Professional Employer Organization (PEO) in Germany

What is a PEO?

For those new to the concept of PEOs, PEO stands for ‘professional employer organization’, and partners like these offer services relating to HR roles for small businesses and large scale companies alike. A PEO will manage your organization’s HR and payroll duties, so you can focus on the other core elements of setting up your business in Germany. 

Among other high-value workflows, a PEO will:

• Help you comply with the local legislation and laws
• Handle the complete payroll process end-to-end
• Do away with the need to pay for the costly company registration process in Germany
• Source and allocate competitive employee benefits packages to keep workers happy and engaged.

Doing all the above (and more!) a PEO like Skuad can take time-consuming and often stressful payroll and HR responsibilities off your plate. As a result, businesses can enter a new market like Germany without onboarding and training local teams themselves.

Better still, having a PEO by your side can help you build a robust remote team with employees and contractors from any corner of the world — wherever you choose to do business, essentially! A PEO partner reduces the financial burden on your company and ensures your workers receive salaries as per the country's standards and legal requirements.

Get in touch with Skuad to start hiring in Germany today, or keep reading to learn more about the benefits of working with a PEO.

What are the benefits of using a PEO provider in Germany?

With the help of a PEO, you can understand the employment laws in Germany and comply with them easily. Working with a professional employer organization can help ambitious entrepreneurs and companies achieve many goals mentioned below.

Become more competitive

Attracting and retaining top talent is the best way to get a competitive edge over other businesses in your sector. But why be limited by borders when it comes to talent acquisition? It’s very possible that the best people for your roles live in other countries across the globe — and now you can hire them with ease by using a PEO.

When it comes to hiring in Germany specifically, a PEO partner will make you aware of the statutory benefits that German law outlines — then you can choose to build on top of that benefits package in line with what other businesses offer, if you wish.

Save on unnecessary costs

Cost efficiency is vital for businesses big and small. So why take on more expenses than you have to when hiring overseas? 

The small investment you’ll make in PEO services in Germany unlocks huge cost savings when it comes to managing your German teams. You can run payroll in Germany, offer competitive benefits packages, and scale your business as needed — all for a fraction of the cost of setting up a business in Germany yourself.

Become experienced in a new market

Germany offers many opportunities and avenues for your business to explore. The country is one of the best worldwide for ease of doing business — but you’ll want some local insight before you make big steps to branch out in the country yourself. 

If you work with a PEO, you can tap into the talent pool of highly-skilled German workers. And the best part is, these workers will know so much more about the German market than you do today. Could your business succeed with German consumers? The German workers you hire through a PEO like Skuad can tell you!

Book a demo with Skuad and we’ll show you how easy it is to hire, pay, and manage international teams with PEO services like ours. 

Avoid setting up your legal entity in Germany

Working with a PEO in Germany isn’t the only way to hire local talent. But it is the most cost-effective — and arguably the easiest — way. 

Your alternative option is to set up a legal entity in Germany. To do so, you’ll need to pay local lawyers, open a branch, get a German bank account, and potentially pay for office space. This process could take weeks, months in fact, and thousands of dollars to complete.

A PEO that operates in Germany will already have a local, legal entity. Through them, you can hire remote employees and sidestep the need for company registration entirely.

Become culturally aware

Cultural awareness is imperative to help new employees blend in with your existing team. What’s the preferred way of doing business in Germany? How can you best motivate German employees?

Collaborating with a PEO brings you up to speed on the various cultural practices you’ll need to (or want to) follow. Did you know, for example, that certain parts of Germany have some of the lowest working hours per week in Europe? And yet, the German workforce is also known for being some of the most productive!

Whatever their secret is, you’ll soon find out when hiring in Germany!

Remain compliant with the German laws

Non-compliance is no laughing matter. Germany has a clear policy regarding labor laws — and you’ll need to follow these regulations to a T, even as an international company doing business in Germany.

Compliance considerations cover a range of aspects, including payroll compliance, paid leave, social security contributions, and more. Below are some specifics you should be aware of when recruiting employees and contractors from within Germany.

Payroll

• German workers receive their pay in Euro (€, EUR).
• The minimum wage in Germany is around 1,584.00 EUR per month.
• In Germany, the workweek is capped at 48 hours — however, some regions will be used to working less.
• Employees who’ve been with your organization for less than 2 years have to be given one month’s notice of their employment ending. That increases to two months for those employed for 2-5 years and three months’ notice for 8 or more years of service.
• Germany has no legal requirement for severance packages.

Tax and payroll deductions in Germany 

The German income tax structure employees have to follow in Germany is:

• No tax on €0 to €9,000
• 14% tax on €9,000 - €55,961
• 40% tax on €55,961 - €265,327
• 45% tax on over €265,327

Then, employers have to make the following contributions:

• Accident Insurance - 1.18%
• Health Insurance - 7.3%
• Nursing Care Insurance - 1.525%
• Pension - 9.3%
• Unemployment Insurance - 1.25%

Leave in Germany

• Public holidays: Germany recognizes 8 public holidays.
• Sick leave: Employees in Germany are entitled to up to six weeks of paid sick leave per year. This is based on a five-day working week. For employees who work a six-day working week, the sick leave entitlement is up to eight weeks per year.
• Maternity leave: The leave starts 6 weeks before the expected date of delivery and lasts at least 8 weeks after the actual date of delivery.
• Paternity leave: The statutory minimum mandate of paternity leave is 2 weeks.

To know about more leave types in Germany, speak to our experts!

What does it cost to build a team in Germany?

As we mentioned previously, companies looking to do business and build a team in Germany have two main options available to them: to incorporate a business and establish a local legal entity in Germany or work with a PEO.

Let’s look at the approximate costs of each option, head to head…

Company incorporation in Germany

Please note: setting up a foreign company in Germany is a nuanced process. You’ll want to hire the services of a German law firm or business consultant in order to make the best choices for your business. 

As an indication of the initial capital costs involved, the cost of registering a GmbH & Co. KG, which is a type of German LLC, would include:

• € 60 for business registration
• €150 for company registration
• €124 to €276 for notarial certification

But that’s just the tip of the iceberg, really, as there are many more documents you need to begin your operations and hire employees or contractors in Germany.

PEO services in Germany

Here at Skuad, our PEO services begin at $19 per month, providing you with the means to onboard and pay your international employees and contractors in Germany. If you need us to also act as your employer of record (EOR), to hire international employees on your behalf as well as manage your payroll, benefits, compliance, etc, prices begin at $199 per month.

We also serve enterprise businesses, which we offer customized prices for (just reach out to our team for more information).

Want to book in for a demo?

Are you ready to hire the best employees in Germany? Then book a demo today. Talk soon!