Payroll in Germany

Payroll taxes in Germany

The payroll taxes in Germany are applied to both employers and employees and are calculated as a percentage of the salaries. Payroll taxes are divided into deductions from the employee’s salary and taxes paid by the employer on the salaries paid to its employees. The deductions applied to German employees are also known as withholding taxes and cover the following:

• - the income tax,
• - social security contributions,
• - other insurances.

The taxes applied to German companies are directly linked to the employment of individuals.

Payroll administration in Germany

German companies are required to withhold the wage tax on a monthly basis and will be considered a prepayment of the income tax. German employees are also allowed to file annual income tax returns. The payroll taxes in Germany depend on the personal income an employee makes on a monthly basis and the tax class the employee opted for.

Social security taxes cover the following contributions:

• - the old-age insurance,
• - the unemployment insurance,
• - health insurance,
• - nursing care insurance,

Other taxes registered in the German payroll system are accident insurance, sick pay insurance, maternity, and insolvency insurances.

These taxes are divided between the employer and the employee. For detailed information about the percentages applied to each insurance, you may refer to our lawyers in Germany.

Available payroll services in Germany

In order to simplify clients’ company administration process, our lawyers may provide them the following payroll services in Germany:

• - preparing the monthly payslips,
• - processing specific payroll documents,
• - verification of all data related to payments to be made,
• - calculating overtime work, vacation, and other bonuses for employees.

The German Employment Law also establishes certain regulations with respect to payroll administration, among which the employees’ rights to join a union, a minimum wage depending on the industry, and other collective agreements. All these provisions must be taken into account when administering the payroll system. Employers must also take into account the provisions of the German Civil Code and the Industrial Code with respect to wage payments. Due to the complexity, payroll administration involves, you may contact our German law firm for specialized services.