Payroll in Germany is the list of employees who are entitled to remuneration from the company and it comprises the entirety of the legal obligations that fall under the responsibility of the employer for the payment of the wages, as well as the withholding of the due taxes and their remittance to the authorities. Below, our specialized lawyers in Germany offer guidance in the matter of legal processes of payroll in this country and specific employment laws.
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Payroll services in Germany
The purpose of outsourcing payroll in Germany is to simplify the company administration process. This is one manner in which the business owners can make sure that they remain compliant with the statutory requirements for making regular employee payments and the taxes that need to be paid for social security purposes.
Our German attorneys offer various types of services in Germany and common solutions for managing payroll:
- preparing the monthly payslips;
- verifying the payment data for the upcoming payments;
- making the monthly payments to the employees;
- processing specific payroll documents;
- calculating overtime work, vacation and other bonuses for employees.
The German Employment Law also establishes certain regulations with respect to payroll administration in Germany, among which the employees’ rights to join an union, a minimum wage depending on the industry and other collective agreements. All these provisions must be taken into account when administering the payroll system. Employers must also take into account the provisions of the German Civil Code and the Industrial Code with respect to wage payments.
Directly dependent on the company’s number employees, payroll administration is a complex process and many business owners choose to outsource the procedures. Clients who need payroll services in a neighboring country, such as the Netherlands, are invited to contact our partners from Dutch-Accountants.com. They can provide businessmen with reliable payroll services in the Netherlands, but also with other tax related services.
If you would like to know more about the services offered by our team, as well as our other tax-relates solutions such as those for VAT registration in Germany, do not hesitate to benefit from the services offered by our German attorneys.
Payroll administration in Germany
Social security contributions in Germany are applied to both employers and employees and are calculated as a percentage of the salaries.
While there is no tax on payroll in Germany per se (i.e., there is no separate payroll tax), the German employer needs make contributions for the following:
- old age insurance;
- unemployment insurance;
- health insurance;
- nursing care insurance.
In most cases, the employer will cover 50% of these contributions and in certain instances, additional charges may apply to the employer’s mandatory contribution, such as those for statutory accident insurance, or for the insolvency fund levy. For details information about the percentages applied to each insurance you may refer to our lawyers in Germany.
Payroll contributions in Germany
Payroll procedures in Germany should be easy understood if you are planning to hire in Germany. In addition to paying an equal amount themselves, employers are required to take a portion of each employee’s wages for mandated contributions. Important social benefits include:
- Pension insurance is equally paid by employer and employee with 9.3%;
- Health insurance paid by both with 7.3%;
- Unemployment insurance is paid by both with 1.2%;
- Worker’s compensation is paid by the employer only with 1.3%;
- Insolvency fund is paid by the employer only with 0.12%;
Depending on their nature, some employee benefits may be subject to taxes ranging from 5% to 25%. In addition to paying salaries on a monthly basis, many organizations also offer bonuses for the 13th month, particularly during the holidays. You can benefit from the professional help of our accountants in Germany with the process of paying contributions to the German authorities and organizing payroll aspects within your company.
Payroll-related taxes in Germany
The payroll-related taxes in Germany depend in the personal income an employee makes on a monthly basis and the tax class the employee opted for. Employees in Germany have access to other types of benefits, as well as overtime pay, if this is included as a monetary compensation, as per their employment agreements (alternatively, overtime may be compensated for with paid time off).Full-time employees are entitled to a period of 24 days of paid holiday per calendar year, not including Sundays and public holidays.
The taxes applied to German companies are directly linked to the employment of individuals. In addition to these, the corporate income tax is one of the most important taxes for companies, along with other corporate taxes that regularly apply.
Our tax lawyers in Germany highlight some of the most important taxes for companies below:
- the corporate income tax of 18.825% (including the solidarity surcharge);
- the value-added tax with a standard rate of 19% and a reduced rate of 7% or 0% in some cases;
- the municipal trade tax at a minimum rate of 7% (levied by municipalities).
Options for German payroll management by employers
Businesses in Germany have several options when it comes to payroll management. You can either:
- Manage it internally, meaning you can manage payroll internally with your own finance or human resources department, or your own accountant in Germany;
- Collaborate with a payroll provider in Germany, as a lot of businesses decide to contract a German payroll service provider to handle their payroll organizational matters;
- Collaborate with a PEO or EOR: using a Professional Employer Organization (PEO) or an Employer of Record (EOR) can make things easier and more efficient. These services take care of compliance, payroll in Germany, and taxes for you.
Payroll in Germany timeline
Payroll processing takes place monthly (and in most cases this can be done at the end of the month), and companies need to submit the payment of both the agreed salary for their employees (which is in line with the minimum wage), and any other bonuses and benefits that may apply on a case-by-case basis.
Our team offers complete solutions for the management of payroll in Germany, along with the payment of the due taxes by the employer, in line with the current labor regulations and any changes that may apply to the industry in which the company activates, in terms of minimum wages.
Business owners can reach out to our local team of accountants in Germany for packages that include payroll administration in addition to the services for accounting in Germany, bookkeeping, and audit.
Data on minimum wage in Germany
According to the German Statistical Office, the values of the minimum wages (until the end of 2023) were the following, according to industry:
- vocational training services, meaning educational staff and educational staff with subsequent qualifications: 17.87 EUR and 18.41 EUR, respectively.
- electrical trade: 13.40 EUR;
- long-term care activities performed by skilled workers/carers: 14.90 EUR;
- industrial cleaning: starting at EUR 13 for indoor and maintenance cleaning activities.
If you would like to know more about payroll in Germany, the duties and responsibilities of the employer, as well as how to handle other matters related to corporate taxation, please contact our law firm in Germany.