What to Know About the German Job Market?
The job market in Germany is generally strong and dynamic, with a relatively low unemployment rate compared to other European Union countries. By the end of 2023, this rate was estimated to be 5.8% in the country. Therefore, it is considered to be a fairly tight job market.
Germans typically pursue relatively long studies, and it is quite common for young graduates to enter the job market in their late twenties, especially those who have completed a master’s degree. Engaging in apprenticeships and having a part-time job alongside their studies is quite common, known in German as “Werkstudent.” With these experiences alongside their studies, these candidates enter the job market with some experience and can expect higher salaries than in other European countries.
In principle, qualified workers are available, but it is important to develop a recruitment strategy to attract and retain talent. This strategy can include different channels, which can also vary from one Land to another. LinkedIn and Stepstone are two examples.
Despite the well-developed vocational training system, there is still a shortage of skilled labour in certain sectors, which creates opportunities for qualified workers. Engineering, sales, and technical profiles are common on the job market and highly in demand.
Germany has a number of programmes in place to attract skilled foreign workers, including the ‘Blue Card‘ for highly skilled non-European workers, as well as programmes for foreign students wishing to stay and work in Germany after their studies.
What are the Labour Laws in Germany?
In Germany, standard working hours are 8 hours a day and 40 hours a week. There are regulations governing maximum working hours, rest periods and overtime.
Regarding paid leave, employees are entitled to a minimum of 20 days’ paid leave per year, based on a 5-day working week. Many collective agreements offer more, up to 30 days.
In Germany, there are Works councils (Betriebsräte) representing employees in companies with more than five employees. They negotiate with employers on issues such as working conditions, working hours and pay.
Health insurance is mandatory for all residents, including employees. There are two main types of health insurance in Germany: statutory health insurance (gesetzliche Krankenversicherung or GKV) and private health insurance (private Krankenversicherung or PKV).
When choosing the statutory health insurance: Contributions to statutory health insurance are shared between employees and employers. Contributions are calculated as a percentage of the employee’s gross salary, up to a certain income threshold.
What Must be Considered for Foreign Employees?
The German labour market is known for its flexibility, with variable working hours, part-time work and flexible employment contracts. The German work culture has its specificities: time in the office is important and generally well structured. Germans have their own working hours and like to be efficient within those hours. Efficiency is more important than quantity. Breaks, particularly at lunchtime, are not very long and once the work is done, talking about work outside these hours would be considered a cultural fault.
In Germany, labor law is governed by the Bürgerliches Gesetzbuch (BGB), which is the German Civil Code. The BGB contains provisions governing employment relationships, including employment contracts, the rights and obligations of employers and employees, as well as dismissal procedures. When hiring a new employee, the employment contract is binding; there is no job promise letter in Germany.
Payroll in Germany
A thorough understanding of local tax laws, reporting requirements, as well as employment and compensation regulations is essential for managing payroll accurately and in compliance with German regulations.
The Social Security Contributions (Sozialabgaben): These contributions are mandatory and split between the employer and the employee. They include:
- Pension Insurance (Rentenversicherung)
- Health Insurance (Krankenversicherung)
- Unemployment Insurance (Arbeitslosenversicherung)
- Long-term Care Insurance (Pflegeversicherung)
One special feature is the Church Tax (Kirchensteuer). If the employee is a member of a church recognized in Germany, they must pay church tax, which generally represents 8-9% of income tax.
In addition, there are several public holidays, called “Feiertage”. These days vary slightly depending on the federal state (Bundesland). Here is a list of national public holidays in Germany:
- New Year’s Day (Neujahrstag) – January 1st
- Good Friday (Karfreitag) – Friday before Easter
- Easter Monday (Ostermontag) – Monday after Easter
- Labour Day (Tag der Arbeit) – May 1st
- Ascension Day (Christi Himmelfahrt) – 40 days after Easter
- Whit Monday (Pfingstmontag) – Monday after Pentecost
- German Unity Day (Tag der Deutschen Einheit) – October 3rd
- Christmas Day (Weihnachtstag) – December 25th
- Second Christmas Day (Zweiter Weihnachtstag) – December 26th
In Germany, it is not mandatory for companies to use the services of a certified public accountant to manage payroll and tax matters. However, due to the complexity of the German tax system, many companies choose to engage a Steuerberater (certified public accountant) to ensure compliance with tax laws and to benefit from expert advice. Although it is not a legal requirement, this is often considered a recommended practice to ensure accurate and efficient tax management.
