Employment and personnel costs

The high level of knowledge and skills among the German workforce is internationally renowned. Also young foreigners who have graduated from German universities can easily be found, as well as Germans with good international language skills.

Employees are protected by strict regulations, collective labour agreements and – in enterprises of considerable size – works councils. Therefore the personnel planning should be conducted carefully to keep the entrepreneur’s flexibility. Employment contracts, e.g. limitation clauses, and dismissals should be given special attention.

The salaries vary from West to East Germany (15% less) and from the urban areas to the countryside. E.g., the average gross salary for secretaries varies from EUR 15,000 to EUR 30,000 p.a.

The employer is obliged to deduct the contribution rates for the social insurance and to withhold the tax from the employee’s salary every month. The employer should carefully check the wage elements, e.g. private use of company car or accommodation. Usually he is liable for mistakes, and there are limited opportunities for recovering the money from the employee.

These amounts sometimes entice the employer and employee into agreeing clandestine employment. Any illegal employment found may lead to considerable additional payments and criminal proceedings. Serious cases may also cause the loss of the residence permits of the people involved.

The following example shows the common non-wage labour costs and tax burden

Agreed gross salary per month: EUR 3,200.00
	employer's share	employee's share
Health insurance (e.g. 6.95%)	222.40 EUR	222.40 EUR
Nursing care insurance (0.85%)	27.20 EUR	27.20 EUR
Pension insurance (9.75%)	312.00 EUR	312.00 EUR
Unemployment insurance (3.25%)	67.20 EUR	67.20 EUR
Wage withholding tax (e.g. 20%)	------------	640.00 EUR
Sum:	628.80 EUR	1268.80 EUR
Total personnel cost / net income	3,828.80 EUR	1,931.20 EUR