Germany offers its employees many benefits under numerous compensation laws. Before going into business in Germany or incorporating a subsidiary, it is vital to understand what benefits are guaranteed to your employees and what supplemental coverages you can offer to stay ahead of the competition.
Germany Compensation Laws
Germany’s minimum wage as of July 2021 is 9.60 euros an hour. There are a few exemptions to the minimum wage requirements which include interns, employees under 18 and long-term unemployed workers for their first six months at their new job. If you violate Germany’s compensation law, you could face a fine of EUR 30,000 to 500,000.
Overtime work must also conform to the maximum working hours (i.e. no more than 60 hours a week, averaging out to 48 hours over a 6-month period). the nation does not have a compensation law related to overtime. Overtime will usually be compensated with time off in lieu. If overtime should be paid out, this should be included explicitly in the employment contract.
Guaranteed Benefits in Germany
Understanding which benefits are guaranteed by law and which are considered additional is a vital part of Germany benefit management. For example, German compensation laws do not specify a 13th or 14th-month bonus, but many employers choose to give an end-of-the-year bonus on top of an employee’s salary.
Your employees are entitled to 24 vacation days a year if they work six days a week. Employees that work five days a week get 20 days of vacation a year. While this is the standard set by German law, most employers give full-time workers 25-30 days of vacation time a year.
The German Social Security System has four separate components that all employers and employees contribute to, including unemployment insurance, health insurance, pension insurance, nursing care insurance. A fifth component, accident insurance, is paid only by the employer.
Germany Benefits Management
You will face harsh fines if you do not follow Germany compensation laws correctly. Instead of undergoing the Germany benefit management process alone, you can work with a German benefit outsourcing company.
Finding benefits for your employees requires a significant amount of time, money, and travel. However, working with a global PEO takes the stress out of German benefit management and helps you stay compliant. Globalization Partners can help you source the best supplemental benefits for your employees while ensuring your compliance with all German employment laws.
Restrictions for Benefits and Compensation
Pay attention to the number of hours your employees work every day. German compensation laws state that employees cannot work more than eight hours a day and 48 hours per week. You also need to pay your employees at or above the minimum wage to avoid fines.
Instead of worrying about various restrictions, work with a German compensation outsourcing company such as Globalization Partners. As a global PEO, we can take care of your payroll and act as the employer of record to place the liability is on our shoulders instead of yours. Contact us today to learn more.
Germany Competitive Benefits Planning
When you expand your company to a new country, you’ll need to learn about typical benefits in the labor market and what you have to provide by law. For employee benefits planning in Germany, you need to consider factors like social security and annual leave before you determine supplemental provisions.
Germany Employee Benefits Plans
Benefits play a critical role in company compliance and employee recruitment and retention. While every country has labor laws with minimum benefits requirements, workers also expect support from their employers. The benefits plan you create will show your employees how valuable they are to the company.
If you want your open positions to be competitive, your benefits package will likely need to include supplemental provisions outside of the legal requirements. The options for these perks are wide-reaching, and it will take some research to determine which ones are best for you. You’ll have to consider your unique needs as a business and what’s typical in the labor market.
Possible supplemental provisions include:
- Company bikes or cars
- Gym allowances
- Holiday bonuses
- Remote work
- Four-day weeks
- Paid lunch
A country’s labor laws will describe the minimum benefits every employee should receive. In Germany, these minimums include:
- Paid annual and sick leave
- Social security contributions
- Parental leave
The nation’s social security scheme is a means of covering many aspects of employee welfare. Under the social security umbrella, workers receive coverage for health, pension, unemployment, nursing care, accidents, maternity leave, and insolvency.
Designing German Employee Benefit Plans
The challenge of benefits planning is meeting your employees’ needs without overextending your company’s resources. This three-step process can be a helpful starting point.
1. Evaluate Company Goals and Resources
In this phase, you should focus on understanding your business earnings and what you want to prioritize with your spending. Knowing your income can help you establish an estimation for benefits expenses, and setting priorities can help you allocate your funds.
Do you want to focus on employee retention or recruitment? Are you interested in improving competitiveness in your industry? If you decide to focus on retention, you might opt for more benefits and a smaller team. If your focus is competition, you may allocate your resources to the same benefits as other industry leaders.
2. Learn About Employee Needs and Expectations
In this research stage, you’ll gain the information you need to execute your goals. To understand employees’ needs, you might survey working citizens to find what they want from an employer.
You might also research the benefits of other companies in your industry. Doing so can help you understand what job applicants expect from employers. With this understanding, you can find out what benefits plans will make your open positions attractive to candidates.
3. Create a Balanced Benefits Plan
After you establish your goals and resources and conduct some research, you can enter the development phase. In this stage, it’s best practice to define the required benefits first and build up based on your budget. Find commonalities between employee needs and industry patterns to understand the high-priority supplemental benefits.
Average Cost of Benefits
The cost of benefits varies extensively between companies, which means a broad market average wouldn’t be a fair assessment of pricing. Benefits expenses depend on several factors, including company size, industry, and location.
Rather than relying on an average cost, you should create a budget unique to your company’s revenue and expenses. It’s helpful to set a percentage of your earnings so your budget will grow as your revenue does.
How to Calculate Employee Benefits
The required benefits outlined in Germany’s labor laws offer some guidance on calculation. For example, social security contributions should be made in evenly split percentages from the employer and employee. Workers and employers both contribute around 20 percent of earnings.
Workers typically receive full pay for leave. For salaried employees, you may need to make additional calculations. You should pay hourly workers the amount they would receive for a full day of work.
How Are Employee Benefits Taxed in Germany?
The country declares any earned employment income as taxable. Generally, employment income refers to all forms of earnings and assets, including fringe benefits.
Employee Health Benefits
Under the country’s social security scheme, employees are covered for most types of health care. However, the public healthcare system leads to long wait times, and it does not cover every charge in a public institution. Employers are not required to provide an additional private insurance plan, but they may choose to do so to make care even more accessible. This supplemental insurance can make your vacancies more attractive to candidates.
Choose Globalization Partners Today
Globalization Partners is here to help your company create competitive, compliant benefits plans. Get in touch to learn more.