Cost Of An Employee Understanding The Payroll System In Germany

Cost Of An Employee Understanding The Payroll System In Germany Tel: +49 (0) 2173 / 2039568, Fax: +49 (0) 2173 / 206963 mail@payroll-services-germany.com

Cost Of An Employee Understanding The Payroll System In Germany

Having one of the world’s best environments for overseas busine sses, Germany has over 22,000 foreign established businesses in Germany which employ more than 2.7 million people.

Germany is by far the most stable location for new business in EU Germany offers an access to its large and well-educated populati on to a lot of businesses which makes the process of Company Fo rmation in Germany a lucrative option.

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Cost Of An Employee Understanding The Payroll System In Germany

However, there are number of complicated processes involved in executing and launching a German payroll system.

Here are a few things that you can keep in mind in order to ensur e a successful payroll system in Germany:

Getting Started In order to start a new business in Germany, a company has to re gister itself under the tax and social security authorities.

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Cost Of An Employee Understanding The Payroll System In Germany

This includes requesting an employer number which is an eight-di git identifier for the name, address, and economic class of the co mpany.

The employer number is a must in order to hire employees and r egistering them for social and health insurance.

You also need to apply for a dedicated tax number as well as stat utory accident insurance.

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Cost Of An Employee Understanding The Payroll System In Germany

The whole process can take up to 6 weeks to complete. Meanwhile, you can complete other chores like setting up a bank account etc.

Employment Law Germany’s Employment Law defines many policies regarding the pa yroll. It dictates that every employee should have the option to join a union, collective labor agreement, or work council, which would p lay an important role in issues relating to shift timings, wages etc.

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Cost Of An Employee Understanding The Payroll System In Germany

(but only if you have a certain number of employees in Germany).

As of January 1, 2017, the law defines the minimum Cost of Empl oyee in Germany as €8.84 per hour subjecting to certain exceptio ns based on employees’ age, status etc.

Employee Payments The payment of wages and salaries are governed by Germany’s In dustrial Code, its Civil Code, and number of other collective agree ments.

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Cost Of An Employee Understanding The Payroll System In Germany

Payments to the employees or the concerned third parties are do ne in the form of electronic bank transfers in accordance with Ge rmany’s standard File Transfer and Access Management (FTAM) p rotocol.

Once the payroll is approved by the employer, the bank is authori zed to release all the concerned payments to its employees.

As far as bonuses are concerned, organizations need to be aware of ‘thirteenth salary’ payments.

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Cost Of An Employee Understanding The Payroll System In Germany

This implies that the German employees, who have worked all 12 months of the year, have a right to receive one month’s wages as a bonus (often split, half being paid in May and half in November).

This is not a legal requirement however and many companies are moving away from this.

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Cost Of An Employee Understanding The Payroll System In Germany

Tax Collection One of the most important jobs when it comes to payroll is to cal culate the income tax due for each employee and to pay the with held amount to authorities.

The employer must withhold the calculated amount from employ ees’ gross payments each month and then submit that payment t o the appropriate tax office by the 10th of the following month. F ailure to do this will result in you being charged with a penalty.

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Cost Of An Employee Understanding The Payroll System In Germany

Social Insurance Contributions - It is the duty of every company t o withhold an appropriate percentage of employees’ total monthl y earnings for unemployment insurance, pension insurance, and nursing care insurance, respectively. The amount varies dependin g on the income of each employee and is split between employer and employee.

Health Insurance - As per law, the health insurance is 14.6% of th e employee’s gross income which needs to be shared equally bet ween the employer and the employee.

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Cost Of An Employee Understanding The Payroll System In Germany

Unemployment Insurance - This is mandatory and is 3.0 percent of the gross wage which is split equally between the employer an d employee.

Maternity Leave and Sick Pay Considerations - As per the regula tions, any employee who has been working for at least four week s will get sick pay, as long as they inform their employer of the sic kness immediately and provide a medical attestation if in case th e sickness lasts for more than three days.

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Cost Of An Employee Understanding The Payroll System In Germany

The maternity leave consists of six weeks before the delivery and eight weeks afterwards. In case of premature births or multiple bi rths it is 12 weeks after birth.

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