By Globalization PartnersMarch 2015
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Germany’s superpower economy is carrying the value of the Euro for the entire continent, and the labor market is on fire. Is your team planning to capitalize on Germany’s strength? If you intend to recruit and retain the best and brightest, you might need to negotiate hard. Keep the following in mind when negotiating the terms of an employment contract and offer letter with a potential candidate.
Great State Health Care
German employees belong to a mandatory social security system, which includes old age pension, disability benefits, unemployment insurance, as well as health and long term care insurance. Plan to budget about 12% on top of the total cost of employment for these statutory benefits. Most employers also provide a supplementary health care allowance to reimburse the cost of supplementary health coverage.
The market norm benefit for full-time employees in Germany is 25 to 30 vacation days per year plus 12 public holidays. While this seems like a lot to Americans, German employees will ardently defend their right to take off large chunks of time. Another important aspect to remember is that German employees will very likely not respond to any work-related notifications while spending time at the beach with their loved ones.
Most salespeople in Germany will negotiate hard for a leased car. It’s much easier for foreign companies that have not yet incorporated to provide a car allowance, although the allowance is taxable to the employee as a fringe benefit of employment. Allowances range widely from 400€ to 1,000€ per month.
Termination and Severance Payments
Terminating an employee in Germany is not easy as most employers are subject to the Act Against Unfair Dismissals. After six months of employment, employers must have proof of a reason to terminate an employee. The employee has 21 days after being terminated to contest his or her dismissal in a labor tribunal. In about 80 percent of cases there is a settlement to pay the person a severance fee over and above the market norm. The minimum settlement a company can expect to pay is equal to about half a month of salary for each year of employment, but it can, of course, be more than this.
The Institute for World Economics in Kiel, Germany, recently published a report stating that EU monetary policy will continue to heat the German economy and labor market, although the intention is to stimulate the rest of Europe. Unemployment is predicted to stay below 5 percent for four more years. If you’re on the edge, now is a great time to hire in Germany!