. Vocational schools in Germany are free so that everyone can make the most of the skill training.


A Rising Force in Tech and Startups


While Germany is a key player in many manufacturing industries, it is also growing a strong presence in the world of tech companies, startups, and entrepreneurs. The emerging tech hub in Berlin has been nicknamed “Silicon Allee” and is ranked the second-best tech hub in all of Europe.


How to Hire in Germany


Before you can begin to hire in Germany on your own, you will need to establish an official branch or subsidiary of the company in the country. This means managing employees in-house with a larger Human Resources department and day to day interactions. Alternatively, you can also partner with an employer of record (EOR) who can act as the legal entity through which you hire employees and continue operations as usual.

Germany’s labor and employment laws, like many EU countries, can be quite strict. It is important to maintain compliance as the government passes new bills. If you are hiring non-EU workers for jobs in Germany, you will need to handle the process of applying for and obtaining a work visa for them.

Hiring local workers is an optimal choice considering the scope of Germany’s large and skilled talent pool.


Popular Online Recruitment Platforms in Germany


Utilizing both online and offline platforms is the best way to connect with local potential candidates. Here are some of the most popular German job board sites:


  • XING: A social networking and job posting platform for the DACH (Austria, Switzerland, Germany) region.
  • Arbeitnow: Based in Berlin and geared towards tech and graphic design jobs, including remote and hybrid positions.
  • STARTUP SUCHT: Another site for the DACH region, this one is focused on startup employers and employees.
  • Kimeta: One of the most wide-reaching job board sites with over 2 million job postings.


Once you’ve selected the right candidate, you will need to go through the process of interviews, background checks, contract management, and onboarding. It’s important to be aware of the best local business practices so that your relationship with local employees is free from miscommunication and conflict.

For example, punctuality and single-mindedness are characteristics that are highly regarded in the German workplace. Small talk is typically reserved for socializing outside of work.


Hiring in Germany: Challenges to Keep in Mind


A Lengthy Set-Up and Registration Time for Companies


Establishing a company branch in Germany can several months, as the legal process is not known for being quick and easy. If you use traditional company incorporation, this wait time can cause delays in the company’s goals. A PEO or global Employer of Record services (EOR) can have you set up and running as usual within a week.


Strict Employment Laws


Germany’s employee protection laws are some of the most stringent worldwide. Employers must adhere to every aspect of the local law or suffer the concequences. Having a legal expert to consult you on local laws can cut down the risk of non-compliance errors.

Hiring in Germany also presents more specific challenges. These include such as the need to understand and comply with local labor laws around workplace environment requirements and contract details. German labor laws are designed to protect employees, so businesses should have a clear understanding of the rights and responsibilities of both parties before they begin the recruitment process.


Termination Protection


In Germany, the most common type of employment contract is an indefinite contract. This means that the employer has no right to terminate the contract without “good cause”.

There are also restrictions on working time and overtime, meaning employers must pay employees for any overtime. Companies should also note that German labor laws forbid discrimination based on gender, religion, or other personal characteristics.


Misclassification Risks


Employment laws differ when hiring an independent contractor or full-time employee. German labor law authorities conduct regular checks to ensure that employers follow local legal employment guidelines. Those who aren’t will receive expensive fees and fines that may damage or delay market entry.


hiring in Germany