4 Things To Consider When Using an EOR To Hire in Germany

Finding and acquiring skilled workers to meet your business needs in today's competitive job market can be challenging. The last thing you need is geographical boundaries getting in the way. This is where an employer-of-record (EOR) provider comes in. 

EOR providers act as the legal local employer of international workers, allowing you to hire them without setting up a legal entity in the country they are based. 

In addition, you will have more time and resources to focus on your daily business operations and building employee relationships, as the EOR provider becomes responsible for all human resources (HR), compliance, and legal tasks surrounding that employee, including payroll, tax compliance, onboard, and benefits. 

As mentioned above, the job market is highly competitive, and gaining access to top talent from other countries will become increasingly essential. UK businesses will be looking to hire talent from Germany, where the workforce is highly qualified in a range of the most competitive fields, including engineering, IT, software development, finance, and business. 

Here are some other reasons why UK businesses will benefit from hiring employees from Germany:

• Well-educated workforce. Germany's education system is known for its emphasis on vocational training and preparing students for both academic and professional careers. It is also designed to prepare students with critical thinking and practical skills.
• Promotes diversity and inclusion. Welcoming German employees to your team fosters a diverse and inclusive working environment, especially if you celebrate their local holidays and cultural differences. Public holidays vary by state; for example, the whole of Germany celebrates Labour Day on the 1st of May, but only two states celebrate International Women's Day on the 8th of March.
• Opportunities for EU market expansion. German employees will understand EU markets and business practices, which can build trust with European partners and clients and navigate cross-border operations more smoothly. This will help UK businesses that want to expand into EU markets.
• It is a highly innovative country. Germany is known for its innovative advancements. The country ranked 9th in the Global Innovation Index 2024, highlighting its innovation performance and potential to drive innovation for UK businesses.
• High level of English speakers. English is widely spoken in Germany, unlike other European countries such as Moldova, Belarus, and Serbia. Germans are taught English throughout school and often focus on improving their English for global business and tourism opportunities later in life.

This article will explore four things to consider when using an EOR provider to hire employees from Germany. 

The AUG Law

The German word 'Arbeitnehmerüberlassungsgesetz' (abbreviated to AUG) translates to Temporary Employment Act. If you plan to hire employees from Germany temporarily, it is critical to understand the laws of the AUG and choose a German EOR provider with a valid AUG license issued by the German Federal Employment Agency. 

AUG laws regulate the leasing of temporary employees from the EOR provider to your business, aiming to protect temporary workers' rights and ensure fair working conditions. Key provisions of the Temporary Employment Act include:

• Equal treatment. Temporary workers are entitled to the same pay and benefits as permanent employees in the same role after nine months of employment.
• Maximum employment period. Temporary workers can only be assigned to the same company for a certain amount of time, usually a maximum of 18 months.
• Employment contract requirements. Contracts between the employer and temporary worker must be in writing and clearly state the terms and conditions of the employment.
• No chain leasing. German law demands a direct contractual relationship between the "borrower" and "lender" of the employee. This stops EOR providers who use local "in-country partners" and subcontract the hiring to their local partner.

Minimum Wage

The minimum wage in Germany, set by the Minimum Wages Act (Mindestlohngesetz), is €12.82 (pre-tax) per hour as of the 1st of January 2025. 

German employment laws do not include provisions for overtime pay, so UK businesses should determine and outline any overtime pay in employment contracts when required.

German's Tax Classes

Whilst your EOR provider is responsible for tax compliance when hiring a German employee, it is interesting to know about the country's tax classes as they are very different from what we have in the UK. Germany has six Tax Classes, based on marital and family status:

• Class 1 is for singles, divorcees, separated spouses, unmarried couples, and pensioners. 
• Class 2 is for single parents. 
• Class 3 is for married couples, where one partner earns significantly more.
• Class 4 is for married couples with similar income levels. 
• Class 5 is for married couples, where one partner earns significantly less. 
• Class 6 is for employees with more than one job. 

In addition, if the employee belongs to an official religious institution in Germany, like the Catholic Church, they owe a church tax of 8% or 9% of their monthly income, depending on where they live.

Working Hours and Leave Entitlements

A typical working week in Germany cannot exceed 48 hours, but employees mainly work 40 hours or less (across five or six days). However, employers can request that a German employee work a maximum of 12 hours of overtime per week. 

When hiring a German employee, UK businesses must provide leave in accordance with German employment laws. This includes public holidays (which vary from 10 to 12 days, depending on the state) and annual leave entitlements of 20 days for employees on a five-day work week and 25 days for those on a six-day work week. 

Ready To Hire Top Talent From Germany?

If you are considering hiring some of the most hard-working and innovative German employees, make sure you do it correctly. Using a German EOR provider will ensure you pay them correctly and on time, whilst minimising the risk of making tax compliance and employee benefits mistakes. 

Just remember that EOR providers are used to hire a few employees to work for your UK business whilst remaining in Germany, not to establish a physical presence in the country.