The popularity of a Germany as a preferred hub for setting up a new business has been constantly growing over the past several years. This in turn has led to a significant rise in the number of employment opportunities available to both local and international professionals. While most businesses operating the country opt for the employer of records services Germany, there are others that use traditional methods of hiring the required talent. In either case, it is important for the hiring organizations to be aware of some key factors related to employing professionals in Germany as it can help avoid complications at a later stage. The brief details of these key factors are given as follows.
Employment Contracts The German employment laws make it mandatory for business organizations to sign an employment contract with individual workers across all levels. These contracts should be drawn in accordance with the local standards and should be drafted by expert professionals operating in the field. The contracts should cover all the aspects of employment including the compensation due to the employees, their roles and responsibilities and any other related information that might be considered integral to ensuring a hassle free employer-employee relationship. Leave Entitlements In general, the German business organizations are expected to have a five day work week and working on Sundays and public holidays is prohibited, although exceptions can be made. The average daily work time is limited to eight hours and employees can avail six leave only after 4 years of employment. Employees are also entitled to annual leave of 24 working days in addition to the usual holidays. Female employees in Germany can avail maternity leave through the entire duration of their pregnancy and can extend it up to 4 month after the birth of the child. Termination Of Employment The employment laws in Germany protect the employees against unfair dismissal if they have been employed for more than six months by a single organization. In case of sudden termination, the employing organizations have to provide a valid cause such as misconduct or redundancy. In addition, employees who are currently on paternal leave are handicapped or pregnant female employees cannot be terminated without gaining proper approval from the government. Moreover, it is essential for the employers to provide a minimum of 4 week notice before terminating the employees. The notice period varies according to the length of employment of the employees and generally increases by one month each for employees who have served for 5, 8, 10, 12 and 15 years. Pension Policy Companies providing the services of employer of records Germany need to educate their clients about the pension policies as applicable in the country. The German system of welfare and benefits covers aspects such as sickness, unemployment, disability and retirement. When it comes to pension policies, the employers and employees are both required to make a contribution equivalent to half of the rate of 18.7 percent of the employee salary. The employees are also expected to pay half the amount of the insurance premium while the employee and employer share for unemployment insurance amounts 1.5% of the salary for each party.
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For most entrepreneurs looking to expand their business or start a new venture, Germany has become a destination of choice. The ease of doing business combined with the favourable laws and a peaceful environment make this European nation one of the best places to start a new company. However, irrespective of the ease of setting up a company in Germany, it is important for the interested investors to consider some important factors related to the same. These are discussed in brief as follows.
A Proper Business Plan And Costing Analysis Starting a new company is a high responsibility job and hence should be based on a proper business plan. The investors need to make sure that they invest ample time and effort in creating an appropriate business plan that effectively summarizes the mission statement of the venture. At the same time, the investors also need to perform an on-depth costing analysis to ensure the feasibility of the project. Even though the German Company law makes it possible for the investors to start a new company with as little investment as 1Euro, there are other costing aspects to be considered. Choosing An Operational Base The investors intending to set up a company in Germany, also need to choose a premises from where they will manage and operate the venture. The choice of the perfect premises depends on factors such as the type and size of the company, the size of the workforce and even the budget limitation for buying or renting a premise. It is highly advisable for the investors to seek the help and guidance of a legal expert specializing in the field of real estate for choosing the bet operational base for their company. These experts can help them with the local real estate laws as well as minimize the chances of any fraudulent transactions, especially in case of overseas investors. Prepare The Necessary Documents And Finances While some aspects of company formation Germany have been modernized, there are various others that are still carried out in a traditional manner. This is especially true in case of registration of a company, wherein all the necessary documents need to be presented physically and in person while the other aspects can be completed online. Hence it is essential for the company founders to prepare the necessary documents well in time. They should also make sure that they have the necessary finances to start the company. The investors also need to set up a bank account attached to the company. The process should preferably be carried out by local experts to avoid any hassles. Registering The Business Once all the formalities of setting up a business have been completed, the investors need to proceed with registration of the new company. Registering the company is generally a complicated process, which is why it should be carried out with the help and guidance of professional experts in the field. The registration needs to be done in person by the founders of the company at the local trade office. They also need to provide important documents photo ID, proof of residence and valid residence for investors belonging to a country in the EU. The global business community is well aware of the fact that setting up a venture in Germany is relatively simpler and effortless. However, this surely does not eliminate the responsibility of the people interested in setting up a company in Germany to follow the proper procedure for the same. While the provision within the German company law minimize the formalities of establishing a business in Germany for both local and foreign investors, having a basic checklist of the key tasks associated with the process can prove extremely beneficial. Given below is such a comprehensive checklist that interested investors can refer to for making the whole process of business establishment extremely smooth and hassle free.
Choose An Appropriate Legal Structure For The Company Even before they start with the process of setting up a company, the investors need to decide about the legal structure that would best suit their interests and needs. The investors can opt for a UG, AG, GmbH or even a miniGmbH structure based on the share capital available as well as the type of venture they intend to operate. In general, the GmbH structure is the preferred choice for a majority of investors. Decide About The Company Name Once the decision about the legal structure of the company has been made, the next step is to decide its name. The investors need to make sure that they choose a unique name for their company and for this they can check the commercial register to learn about the names that have already been taken. State The Objective Of The Company Quite Clearly The German law makes it mandatory for the founders of the company to state its objective in a clear manner. The investors can seek the help and guidance of the German Chamber of Commerce and Industry in this context. The government body checks the name and objective of the company for free and offers advice to the investors whether or not these are compliant with the provisions of law. Start The Actual Company Formation Process By Hiring A Notary Hiring the services of a notary for company formation is the first concrete step taken by the investors in this direction. In case of overseas investors, it is advisable to hire a notary familiar with their native language to prevent any misunderstandings and misrepresentation of facts. Draft The Articles Of Association The next step comprises of drafting the articles of association by the company founders. This can be done either by using a standard template for the statues and registration or by using a customized version tailored to meet the specific needs of the company. Accumulate The Essential Documents Whether the investors intend to establish a UG or an AG or are interested in setting up a GmbH in Germany, they need to collect all the necessary documents for notary appointment. These documents include the articles of association, list of shareholders and the founding documents required for opening a bank account. Make It Official The final step on setting up a business in Germany is for the founders to keep the notary appointment along with all their shareholders to make it official. When it comes to choosing the right European country for setting up a company, Germany is undoubtedly the most preferred choice. The fact that the German laws do not make any distinction between Germans and foreigners in terms of establishing a company has greatly helped the country to attract foreign investors. Moreover, the basics of German company law are in many ways similar to the laws in many English speaking countries. This makes the process of company formation Germany relatively easier as the aspiring entrepreneurs find the laws somewhat familiar and hence are able to better understand them. Discussed below are the various reasons that make the decision of establishing a company in Germany a truly wise one.
A Strong Dynamic Economy With a significant spending power, an environment that supports innovation, strategic location with respect to a dense transport network and the presence of highly skilled workforce, make Germany an ideal location for business establishment. The highly efficient German infrastructure further helps in establishing a business set-up in the country relatively easier and hassle free. With such a strong and dynamic economy, both local and foreign business investors find the prospect of setting up a venture in German extremely appealing and rewarding. Politically And Economically Stable Environment Germany is one of the most politically and economically stable countries not only in Europe but also across the world. The German government has passed appropriate legislation to prevent the inventions, company logos and even the concepts of budding entrepreneurs from being stolen. Moreover, the German economic policy is focused on protecting the innovative ideas thought of by the aspiring investors. With a democratic form of governance, the political environment in Germany is also quite stable and this further motivates investors to set up their ventures in the country. An Open Minded And Welcoming Approach Germany boasts of an open-minded and welcoming approach when it comes to treating people from other countries and cultures. The country is has been welcoming immigrants from across the globe for the past several years and rather than feeling threatened by their presence, the Germans believe that they can help create a culturally diverse environment. In fact coming from a different cultural background is often advantageous for people arriving in this country. This attitude proves to be extremely supporting and highly motivating for foreign investors and entrepreneurs seeking to establish a foothold in a new country with a unique culture and language. Provision Of Professional Support And Funding Whether the foreign investors intend to set up a small or medium business venture or invest in a major conglomerate, they can be assured of receiving complete professional support and even funding in Germany. The country boasts of countless information centres across its length and breadth, offering comprehensive advice with respect to setting up a company in Germany. These centres also educate the interested individuals or organizations about the best approach towards initiating the process as well as the best options for obtaining funding for the project. The aspiring business investors can also gain answers to any other queries besides learning about the most suitable networks that match their project needs. Assurance Of A High Quality Life Setting up a venture in Germany ensures the investors as well as the members of their family of a high quality life. The culturally diverse society, the warm and loving populace and generally lively ambience within the country can have a deeply positive impact on the life and well –being of the people. The Government has taken various steps to ensure a stress free life for its people and even the business organizations understand the need for a work life balance. This is something that organizations across the world are still struggling to acknowledge and accept. Germany is one of the few countries with a booming business culture ranging from small and medium sized businesses to large conglomerates. The German government supports the establishment of businesses of all types and sizes by both local citizens and foreign investors. Hence it is not really surprising that a large number of budding entrepreneurs find the prospect of forming a company in Germany, especially a GmbH type company, quite appealing.
A Brief Overview Of GmbH GmbH is the acronym for Gesellschaft mit beschränkter Haftung (GmbH) and is comparable to a limited liability company in other parts of the world. It offers the combined benefits of high flexibility and relatively few obligations making it a preferred choice for establishing small and medium businesses. Setting up this type of company does not make the shareholders personally responsible for the any debts of the company. A GmbH is can be set up by a single individual with a minimum capital of €25,000 and it can start to exist legally only when it has been entered into the Commercial Register or the Handelsregister. Legal Aspects Of Setting Up A GmbH The Company Law of Germany has provisions for a suitable legal structure for setting every type of business within the country, including GmbH. There are five key legal steps involved in the process of forming a GmbH in Germany, which are discussed in brief as follows. Drafting of Articles of Association The Articles of Association is a critical document as it helps in shaping the identity and constitution of the GmbH. It must necessarily include the name of the business, company object, registered office, share capital, shareholders and respective shares held by each. Given the large scope of the contractual design, the GmbH can be established as an extremely flexible corporation. Notarizing Articles of Association Once the drafting of Articles Of Association has been completed, the next step is to get it notarized. In general, both these steps are performed in a single session by a German notary. The task of adopting the Articles Of Association and appointing one or more managing directors in the notarial deed is also performed at the same time by the founding shareholders of the GmbH company. It s also important to get the Articles Of Association signed by all the founding shareholders and get it notarized. Paying The Share Capital The next step after the notarization of Articles Of Association is the opening of the company account and depositing the share capital. The founding shareholders need to pay just € 12,500.00 in total for registration of the GmbH, while its commercial registration can be completed with a a minimal amount of € 25,000.00. Registration In The Commercial Register It is important for the new GmbH companies to get registered in the Public Commercial Register after the required share capital has been verifiably deposited in the GmbH account. The electronically filed application needs to be first personally signed by all managing directors of the GmbH. Documentation verifying the existence of any parent company and the power of representation for persons acting on behalf of it also needs to be attached. Once all the information has been checked and verified, the GmbH is registered and can start operating as an independent legal entity. Trade Office Registration The GmbH also needs to be registered with the Trade Office also known as "Gewerbeamt", before it can start any commercial activities. The government offers the flexibility of submitting the application for registration latest on commencement of business. Moreover, most such businesses do not require a business license or permit for registration. The process can be completed simply by providing specific documents from the commercial register or equivalent in case of foreign organizations in the requisite form. There is no denying the fact that the position of women with respect to freedom of career has improved significantly over the past several decades. However, despite these advances, most working women still have to face the problem of getting lesser pay as compared to their male counterparts. Contrary to the general belief, this problem is prevalent not only in developing nations, but even in developed countries. However, over the past several years there has been a growing demand for equal rights for both men and women at workplace with special focus on pay equality for same or equivalent work. In this context, Germany is one of the few countries known to have taken the concrete steps in the direction of ensuring pay equality.
Pay Transparency Act As any professional payroll company Germany will inform its clients, the Pay Transparency Act, which was implemented by the German government in 2017, has been one of biggest step in the direction of ensuring pay equality. This is because the Act not only aims to reveal the differences between the pays of men and women but also goes a step further to work towards removing these inequalities. The finer aspects of this Act are discussed in brief as follows.
All the above provisions will require the employers to invest their time and resources to ensure quality of men and women at the workplaces. To ensure timely provision of information in an accurate manner and to minimize the expected bureaucratic burdens, it is advisable for the employers to have standardized procedures in place supported by model documents. It is also important to understand that there are some exceptions to the above provisions, which need to be handled in a special manner. However, the overall affect of the Act is to ensure greater equality within workplaces. |
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