INVESTOR’S BASICS

Employees and Social Security
Germany is internationally known for its highly qualified,
motivated, and conscientious workforce. Employers are freeto tailor the recruiting process to their individual needs. Onlya few guidelines need to be observed; such as offering jobs
in a non-discriminatory manner (meaning that employers
are required to hire on an equal opportunity basis without
discrimination in terms of race, ethnicity, gender, religion,conviction, disability, age, or sexual orientation). Recruitment
services are offered by the Federal Employment Agency(Bundesagentur für Arbeit). There are several programs offering extensive public support for hiring employees.

Employment Models
Regular Employment
Regular employment contracts are unrestricted and canbe terminated by a written letter of termination, provided a
mandatory notice period has been observed. In companies
with more than 10 employees, a justified reason is required
for regular termination. In a regular employment contract,
employer and employee usually agree upon a six-monthprobationary period during which the contract may be terminated by either party at any time with two weeks’ notice.
Fixed-term Contracts
Fixed-term contracts expire automatically on a specified
date without a formal dismissal requirement. It is for theemployer to decide whether to renew the contract or not.
Fixed-term contracts are generally limited to a maximum of
two years and may be extended up to three times provided
the total duration of contract does not exceed the maximumof two years. During the first four years of a company’s existence in Germany, employment contracts may be limited orextended several times up to a total duration of four years.
Temporary Employment
Temporary employment means that a company leases
employees from a temporary employment agency. The
employee is legally employed by the temporary employment agency and receives the salary from them – as nocontractual relationship exists between leasing company
and employee. General working conditions such as weekly
working hours and wages are usually determined in collective agreements. They can modify the “equal treatment”principle of leased employees and permanent staff to alimited degree. The service contract between the hiring
company and the temporary employment agency regulates
the duration and terms of termination of service of theemployee in the hiring company. The statutory maximum
hiring term for the same leased employee at the same company generally is 18 months.

Wage Level
Wages are generally subject to individual negotiations. It
must be noted that a general minimum wage of EUR 12.41
an hour is applicable from January 2024. An adjustment toEUR 12.82 is set for January 2025. Higher minimum wages
may be set in certain industries (e.g. those with universallyapplicable collective wage agreements).
There are also general exemptions from the national minimum wage. For instance, the following group categories are
not covered by the minimum wage regulation:· young people under 18 years of age,
· students completing compulsory internships/internships up to three months,· long term unemployed (one year or longer)
for the first six months in employment.

Working Times and Vacation
Working hours in Germany are in line with the EU Working
Time Directive. Employees are allowed to work eight hours
per day - 48 hours per week. Saturday is considered to be anormal working day. With a five-day week, the permitted
weekly working time totals 40 hours. Most business is conducted from Monday to Friday but retailers and manufacturing industries usually operate on Saturdays as well. Sundays
and public holidays in contrast, are generally considered to
be days off. However there are numerous exceptions fromthis general rule, permitting Sundays and public holiday
work. An extension of the working time to a maximum often hours per day is possible under certain conditions.
The statutory amount of work breaks depends on the total
number of hours worked per day. Employees are entitled to abreak of 30 minutes when working between six and nineworking hours per day. Employees are entitled to 45 minutes
break when working more than nine hours a day.
Full-time employees working six days per week are entitledto a minimum of 24 paid vacation days (the equivalent offour weeks) per year. Accordingly, full-time employees
working five days per week are entitled to a minimum of
20 days per year.
→ Our Economic Overview Germany provides detailed infor-mation and statistics on the German labor market, the highqualification and productivity of the workforce in Germany.
www.gtai.com/economic-overview-germany

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INVESTOR’S BASICS

Social Security

Payroll Accounting

In Germany, core social security provision is collectively
financed by means of a process of redistribution. The current
costs for pensioners, sick people, those in need of nursing
care, and unemployed people are paid directly from contributions by employees and employers alike. The contributions
are roughly shared equally by employer and employee withthe exception of accident insurance costs which are solely
borne by the employer. Each share corresponds to approximately 20 percent of the employee's gross wage.

Employees in Germany receive a net wage – meaning asalary from which tax and social security contributions
have already been deducted.

Components of Social Security Insurance
The German social security insurance system consists of:· Pension insurance· Health insurance· Unemployment insurance· Nursing care insurance· Accident insurance

Common funds exist for all social security components. Only
the statutory public health insurance provider can be chosen
individually by the employee. Employees can also choose
to opt out of the statutory health insurance in favor of a
private health insurance scheme subject to satisfaction ofa minimum monthly gross salary level.

Allocation of Social Security Contributions (SSC)

Employer's Share of SSC
approx. 20%
of gross wage

Employee's Share of SSC

Employee's gross wage

approx. 20%
of gross wage

Wage TaxEmployees pay wage tax (Lohnsteuer) – a special term forthe income tax paid by employees. The employer is obliged
to deduct the wage tax due directly from the salary of
the employee and to pay it to the tax office. This must becompleted electronically with authentication on a monthly,quarterly or annual basis depending on the amount of total
wage tax. To obtain the electronic certificate required forauthentication, the employer has to register him or herself
and all employees electronically at the "Elster" online tax
portal (www.elster.de).
Social Security Contributions
Social security contributions are also withheld by the employer after calculation of the gross wage and transferredto the employee's health insurance company (which passeson the contributions excluding accident insurance to all
relevant parties). The employer must register each individual
employee with their respective health insurance company.
The company number (Betriebsnummer) is a prerequisite forregistration. Employers must apply for a company number at
the Federal Employment Agency Saarbrücken.
Statutory accident insurance contributions have to be transferred separately by the employer to the statutory accident
insurance association (Berufsgenossenschaft). To do so, theemployer has to register separately with the Berufsgenossenschaft in advance.
International Social Security Agreements
In order to facilitate the international transfer of employees,
Germany has signed social insurance agreements with countries including Australia, Brazil, Canada, China, India, Israel,
Japan, South Korea, Turkey, and the USA.
Within the EU, the posting of employees is facilitated byEU regulations. This allows transferred employees to remainwithin the national social insurance system of their homecountry if they are relocated to Germany for a certain time.
In this case, the employer does not have to pay Germansocial security contributions for the employees temporarily
located in Germany.
The EU has concluded special agreements on social security
topics with countries including Switzerland and the UK.

Pension insurance
Health insurance
Unemployment insurance
Nursing care insurance
Accident insurance

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