For many entrepreneurs, the moment they take on their first employee is a big step. But when is this point really reached? What qualifications should the first employee have? And what legal and financial aspects need to be considered? Here we answer the most important questions about hiring employees.
The right time to hire your first employee is individual and depends on several factors. If you as an entrepreneur realise that your tasks exceed the time available and important business opportunities remain untapped, it is time to think about support. Even if the company is growing and you want to focus on strategic tasks, a first employee is often the next logical step.
Finding the right person is crucial to the success of your company. Start with a clear job description in which you precisely define the tasks and requirements. In addition to professional qualifications, you should also pay attention to personal qualities such as initiative, flexibility and the ability to work in a team — the right chemistry is particularly important in a small company. Always use various platforms, networks and perhaps even personal contacts to find the right candidates. A particularly important decision you need to make is whether you are looking for someone who is a generalist and can provide a little support in all areas of the company, or whether you are looking for someone who is an expert in a specific area.
The decision to hire an employee naturally also entails costs. In addition to salary costs, there are social security contributions, contributions to health and pension insurance and potential special benefits such as holiday pay or a company pension scheme. Plan these costs carefully so that they do not exceed the budget. Many young companies underestimate the total costs, so solid financial planning is essential.
In Germany, the employer generally pays half of the current health, nursing care, pension and unemployment insurance. These are costs that are added to the employee’s gross salary. In practice, this means that the employee receives a monthly payslip showing their gross wage or salary and then the deductions made for income tax and social security contributions. At the bottom is the actual amount paid out, the net wage that is actually available to the employee. However, the employer’s social security contribution is not shown on this payslip.
A rule of thumb for the actual calculation of how much an employee really costs (taking into account the employer’s contribution and the provisions for holiday and sickness) is to multiply the gross salary by a factor of 1.25.
When you hire your first employee, you need to take various legal and administrative steps. Here you can find out what is important when it comes to contracts, company number, accident insurance, social security, the health authority and health insurance.
The employment contract
The employment contract is the central document that governs your employment relationship with your employee. It contains all the essential details, such as the exact job description, salary, working hours, holiday entitlement and notice periods. Make sure that the contract fulfils all legal requirements, for example with regard to the minimum wage or holiday entitlement. It also makes sense to include topics such as overtime regulations, any special benefits and the company pension scheme in the contract.
In addition to the employment contract, the employee must fill out a personnel master form (or many companies already have a digital way of entering employee data), which contains the social security data and other contractual data.
Obligation to register upon hiring
The start of employment must be reported with the first payroll. However, the notification must be made within six weeks of the start of employment at the latest. You register the employee with the health insurance fund that the employee has specified in the personnel master sheet, which forwards the registration to the pension insurance fund and other social insurance schemes. It is important that this is done in good time to avoid legal problems.
Accident insurance
Every employer in Germany must insure their employees against accidents at work and occupational illnesses. To do this, you register your company with the relevant employers’ liability insurance association. In the event of an accident, this organisation provides financial protection for your employees. The contributions to the accident insurance are paid exclusively by you as the employer.
Social security
As soon as your employee starts working for you, they must be included in the social security system. This includes health insurance, pension insurance, unemployment insurance and long-term care insurance. Your task is to register your employee with the relevant health insurance fund, which will then also coordinate the other insurances. You and your employee pay half of the social insurance contributions, with the exception of accident insurance, which you pay alone.
Health insurance
You must register your employee with their health insurance fund before they start work. The health insurance fund will then take care of forwarding the information to the other social insurance providers. Your employee can decide for themselves which health insurance fund they would like to be insured with. As the employer, you register them there and pay half of the health insurance contributions. Please note that the income threshold and any additional contributions may vary depending on the health insurance fund.
Health department
Depending on the industry in which you work, it may be necessary for you to register your employee with the health authority. This mainly applies to professions in the food sector or in care. Here, your employee may have to complete an instruction course in accordance with the Infection Protection Act or present a health certificate. These measures serve to protect public health and ensure compliance with hygiene standards.
The company number
To register your employee with the social insurance institutions, you need a company number. (apply online!) You will receive this from the Federal Employment Agency. The number is used to uniquely identify your company and your employees. Without this number, you cannot report to the social security system, which makes it essential to apply for it in good time. You are legally obliged to apply for the company number electronically. You can find more information on the Website of the Federal Employment Agency.
Please note: Since 1 January 2024, you will need the company number of the company to which the new employing company belongs to apply for a company number. This number will be assigned to you by the responsible accident insurance institution.
If you have further questions about assigning or using the company number, read our article on Employer’s liability insurance associations and company numbers through.
Based on screenshots, we explain step by step how to apply for a company number:
1. view notes and declarations on data protection
In this step you will receive important information on data protection. Please read the information carefully to understand how your data is processed and protected.
2. start application
Enter all relevant information about the function, the case and the facts of the case. This is where you lay the foundation for the rest of the application process.
3. report social security details
In this section, you must provide information on social security. Make sure that all relevant information is entered correctly and completely.
4. Operating data
Enter all company details required for the application here. This includes details such as the type of company, address and accident insurance.
5. enter contact details
Enter the contact details of the contact person for the social security registration procedure here.
6. select industry
In this step, you determine the economic focus of the company by selecting the corresponding industry via a selection field.
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