Hiring your first employee is a special moment for many founders. Your own business is gaining momentum and is on a growth trajectory. Dr. Frauke Kamp, an expert in labor and social security law at the IHK for Munich and Upper Bavaria, explains what to pay attention to when searching for and hiring employees.
Ms. Dr. Kamp, what should startups pay attention to during the application process?
Basically, there is freedom of contract, meaning both the (future) employer and the employee are free to decide with whom and under what conditions they want to conclude an employment contract. However, some legal requirements must be observed even when searching for suitable candidates and during the hiring process.
Gender-neutral job postings
According to § 11 of the General Equal Treatment Act (AGG), job postings must not be discriminatory. This means that job advertisements must not contain specifications for characteristics such as gender, age, religion, and similar attributes – unless these are justified by the special requirements of the position. For example, when hiring for a female lead role, it is of course permissible to explicitly search for an actress. However, if such specifications do not necessarily result from the nature of the work, the posting must be neutral. In addition, the recent case law of the Federal Constitutional Court regarding the so-called “third gender” must now be taken into account. Accordingly, a gender-neutral job posting should include the addition (“male/female/diverse”) to the job title. For many occupations, there is also a gender-neutral umbrella term that can be used without additions (“cleaner”).
Furthermore, according to the Part-Time and Fixed-Term Employment Act (§ 7 TzBfG), employers are required to advertise a position as a part-time position if the job is suitable for part-time work.
If the employer invites a candidate to an interview, the employer is generally required to reimburse the candidate for travel, meal, and accommodation expenses incurred for the interview, even if an employment contract is not concluded. However, it is possible to exclude this claim. However, the employer must clearly point this out in the interview invitation in advance so that the candidate can freely decide whether to attend the interview at their own expense.
Which points must be agreed upon and regulated in the employment contract, and which can be? Are there special forms?
To conclude an employment contract, it is sufficient if there is agreement on the type of work, the time period, and the compensation to be paid. The agreement does not have to be in writing; oral employment contracts are also valid. However, for evidentiary reasons, it is always advisable to document the agreed terms in writing. If only an oral agreement is made, the employer must provide the employee with a written record of the essential contract terms within one month of the agreed start date, in accordance with the Evidence Act.
Even though agreement on the type and scope of work and compensation is sufficient to conclude an employment contract, in most cases additional regulations are made, such as vacation duration, notice periods, and other details of the employment relationship. If no such regulations exist, the statutory (minimum) conditions apply. For more details on contract conclusion, see the IHK fact sheet on hiring employees.
It is also possible to agree on special conditions, such as fixing a term for the employment contract. Special requirements apply here; moreover, a fixed-term contract can only be validly concluded if it is agreed in writing before the employee begins work. See details in the IHK fact sheet on fixed-term employment relationships.
Employer registration requirements
What documents do startups need to register their employees?
Once a suitable employee is found and the employment contract is concluded, the employee must be registered with the tax office and the social security institutions. Many employers use a tax advisor for this. In principle, however, employers can fulfill the registration requirements themselves.
First, a company number must be requested from the Federal Employment Agency. The application is submitted electronically via the Federal Employment Agency’s website. To register with the social insurance institutions, the employee’s social security number is required. Registration with all social insurance institutions is made through the employee’s health insurance company as the main collection point via electronic data transmission. Standard payroll accounting programs have the appropriate interfaces. Registration must be made with the first payroll, but no later than six weeks after the start of employment.
Registration with the tax office is also done electronically via the website www.elster.de. The employee’s tax identification number, date of birth, and information about whether this is a primary or secondary employment relationship are required. Based on this data, the tax office electronically transmits the so-called ELStAM, i.e., the employee’s tax data, on the basis of which the payroll is calculated. The tax calculated on this basis must be withheld by the employer and remitted directly to the tax office.
In addition, registration with the occupational association/accident insurance is mandatory. Depending on the industry, different entities are responsible. You can find out which occupational association is responsible at www.dguv.de.
What social security contributions do I bear as an employer? When are they due?
The employer bears the total social security contribution, meaning the employer is required to pay both the employer and employee shares for health, long-term care, pension, and unemployment insurance in total to the employee’s health insurance company as the collection point. The corresponding employee shares are deducted from the employee’s compensation. The total social security contribution must be received by the health insurance company’s account no later than the third-to-last banking day of the respective month.
In addition, contribution payments for the cost-sharing system must also be made to the health insurance company. From the funds of the cost-sharing system, small businesses receive reimbursement when they provide continued wage payments in case of illness or maternity benefits.
The employer alone bears the contributions to the occupational association (accident insurance); the responsible occupational association provides information on the amount and due date.
Minijobs and immediate registration requirements
Are there any other registration requirements that need to be observed?
If an employee is only employed on a minor basis (“450-euro job”), all registrations and contribution payments are made through the Minijob Center.
In certain industries where there is an increased risk of undeclared work, such as the construction or hospitality industries, there is an additional immediate registration requirement. This means that the employer must submit an electronic notification to German pension insurance at the start of employment. For more details on the affected industries and procedures, see www.deutsche-rentenversicherung.de. In these industries, there is also generally a documentation requirement regarding working hours under the minimum wage law. For details, see the IHK fact sheet on minimum wage.