- Overview: Germany
- Global HR Compliance
- Global PEO and payroll
- 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
Do you have Ukrainian workers who are planning to flee to Germany to escape the Russian conflict? Or have your employees already left Ukraine and arrived in Germany?
Acumen International can help companies like yours, including IT, to compliantly employ your Ukrainian talent in Germany within days. Acumen’s global PEO and Payroll solution helps you to legally relocate your Ukrainian personnel to Germany so you can enjoy uninterrupted workflow with employees you know and trust. Our solution enables us to arrange for global payroll, and to open bank accounts for your employees. We can also provide your talent with laptops, mobile phones, and other tools they need to perform their jobs.
If your business or your international clients are considering expanding to Germany, you may opt to set up a local entity in the country. However, setting up a business in Germany can be a bureaucratic nightmare for you. What if we say that’s not at all necessary?
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 that lets you get a smart footprint in the country 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 PEO services via AÜG (Arbeitnehmerüberlassung) license in Germany which enables 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.
Send us your project details to get a detailed expert consultation.
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.
Acumen International – Your Professional Employer Organization in Germany
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 own business operations abroad, thanks to Acumen’s Global PEO and Payroll service we can now onboard and payroll expat 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.
NOTE: Acumen International is not a payroll service provider and we do not provide international global payroll as a standalone solution apart from our complex global PEO and Payroll solution in Germany.
Send us your project details to get a detailed expert consultation.
International Global Payroll and Taxation in Germany
Taxation in Germany is regulated by the Fiscal Code containing all common rules and procedures applying to all taxes. The calendar year serves as a tax year in Germany. The key taxes in Germany are personal income tax (PIT), corporate income tax (CIT), and value added tax (VAT).
Personal income tax implications in Germany mostly depend on the individuals’ tax residency status, the individuals’ 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 a considerable amount of 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 related 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% rate. Certain financial, insurance and reinsurance, education, cultural, healthcare and medical services, land and real estate transactions, etc., are exempt from VAT in Germany.
The standard VAT (Mehrwertsteuer or MwSt for short) rate in Germany is 19%.
Please note that in some countries VAT and/or additional local sales tax may be applied to PEO services rendered, which may raise the initial invoice amount. Fill out the form to get tailored 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 the existence of 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 for 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 economical) 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 to reach your business goals in Germany by officially employing and compensating your best global talent – both locals and expats – 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.