Entrepreneurial activities are governed by a variety of laws in Germany. The two most significant areas for companies planning to locate in Germany are employment law and social insurance legislation.
Germany has a wide variety of labour laws governing such matters as the continued payment of wages during illness, minimum holiday periods, term of notice for contract termination, working hours, unlawful dismissal, child labour and the rights of expectant or working mothers. No particular form is required for employment contracts unless specific legislation or collective bargaining agreements call for it. However, it is generally advisable to conclude agreements in writing. The parties can agree on whether the employment contract will be subject to German law or to that of another country. If nothing is specified, the contract will be subject to the law of the country in which the employee primarily carries out his/her work – even if temporarily posted in another country. If the employee does not work primarily in one specific country, the contract is subject to the law of the state in which the subsidiary that hired the employee is located. If you would like to receive more information on German employment legislation, please contact us by phone or email.
Social Insurance Legislation
The German social insurance system comprises the following categories of compulsory insurance:
- Pension insurance (a)
- Unemployment insurance (b)
- Health insurance (c)
- Long term care insurance (d)
- Accident insurance (e)
The insurance types listed above apply to all gainfully employed persons in Germany with an income below a specified statutory limit.
Contributions to schemes a) - d) are shared equally by employer and employee. The occupational accident insurance e) is covered solely by the employer. All contributions are based on the employee’s annual income. Contributions to schemes a) - d) are withheld from the employee’s monthly wages or salary and passed on to the social insurance carriers.
Foreign nationals are not exempt from such contributions unless they are employed on a temporary basis only. However, there are numerous bilateral social security agreements that take effect when a foreign national leaves Germany at a later stage.
We will gladly answer your questions regarding social insurance requiremetnts, or recommend suitable experts.