Hiring an employee in Germany involves a series of steps that ensure compliance with German labor laws and efficient payroll processing. At WW+KN, a Baker Tilly Company, we have compiled a detailed checklist to help you through this process. Should you have any questions, please do not hesitate to contact us via info@payrollgermany.de.
Step-by-Step Checklist for Hiring an Employee in Germany
1. Pre-Employment Preparation
- Register the Business: Ensure your business is registered with all necessary local and federal authorities, including the Finanzamt (tax office) and Sozialversicherungsträger (social insurance agencies).
- Obtain a Tax Number: Secure a Steuernummer (tax number) from the Finanzamt.
- Health Insurance Provider: Choose and register with a statutory health insurance provider for the company.
2. Employment Contract
- Draft the Contract: Include salary details, job title, work hours, benefits, probation period, termination notice, and any other financial terms.
- Legal Review: Have the contract reviewed for compliance with German labor laws.
3. Employee Registration
- Social Security Number: Ensure the employee has a Sozialversicherungsnummer (social security number).
- Tax Class: Determine the employee’s Steuerklasse (tax class) for payroll purposes.
- Health Insurance Registration: Register the employee with a health insurance provider.
- Pension Insurance: Register the employee with the Deutsche Rentenversicherung (German pension insurance).
4. Setting Up Payroll
- Payroll Software/System: Implement a payroll system that complies with German laws.
- Bank Details: Collect the employee’s bank account details for salary payments.
- Determine Salary: Define the gross salary and understand net salary calculations.
- Deduction Setup: Set up automatic deductions for income tax (Lohnsteuer), solidarity surcharge (Solidaritätszuschlag), church tax (if applicable), health insurance, pension insurance, unemployment insurance, and long-term care insurance.
5. Monthly Payroll Processing
- Collect Work Hours: Track and record the employee’s working hours if they are paid hourly or have overtime.
- Calculate Gross Salary: Compute the employee’s gross salary based on their employment contract.
- Calculate Deductions: Calculate all statutory deductions:
- Income Tax (Lohnsteuer)
- Solidarity Surcharge (Solidaritätszuschlag)
- Church Tax (Kirchensteuer)
- Health Insurance (Krankenversicherung)
- Pension Insurance (Rentenversicherung)
- Unemployment Insurance (Arbeitslosenversicherung)
- Long-term Care Insurance (Pflegeversicherung)
- Compute Net Salary: Subtract all deductions from the gross salary to determine the net salary.
- Payslip Generation: Generate a detailed payslip for the employee.
- Salary Payment: Transfer the net salary to the employee’s bank account.
6. Monthly and Quarterly Reporting
- Tax Declaration: Submit monthly payroll tax declarations to the Finanzamt.
- Social Security Reporting: Submit monthly reports to the social insurance agencies.
- Health Insurance Reporting: Report to the health insurance provider.
- Unemployment Insurance Reporting: Report to the Bundesagentur für Arbeit (Federal Employment Agency).
- Accident Insurance Reporting: Report to the Berufsgenossenschaft (employer’s liability insurance association).
7. Annual Reporting
- Income Tax Statement: Provide the employee with an annual income tax statement (Lohnsteuerbescheinigung).
- Social Security Statement: Submit an annual social security report.
- Financial Reporting: Include payroll expenses in the company’s annual financial statements.
8. Ongoing Compliance and Updates
- Monitor Legislative Changes: Stay informed about changes in tax laws and social security regulations.
- Update Payroll System: Ensure your payroll system is updated to reflect any legislative changes.
- Employee Records Maintenance: Keep detailed and up-to-date records of all payroll-related documents.
9. Employee Offboarding
- Final Payroll Calculation: Calculate the final payment, including any unused vacation pay and severance if applicable.
- Termination Reporting: Inform social insurance providers and the Finanzamt of the termination.
- Issue Final Payslip: Provide the employee with their final payslip.
- Provide Employment Certificate: Issue an Arbeitszeugnis (employment certificate) if requested.
Employee Questionnaire (Based on DATEV Personalfragebogen)
To gather necessary information from the employee for payroll processing, provide them with the following questionnaire. Ensure this questionnaire complies with the DATEV Personalfragebogen standards.
Employee Personal Information
1. Full Name: ___________________________________________
2. Date of Birth: ___________________________________________
3. Place of Birth: ___________________________________________
4. Nationality: ___________________________________________
5. Address: ___________________________________________
6. Phone Number: ___________________________________________
7. Email Address: ___________________________________________
8. Marital Status: ___________________________________________
9. Number of Children: ___________________________________________
Employment Details
10. Start Date: ___________________________________________
11. Job Title: ___________________________________________
12. Department: ___________________________________________
Bank Information
13. Bank Name: ___________________________________________
14. IBAN: ___________________________________________
15. BIC: ___________________________________________
Tax Information
16. Tax Identification Number (Steuer-ID): _____________________________________
17. Tax Class (Steuerklasse): ___________________________________________
18. Religious Affiliation (for Church Tax purposes): _______________________________
Social Security Information
19. Social Security Number (Sozialversicherungsnummer): ________________________
20. Health Insurance Provider (Krankenkasse): ______________________
Additional Information
21. Pension Insurance Number (Rentenversicherungsnummer): ____________________
22. Employment History (previous employers, duration): ___________________________
23. Any existing exemptions or special tax allowances: ____________________________
24. Emergency Contact Information:
- Name: ___________________________________________
- Relationship: ___________________________________________
- Phone Number: ___________________________________________
Employee Declaration
25. I declare that the information provided is accurate and complete to the best of my knowledge.
Employee Signature: ___________________________________________
Date: ___________________________________________
This comprehensive guide ensures compliance with German payroll regulations and facilitates a smooth payroll process for hiring employees in Germany. For further assistance, contact WW+KN, a Baker Tilly Company, at info@payrollgermany.de.