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As the situation in Germany continues to develop, Safeguard Global will be providing in-country intellect to our clients regarding legislative changes affecting employees and impacting businesses, as well as government recommendations on how to keep employees safe and healthy.
As of today, we have not identified any disruption that will impact our ability to provide the service our clients expect. Learn more in our COVID-19 Resource Center.
Germany is composed of 16 federal states and is divided into 20 regions, each of which has the power to levy regional taxes, ranging from 1.23% to 2.03%.
These regional differences in tax rates, along with various labor-related requirements and benefits, make payroll reporting and administration in Germany more complicated than in many other countries.
If you’re looking to administer accurate and compliant payroll in Germany, you’ll need a firm understanding of the local tax and employment regulations that govern payroll processing and reporting.
The euro (EUR) is the official currency of Germany.
Employees must be paid at least monthly and employers are required to provide a written pay slip upon payment.
Taxes for payroll in Germany
The total corporate rate for entities in Germany is between 30% and 33%, including: a company tax of 15%, a solidarity surcharge of 5.5% levied on the corporate income tax, and a municipal surcharge of between 14% and 17%, depending on municipalities.
Income tax rates for employees are levied on a progressive scale, with rates ranging from zero to 45%. The basic allowance of income upon which income tax is not assessed in Germany is known as Grundfreibetrag.
Current federal tax bracket are:
- €0 – €9,408: 0%
- €9,409 – €57,051: 14% – 42%
- €57,052 – €270,500: 42%
- over €270,500: 45%
Employers must withhold the appropriate amount from employees’ gross payments each month, then submit payment to the appropriate tax office by the 10th of the following month.
The penalty for a late tax submission in Germany is up to 10% of the assessed tax, and interest due for a late payment is 6% per annum.
Germany’s multifaceted social insurance scheme, known as Sozialversicherung, is financed jointly by employer and employee contributions and includes: unemployment insurance, healthcare coverage and old age systems—both pension and care during old age.
Employers in Germany must withhold the appropriate amount and pay social taxes to federal government. Current contribution rates are as follows:
- Pension: 9.3% each for employees and employers
- Healthcare: 7.3% each for employees and employers
- Long-term care: 1.53% each for employees and employers
- Unemployment: 1.2% each for employees and employers
Employers contribute an average of 1.32% of payroll for workers’ compensation. Rates may vary with the assessment of risk and employees do not contribute to this fund.
Employers are responsible for withholding a mandatory solidarity tax of 5.5% for most individuals, known as Solidaritätszuschlag, that is assessed on total income tax obligations rather than total taxable income.
This tax surcharge is designed to address economic development in the former states of East Germany.
Employers are assessed an insolvency benefit contribution of 0.06% of payroll to fund wage-replacement benefits to individuals who lost work because their employer became insolvent.
Employers have the option to pay a flat income tax rate—typically between 15% to 25%— for services provided to employees, like office outings, transportation, accident insurance and retirement payments.
Employee compensation and benefits in Germany
Most labor-related requirements and benefits in Germany are regulated by the German Trade Union Federation and collective bargaining agreements. The Federal Leave Act mandates time off, such as vacation, maternity, parental and sick leave. These regulatory bodies in Germany have a big impact on the structure of payroll, as they may decide issues related to working decisions, working times and wages.
When processing payroll in Germany, you’ll need to consider the following employment regulations:
Partner with Safeguard Global for your payroll in Germany
Hundreds of organizations depend on our global payroll expertise to ensure their payroll processing is accurate and compliant with local tax and employment requirements.
We support payroll in Germany in various ways: through our employer of record solution, as a local payroll provider for your German operations, and as part of a managed provider solution for your global organization.
As an employer of record in Germany, we handle payroll for your German workers, ensuring accuracy and compliance, while you manage their day-to-day contributions.
As a local provider of payroll in Germany, we can help your German operations:
- Comply with German labor laws and regulations
- Deduct the appropriate tax and social security withholdings
- Ensure your employees in Germany are paid accurately and on time
As a Global Managed Payroll provider, we offer centralized multinational payroll in over 150 countries—with streamlined processing across countries, currencies, languages and time zones—to help companies gain global visibility to pay data and make smarter workforce decisions.
Whether you need payroll support in Germany through an employer of record, a local provider or as part of a comprehensive global payroll system, contact us to let our experts find the right solution for you.
The information provided on or through this website is for informational purposes only and does not constitute legal advice. Safeguard Global expressly disclaims any liability with respect to warranty or representation concerning the information contained herein, including the lost essence, interpretation, accuracy and/or completeness of the information in transit and language translation.
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