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Employer of Record & PEO in Germany

Hire Staff Without Setting Up a Company

Employment Services Made in Germany

Universal Hires’ provides Employer of Record & PEO services for foreign corporations looking to hire staff and process payroll without having to establish a branch office or subsidiary in Germany. In other words, local employees are directly on-boarded by Universal Hires on behalf of your company abroad. The individual is fully dedicated to work for your project in Germany.

As a global economic powerhouse, Germany must be a place of business for internationally active corporations. Due to a wide range of administrative hurdles when entering the market, it is challenging for foreign companies to get up-and-running.

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Employer of Record & PEO in Germany: Employment Setup

Market Entry Cost

Without having to setup an entity in Germany to employ a team onsite, you can launch your business for a fraction of the cost.

Hiring Speed

Hire staff in days, not weeks or months to start your business in Germany onsite.

Expansion Flexibility

Add additional employees to your operations at ease or simply stop your in-country presence. 

Low Risk

Minimize your organization’s risk when expanding to Germany as all employer liabilities are absorbed. 

HR Compliance

  • Dedicated HR advisor
  • Local employment contract for employee inline with Employer of Record regulations in Germany
  • Compliance with HR legislation
  • Support with performance management process (incl. disciplinary issues)
  • Employee correspondence (letters, amendment to employment contracts, etc.)
  • Defining of remuneration and benefits

Employer Legal Liability

  • Mandatory Social and Pension Insurance registration
  • Individual Income Tax Withholding
  • Termination liabilities, severance calculation and communication support
  • Work health and safety liability (shared with client)

Payroll Processing

  • Dedicated Payroll Officer
  • New employee setup
  • Review of periodic payroll instructions (bonus/commission)
  • Monthly payroll processing to employees
  • Expenses declaration and reimbursement
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Essentials On Hiring With a PEO in Germany

Social Security in Germany

The social security system in Germany consists of four mandatory major pillars: Health insurance, pension & retirement insurance, unemployment insurance and nursing care insurance.

Health Insurance

Health insurance coverage is mandatory in Germany. Choosing between the statutory public health insurance or a private health insurance provider largely depends on the employee’s salary as well as on the personal preference.

Both, governmental and private providers are fully comprehensive and cover all necessary impatient and outpatient treatments. Nonetheless, many Germans stay publicly insured even if they can could afford to be enrolled in a private medical  insurance plan.

Additional voluntary private insurances for extra coverage would commonly not be subsidized by the employer as salary additions would be fully taxable. It is worth mentioning that when traveling throughout Europe, the employee is fully covered by the German health insurance.

Pension & Retirement

Upon employment start, employees will be automatically enrolled into the statutory Rension and Retirement Insurance. Besides pension and retirement coverage, the insurance also covers survivor and disability benefits.

Upon employee’s request, an employer in Germany must provide a supplementary pension scheme.

Unemployment Insurance

Unemployment protection plays a major role in Germany’s society and social insurance system.

In case a person has been in an employment relationship for at least 12 months in Germany, the employee is entitled to receive full unemployment benefits to the amount of 60-70% of the previous average income from the Federal Employment Agency for 6 months. The duration of payments can be longer depending on the length of service.

Nursing Care

Nursing care insurance provides monetary compensation or subsidizes the use of professional nursing services depending on the degree of care dependency.

Maternity Leave

As per German Labor Law, it is prohibited for pregnant women to work within the last six weeks  of their pregnancy as well as within at least eight weeks after giving birth.

These periods might be longer with multiple or pre-mature births. While the female employee is off, her basic net salary will still be covered out which is covered  partly paid by the employer and by the National Health Insurance pool.

In addition, both parents are eligible to go on parental leave for a maximum of 36 months. For the first 12 months of the parental leave, the employee is subject to receive additional financial support from the National Health Insurance pool.

Work Accidental Insurance

The statutory Work Accident Insurance fully covers any potential costs arising for medical treatments of accidents taking place either on the way to work, at work and on the way back.

The premium is determined according to the employee’ respective risk classes calculated based on the industry and working location.

Labor Laws & Requirements

Employment Agreements

Universal Hires’ PEO employment agreement are tailored to meet the AUG requirements and available in both German and English language. 

In practice, employment agreements need to detail: Parties involved, duration terms, probationary period, working location, job details, remuneration package, working hours, paid time off, applicable notice period, etc. 

Individual Income Tax (Einkommenssteuer)

Income tax is solely paid by the employee and withhold by the employer from the employee’s payroll on a monthly basis.

The amount of income tax to be paid depends on the amount of income earned. Starting from an annual income of 9,000 euros, the applicable tax rate is 14 percent. The highest tax rate is set at 42 percent for annual incomes exceeding 54,950 euros. Since 2007, the so-called “wealth tax” of 45 percent has been applied to incomes from 260,533 euros and higher.

National Holidays & Annual Leave

As an Employer of Record in Germany, it is important to be aware of the national holidays on whichbusinesses are typically closed.

Germany has nine official public holidays in that are celebrated nationally each year, in addition to regional holidays that are only celebrated in certain German federal states (Bundesländer). This means that some German states have more German holidays than others. Employees in Germany are entitled to one of the highest amount of holidays in Europe of up to 13 days of German public holidays a year.

Termination & Severance

It’s important to be aware of the national holidays in Germany as businesses are typically closed.

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Licensing Requirements in Germany

In April 2017, the German Labor Authorities introduced the updated Arbeitnehmerüberlassungsgesetz (AÜG), a new and stricter law on employment secondment, also referred to as employee leasing or Employer of Record & PEO services in Germany. 

The updated law could lead to severe financial and legal liabilities for foreign companies doing business in Germany through an Employer of Record / PEO. Therefore, it is key to have a profound understanding of its obligations and requirements prior to engaging employees onsite. 

Universal Hires ensures day-to-day compliance in close collaboration with the German Labor Authorities. In comparison to other Global PEOs, Universal Hires is a sole German entity with headquarters in Berlin. Rather than working through an in-country partner, we focus on delivering direct services to our clients and value a positive long-term development.

Universal Hires enabled us to rapidly employ a full sales team in Cologne – no company incorporation required.

Thomas Wen, Head of Global Expansion

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    Advantage: Employer of Record & PEO in Germany

    FAQ: Employer of Record & PEO in Germany

    Do I need to setup an entity in Germany to hire staff onsite?

    No, you do not need to setup an entity in form of a branch office or GmbH to hire staff in Germany. Through our Employer of Record & PEO solution, Universal Hires will hire and payroll German staff on your company’s behalf.

    How long does it take to onboard new employees?

    New employees can be onboarded within a matter of days.

    What is included in the Employer of Record & PEO service?

    Universal Hires will hire and payroll your staff in Germany in your behalf. In practice, this includes the labor contract preparation and employee registration with the authorities as well as the ongoing payroll management (salary, taxes, mandatory contributions, expenses, etc.).

    How much does it cost?

    Universal Hires offers tailor-made employment solutions in Germany. Please reach out to our team to receive further information. We will be happy to prepare a detailed quote for review

    Is Universal Hires a licensed EoR / PEO company?

    Universal Hires’ German entity is licensed under the Arbeitnehmerüberlassungsgesetz (AÜG) by the Federal Employment Agency. We ensure that our staff is working compliantly under the German labor law.