A Guide To Understanding Cost Of Employee In Germany

With over  22,000 foreign businesses, Germany is considered as one of the best countries to do business. Germany has a large consumer base that makes it a lucrative place to do business. However, understanding a few processes like payroll Germany or how to optimize the cost of employee in Germany can be a bit overwhelming.

Here is a guide to develop the basic understanding of the same.

Getting Started

To set up a new company in Germany, a company has to register under the tax and social security authorities. This includes steps such as requesting an employer number. The employer number is a must to hire employees. You also need a dedicated tax number as well as statutory accident insurance.
Employment Law - jotwani
Employment Law

Germany’s Employment Law has laid out many policies regarding payroll. These laws keep getting updated by the government, therefore having professional help in handling the payroll process can save you from unnecessary fines and penalties.
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Employee Payments

The payment of salaries and wages is governed by Germany’s Industrial Code, Civil Code, and a number of other collective agreements. Once the payroll is approved by the employer, the bank releases all the concerned payments to its employees. In the case of bonuses, organizations need to be aware of ‘thirteenth salary’ payments which say that the German employees, who have worked all 12 months of the year, are entitled to one month’s wages as a year-end bonus.
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Tax Collection

One of the most crucial tasks in payroll is to calculate the income tax due for each employee. The employer needs to withhold the calculated amount from employees’ gross payments each month. They further need to submit it to the appropriate tax office by the 10th of the following month. Failure in doing so will be charged with a penalty of as high as 10% of the assessed tax.

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