Hiring the first employee is a very special moment for many founders. Their business is gaining momentum and is on a growth trajectory. Dr. Frauke Kamp, an expert in labor and social security law at Chamber of Commerce and Industry for Munich and Upper Bavaria.
Dr. Kamp, what should startups pay attention to during the application process?
In principle, there is freedom of contract, meaning that both the (future) employer and the employee are free to decide with whom they wish to enter into an employment contract and under what conditions. However, certain legal requirements must also be observed during the search for suitable candidates and during the hiring process.
Gender-neutral advertisement
According to Section 11 of the General Equal Treatment Act (AGG), job advertisements must not be discriminatory. This means that the job advertisement itself may not contain any specifications regarding characteristics such as gender, age, religion, or similar – unless these are justified by the specific requirements of the position. For example, the female lead role vacant may, of course, explicitly request an actress. However, if such specifications do not necessarily arise from the job, the advertisement must be neutral. In this context, the recent case law of the Federal Constitutional Court on the so-called "third gender" must also be taken into account. A gender-neutral advertisement therefore includes the suffix ("male/female/diverse") next to the job title. For many jobs, there is also a gender-neutral generic term that can then be used without any suffixes ("cleaning staff").
In addition, according to the Part-Time and Fixed-Term Employment Act (Section 7 TzBfG), there is an obligation to advertise a job as a part-time job if the job is suitable for this purpose.
If the employer invites the applicant to an interview, they are generally obligated to reimburse the applicant for travel, meals, and accommodation expenses, even if no employment contract is concluded. However, it is possible to exclude this claim. However, the employer must clearly indicate this in the interview invitation so that the applicant can freely decide whether they wish to attend the interview at their own expense.
Which points must and can be agreed and regulated in the employment contract? Are there special forms?
To conclude an employment contract, it is sufficient to reach agreement on the nature of the work, the duration of the work, and the remuneration to be paid. The agreement does not have to be in writing; verbal employment contracts are also valid. However, for evidential purposes, it is always advisable to record the agreements made in writing. If only an oral agreement is made, the employer must, in accordance with the Evidence Act, provide the employee with a written record of the essential terms of the contract no later than one month after the agreed start date.
Even if an agreement on the type and scope of work and remuneration is sufficient for the conclusion of an employment contract, in most cases further provisions are made, such as the length of vacation, the notice period, and other details of the contractual relationship. If such provisions do not exist, the statutory (minimum) conditions apply. Further details on the conclusion of the contract can be found in the Chamber of Commerce and Industry leaflet on hiring employees.
It is also possible to agree on special conditions, such as a fixed-term employment contract. Special requirements apply here, and a fixed-term contract is only valid if it is agreed in writing before employment begins. See details below. IHK leaflet on fixed-term employment contracts.
Employer reporting obligations
What documents do startups need to register employees?
Once a suitable employee has been found and the employment contract has been concluded, the employee must be registered with the tax office and social security authorities. Many employers commission a tax advisor for this. However, in principle, the registration requirements can also be fulfilled independently.
First, an employer's ID number must be applied for from the Federal Employment Agency. The application is submitted electronically via the Federal Employment Agency's website. The employee's social security number is required for social security registration. Registration for all social security benefits is done via the employee's health insurance provider, which serves as the primary collection point, via electronic data transmission. Commercially available payroll programs have corresponding interfaces. Registration must be submitted 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.deThe employee is required to provide their tax identification number, date of birth, and whether their employment is primary or secondary. Based on this information, the tax office then electronically transmits the employee's tax data, known as ELStAM, which forms the basis for the tax calculation. The tax calculated on this basis must be withheld by the employer and paid directly to the tax office.
In addition, registration with the employer's liability insurance association/accident insurance is mandatory. Depending on the industry, responsibilities vary. You can find out which employer's liability insurance association is responsible at www.dguv.de.
What social security contributions do I pay as an employer? When are they due?
The employer bears the total social security contribution, meaning they are obligated to pay both the employer's and employee's contributions to health, nursing care, pension, and unemployment insurance to the employee's health insurance provider as the collection agency. The corresponding employee contributions are deducted from the employee's remuneration. The total social security contribution must be received in the health insurance provider's account no later than the third-to-last banking day of the respective month.
In addition, health insurance contributions must also be paid under the pay-as-you-go system. Small businesses receive reimbursement from the pay-as-you-go system if they provide continued payment of wages in the event of illness or maternity benefits.
The employer alone bears the contributions to the professional association (accident insurance); the relevant professional association provides information on the amount and due date.
About mini-jobs and the obligation to report immediately
Are there any other reporting requirements that need to be observed?
If an employee is only employed on a marginal basis (“450-euro job”), all notifications and contributions are made via the Minijob Center.
In certain sectors where an increased risk of undeclared work is assumed, such as the construction industry or the catering industry, there is an additional obligation to report immediately. This means that the employer must submit an electronic notification to the German pension insurance system upon the start of employment. Further information on the affected sectors and the procedure can be found at www.deutsche-rentenversicherung.deIn these sectors, there is also a general obligation to document working hours under the Minimum Wage Act. For details, see Chamber of Commerce and Industry (IHK) information sheet on minimum wage.
