- Overview: Germany
- Global PEO and Payroll
- Global HR Compliance
- Work permit for hiring expats via PEO
- Expand without a company set up
- Contractor vs. employee: which is better?
Global PEO and Payroll in Germany
What is a Global PEO?
A global PEO, or Professional Employment Organization, is a company that contracts with other businesses to provide human resources services across multiple jurisdictions. These include payroll and benefits administration, tax reporting, workers’ compensation insurance, unemployment insurance claims management, employee screening, legal and regulatory compliance assistance, HR consulting, immigration services, and other financial services. Businesses can focus on their core competencies and goals by outsourcing these time-consuming and complex tasks to a global PEO.
If you’re looking to compliantly and quickly hire, manage, and pay employees across multiple jurisdictions via a single trusted global employment partner, then you’ve come to the right place.
We offer a comprehensive portfolio of global employment services in 190 countries. This makes Acumen International Global PEO (Professional Employer Organization) incredibly agile and able to adapt quickly to your talent acquisition needs. Our global PEO talent engagement model can help you scale up or down according to your business’s changing requirements – minimizing your global employment risk in Germany. When you partner with us, you can delegate HR responsibilities like payroll, benefits and tax administration, background checks, immigration services, and more. We take care of everything so you can focus on running your business.
9 Global Employment Challenges to Consider
If you’re thinking about expanding your operations to a global level, you’ll want to consider all the details that go into that decision. That includes everything from choosing the most cost-effective country and the right entity type to preparing for the challenges of doing business across borders. Choosing a location that works with your overall strategy and offers lower taxes could be one way to help improve profitability.
As you prepare to expand internationally, it’s crucial to understand how each factor impacts the overall success of your business. Here are some global expansion challenges:
- Every country in the world has its own set of unique business laws.
- The legislative and regulatory landscape is ever-evolving. Keeping track of changes is cumbersome
- Global HR Compliance challenges
- Need to understand and keep track of ever-evolving local labor laws and tax regulations across multiple jurisdictions
- Need to understand the local labor market
- Need to understand local business practices pertinent to employment
- Need to adhere to the company’s global employment policies
- Need to understand local competition and benchmark against common business practices
- Working with different languages, time zones, customs, and cultures
No matter which countries you expand to or what type of operation you open, there are some significant issues you will always have to deal with.
Global expansion decisions come with a lot of moving parts. The decision to expand internationally can significantly impact your business, so it’s essential to make sure you handle it correctly.
When Use a Global PEO Services?
1. Avoid Independent Contractor Non-compliance and Misclassification Risks in Germany
Employment and tax laws vary from country to country. You must comply with all local labor laws if you hire a worker directly. The penalties for non-compliance are steep and can include fines, imprisonment and loss of your business license. In some countries, employers must pay payroll taxes for all employees, regardless of whether they work for the company in-house or remotely.
Labour and tax authorities in Germany can impose penalties for misclassifying employees as independent contractors, including fines and back taxes. You could risk violating employment and tax laws if you plan to grow your business by hiring international contractors. A global PEO can enhance compliance by hiring contractors on your behalf and following all local in-country labour requirements.
2. Global PEO & Payroll Solutions: Enter New Markets without Foreign Entity Set-Up
Many companies have an eye on the international market. With the rise of globalization and the increase in demand for products and services, it’s becoming increasingly important for companies to expand their reach. Establishing a new entity in another country can take months.
With a global PEO, businesses can have a workforce operational in the new country within days. At the same time, your organization does the work of setting up the new entity in parallel if needed. The global PEO service allows organizations to enter new markets quickly without spending months on set-up, making it a low-cost and secure way for businesses to expand into international markets.
3. Ensure Consistency of HR Operations & Effective Cost Management with a Global PEO
There is no one-size-fits-all when it comes to pricing for outsourced employee services. However, working with a single global PEO solutions provider can offer consistency in pricing so that you can manage your global workforce more efficiently. Acumen International’sglobal PEO PEO solution offers a straightforward pricing model that can be applied to managing all your employees, regardless of location. By consolidating your relationship with one Global PEO and payroll solutions, you can avoid dealing with multiple charging structures, which can be confusing and costly.
17 Burdens a Global PEO Can Relieve for Your In-House HR Department in Germany
- Global expansion complexity
- Global payroll administration
- Employee benefits administration
- Drafting compliant employment contracts to adhere to local labor and tax regulations in 190 countries
- Lengthy onboarding
- Complex and risky offboarding
- Background checks
- Workforce compensation administration
- Compliance assistance
- Guidance on best practices of voluntary benefits provisioning
- Immigration and relocation support for your ex-pat workforce, such as visa sponsorship and securing work permits
- Lack of institutional knowledge.
- IP right protection
- Lack of local and international legal support
- Convert local contractors into full-time employees
- Business transitions and restructuring: acquisitions, mergers, close-downs
- Need to deal with multiple global employment service providers.
How to Choose a PEO (Professional Employer Organization) in Germany?
As you consider partnering with a global PEO, remember that the needs of each business are unique. Just as you would carefully select international employees, you need to find a global PEO that can address your industry’s specific challenges. Look for a global PEO with a strong track record and fiscal stability that can provide comprehensive support and compliance expertise. Make sure they offer services and coverage in all your business areas. Get references from other clients in your industry to ensure you make the best choice for your business.
Global Payroll Management & Compliance Considerations
Managing employees in different countries can be a complex and challenging task. Employees may need to be registered and taxed differently in each country, and other laws must be followed. This can make it very hard to keep track of everything and ensure everything is done correctly.
When it comes to payroll, there are many different regulations that you must follow to avoid penalties or litigation. Each country has its laws and regulations, but some standards apply internationally. You must know and adhere to tax deadlines, withholding and reporting laws, and regulations requiring employee tax slip signatures. If you fail to adhere to these payroll compliance rules, you could face severe penalties that could negatively impact your business.
Global payroll management is a complex process that requires careful consideration of various factors. Payroll specialists must consider local regulations and taxation requirements, which can be time-consuming and difficult to navigate. However, by addressing some key challenges and partnering with a Global PEO, organizations can ensure compliant, accurate, and timely payments.
Global Payroll Calculator: Accurate Global Employment Cost Estimation
When hiring employees and contractors across the globe, you may not choose the most cost-effective and business-friendly country.
- Do you know which country is the most cost-effective place to hire employees?
- What are the costs of entity establishment and legal representation?
- What are the payroll costs and management fees?
- What are your ongoing annual tax compliance costs?
- Are you fully aware of banking implications?
- Did you know that labor laws and hidden costs could make your company less efficient when choosing a country to run your business?
- Did you know that there could be a more cost-effective country to hire employees in and save up to 50%?
This is because countries have different labor laws, compliance, and tax regulations. What if, instead of limiting your company’s international expansion by cutting through the jungle of local regulatory compliance, tax, labor, and immigration requirements, you could have all the information of 190 countries at your fingertips?
Acumen International offers the Global Payroll Calculator to help businesses understand the compliance requirements for conducting business in a new country. Acumen’s research team tracks developments in 190 countries around the globe. It provides up-to-date data on local regulations related to tax, payroll regulations, benefits, hiring practices, compliance requirements, and other labor-related factors that impact an employer’s bottom line. This valuable information makes the Global Payroll Calculator an invaluable tool for businesses looking to expand internationally.
Global Payroll Calculator helps companies reduce labor costs by providing up-to-date information on hiring, compensation, and tax requirements. It is also an ideal tool for quickly locating employees in any country.
Acumen International – Your Professional Employer Organization in Germany
Acumen offers a viable alternative or an interim solution to help you get a smooth operation up and running. This is via employing your or your international clients’ selected professionals in Germany, which allows you get an intelligent and quick footprint in Germany while you are still evaluating the market.
Our Global PEO and Payroll service offers a way to get that without the need to open a legal business entity or an interim solution prior to incorporating in Germany.
We offer global PEO services via AÜG (Arbeitnehmerüberlassung) license in Germany, enabling us to legally deploy your selected employees for a maximum of 18 continuous months*.
* Please note: a maximum duration of deployment with the same end client in Germany can take 18 continuous months.
Acumen International as a Global Professional Employer Organization (PEO) offers your business on-the-ground support and local knowledge to conduct your business in Germany without the risk of legal or tax repercussions.
Navigating the German legal system and abiding by the in-country labor laws and taxation regulations on your own can be a serious challenge, especially if you are not fluent in German. Acumen International is there to take the concerns off your shoulders.
Whether you are an agency representing international clients or are taking your business operations abroad, thanks to Acumen’s Global PEO and Payroll service, we can now onboard and payroll foreign and local employees in Germany on behalf of your business or agency clients. Acumen partners with you for the entire employee journey, from onboarding to payroll, including benefits provision and potential offboarding.
International Global Payroll and Taxation in Germany
Taxation in Germany is regulated by the Fiscal Code containing all standard rules and procedures applying to all taxes. The calendar year serves as a tax year in Germany. The critical taxes in Germany are personal income tax (PIT), corporate income tax (CIT), and value-added tax (VAT).
Personal income tax implications in Germany mainly depend on the individual’s tax residency status, the individual’s marital status and the number of dependents the individuals have, the source and the amount of income received, etc. Germany has progressive tax rates ranging between 0% and 45%.
Managing local and federal taxes can take much company time compared to many of Germany’s OECD counterparts. In Germany, accounting practices are highly complex, and local tax authorities do not offer much flexibility on tax filing errors and penalties.
Partnering with Acumen International and leveraging our Global PEO and Payroll service in Germany to handle your employment details can eliminate the burden of managing the complexities of compensating your global employees in the country.
Employment Taxes in Germany
Social security contributions in Germany are split equally between employers and employees.
Employers and employees each contribute the following percentages of gross employment income:
- 9.30% to Pension insurance (Rentenversicherung short RV)
- 7.3% to Health insurance (Krankenversicherung short KV)
- 1.525% to Long-term care insurance (Pflegeversicherung short PV)
- 1.2% to Unemployment insurance (Arbeitslosenversicherung short AV)
Employers also contribute 0.09% of gross employment income to an insolvency charge and an average of 1.3% of payroll for workers’ compensation, also known as accident insurance (Gesetzliche Unfallversicherung). The rates for accident insurance vary, depending on the risk assessed, and employees do not need to contribute.
In addition, there exists a solidarity surcharge and a church tax for German residents who are members of the registered churches.
Need to see the detailed rates? Ask us for expert advice. Get instant Total Employment Cost estimates for Germany with our Global Payroll Calculator (GPC).
Payroll Cycle in Germany
The payroll cycle in Germany is monthly as standard, and salaries are typically paid after the working month is completed. For example, on the first or the fifteenth of the following month. The terms of payroll payments are commonly included in employment agreements defining a fixed date or a fixed period for receipt of the salary.
Salaries in Germany are paid in the local currency, the Euro (EUR).
13th salary in Germany
The 13th monthly salary in Germany is a concession from the employer defined by:
- an employment contract
- a company agreement
- a collective agreement
Where a collective agreement in the relevant industry demands a 13th monthly salary payment, employers need to abide by it. Contracts and agreements must clarify whether the 13th monthly salary is considered a bonus or an actual 13th salary with remuneration.
A gratuity or bonus payment serves primarily to reward loyalty to the company. A 13th-month salary, on the other hand, is intended to reward work. This means in the case of illness, for example, a 13th month’s salary could be reduced, or an employer could pay out the yearly salary in 13 installments instead of 12.
Non-payroll taxes in Germany
Germany is part of the EU VAT system. Export deliveries and the intra-community supply of goods and services are subject to VAT at 0%. Certain financial, insurance and reinsurance, education, cultural, healthcare and medical services, land and real estate transactions, etc., are exempt from VAT in Germany.
Germany’s standard VAT (Mehrwertsteuer or MwSt for short) rate is 19%.
Please note that VAT and/or additional local sales tax may be applied to PEO services rendered in some countries, which may raise the initial invoice amount. Fill out the form to get expert advice on additional taxes in Germany.
Permanent Establishment Risk in Germany
Once you establish a legal business entity in Germany, you become liable for all corporate taxes under German law. Your organization will be taxed for profits generated within the country and subject to charges for interest and late fees on any outstanding taxes.
For a foreign enterprise wanting to prove they have no permanent establishment in Germany, detailed documentation is required to ensure that the preconditions for a permanent establishment are not fulfilled.
Avoiding establishing a legal entity in Germany by hiring independent contractors still puts your business at risk of being considered a “permanent establishment” based on your business activities performed through these independent contractors.
Tax Residence in Germany
German tax residents need to pay taxes in Germany on their worldwide income, while tax non-residents pay taxes only on their German-source income.
Tax residence in Germany applies if:
- Individuals have a residence in Germany that they use or that is at least available to them (i.e., have a domicile in Germany), or
- Individuals have a habitual abode in Germany which is assumed if they are physically present in Germany for more than six months in any calendar year or a consecutive period of six months over a year-end
Where an international employee has a permanent home available to them in two or more countries, they are deemed, for application of a double tax treaty (DTT), to be a resident of the contracting state in which the employee has a center of vital (personal and economic) interests. Germany has double tax treaties with more than 90 countries/jurisdictions.
How Acumen International’s PEO and Payroll Service can Benefit Your Business in Germany
A strong economy, local talent, and a strategic geographic position make Germany an attractive business opportunity.
However, don’t let high levels of bureaucracy and evolving labor legislation divert your team’s time and valuable resources from growing your business in Germany. Partnering with Acumen International and leveraging our global PEO and Payroll service in Germany puts your agency, business, and organization in a prime position to legally hire and payroll your global workforce while remaining in compliance with the in-country labor and taxation laws.
Outsource the administrative and compliance hassle involved in employee payroll to us.
Our comprehensive global PEO and payroll services are just some of the benefits of a partnership with Acumen International. We help you reach your business goals in Germany by officially employing and compensating your best global talent – locals and ex-pats – without facing any potential risks.
Disclaimer: The information on this page is subject to changes imposed by German laws. To get the latest updates on taxation in Germany and 190 countries worldwide, contact Acumen’s team of global employment experts.
Interested in finding out more about our all-in-one global PEO and payroll solution? Get in touch now or request a quote.