• Access and hire global talent & deploy them anywhere in the world
  • Remove restriction from only hiring from local markets
  • Enter any international market without the requirement of opening a local entity

Expanding into Germany – which is characterised by a highly-skilled and efficient international workforce, intricate employment and tax laws, and a first-class communications and transport infrastructure network linking the country to the rest of Europe and boasting the title of Europe’s No. 1 logistics market – can bring excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigid legal structures and laws. Ensuring compliance without sufficient knowledge of the country’s laws also adds stress to getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Global expansion is a step for any business, regardless of your goal. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that need to be done and the documentation required. This can be worked through efficiently and cost-effectively with the support of an international Professional Employer Organisation (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilised when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

Quick Links

Germany – The Economy

Germany is one of the founding members of the European Union and the Eurozone. It ranks 9th in the 2020 Global Innovations Index and 7th in the 2019 Global Competitiveness Index, both published by the World Economic Forum and IMD. It is Europe’s strongest and largest national market, the fourth largest in the world by nominal GDP, and the fifth largest in the world by GDP or PPP.

The country’s economy is based on the social market economy, which is highly diversified and places equal focus on services and industry. Its influence stretches throughout Europe and beyond – Germany is one of the largest exporters globally, recording exports of goods and services of over EUR 1,600 billion in 2019.

Geographically, Germany is ideally placed within the European continent and holds state-of-the-art logistics and communications networks. This includes a strong and world-renowned transportation infrastructure of airports, railways, ports, and highways that connects the country domestically and internationally.

Germany is one of the main gateways to European talent for companies expanding abroad and serves as a magnet for business ventures from the United States, Australia, and Asia. World-renowned companies such as Allianz, Diamler, BMW, SAP, and Volkswagen are headquartered in Germany. It is also the world’s top location for trade fairs.

Regarding production, Germany possesses the largest manufacturing economy in Europe. It also invests in a strong research and development infrastructure with practical industrial value, gaining a reputation as the bridge between current university insights and industry-specific improvements.

Germany also focuses on the future, embracing innovation, sustainability, and digitalisation. The EU Innovation Scoreboard (2021) ranks the country highly in human resources, information technology, research and development, and environmental sustainability.

Small and Medium-sized Enterprises

Small and Medium-sized companies, referred to as the “Mittelstand“, primarily drive Germany’s economy. These 3.5 million SMEs account for over 99% of Germany’s businesses and contribute to half of the country’s GDP, providing almost 60% of the jobs.

German SMEs have long been celebrated for contributing to innovation and technology, locally and abroad. Recent studies commissioned by the Federal Ministry of Economic Affairs and Climate Action demonstrated that with a focus on adopting new trends such as digitalisation – and access to skilled labour despite potential shortages – SMEs could remain competitive in specialised market sectors, keeping Germany at the forefront of industry success worldwide.

Every year, over 300,000 new companies open up in Germany. The “GO! start-up” campaign aims to encourage more people into entrepreneurship – especially those underrepresented, such as women or migrants wanting to break into the start-up scene.

German SMEs have access to ample funding options, thanks partly to the government’s allocation of EUR 2 billion towards venture capital. This includes the ERP/EIF Growth Facility (€500 million), the Coparion Co-Investment Fund (€225 million), and an increase of up to €1.7 billion in volume for the ERP/EIF fund of Funds! In addition, measures are being taken by Germany to encourage a more favourable fiscal environment for investments and to facilitate young companies’ listing on the stock exchange – all crucial elements for SMEs to remain competitive today!

Expanding into Germany
Germany (Federal Republic of Germany)
No. of States
16 Federal States (Länder): Baden-Württemberg (BW), Bavaria (BY), Berlin (BE), Brandenburg (BB), Bremen (HB), Hamburg (HH), Hesse (HE), Lower Saxony (Niedersachsen, NI), Mecklenburg-Vorpommern (MV), North Rhine-Westphalia (Nordrhein-Westfalen, NW), Rhineland-Palatinate (Rheinland-Pfalz, RP), Saarland (SL), Saxony (Sachsen, SN), Saxony-Anhalt (Sachsen-Anhalt, ST), Schleswig-Holstein (SH), and Thuringia (Thüringen, TH).

Note: Bavaria, Saxony, and Thuringia describe themselves as a Freistaat (free state"). Berlin and Hamburg are frequently called Stadtstaaten (city-states). The other thirteen states are called Flächenländer ("area states").
Principal Cities
Berlin, Hamburg, Munich (München), Cologne (Köln), Frankfurt am Main, Stuttgart, Düsseldorf, Dortmund, Essen, Leipzig, Bremen, Dresden, and Hanover (Hannover).
Local Currency
Euro (EUR)
Major Religions
Christianity (66.8%) - No religion (27.9%) - Islam (3.5%).
Date Format
Time Zone
CET (UTC+1/+2 with DST)
Country Dial Code
84.3 million (January 2023)
Border Countries
West: France (418 km - 259 mi), Luxembourg (138 km - 85 mi), Belgium (133 km - 82 mi), Netherlands (575 km - 357 mi);

North: Denmark (140 km - 86 mi);

East: Poland (467 km - 290 mi), Czech Republic (817 km - 508 mi), Austria (801 km - 497 mi) ;

South: Switzerland (348 km - 216 mi).
Tax Year
1 January – 31 December (calendar year)
National Minimum Wage
EUR 1, 584/month - EUR 19,020/year
Taxpayer Identification Numbers
Steuer ID – Tax ID (Personal)

Steuernummer – Tax Number (Businesses)

Umsatzsteuer ID – VAT Number

Sozialverischerungsausweis – Social security ID
Leading Sectors
% of the GDP in 2021: Services (62.9%) - Industry (26.7%) - Agriculture (0.9%)
Main imports
Machinery, data processing equipment, vehicles, chemicals, oil and gas, metals, electric equipment, pharmaceuticals, foodstuffs, and agricultural products - USD 1.78 trillion (2021)
Main exports
Motor vehicles, machinery, chemicals, computer and electronic products, electrical equipment, pharmaceuticals, metals, transport equipment, foodstuffs, textiles, rubber and plastic products - USD 2 trillion (2021)
Main trading partners
Main Customers: the USA (8.9%), China (7.6%), France (7.4%), the Netherlands (6.6%), Poland (5.6%), and Italy (5.4%).

Main Suppliers: China (11.9%), the Netherlands (7.6%), the USA (6.1%), Poland (5.7%), Italy (5.4%), and France (5.2%).
Government Type
Federal Parliamentary Republic
Current Chancellor / President
Chancellor: Olaf Scholz (since December 2021)

President: Frank-Walter Steinmeier (since March 2017)

Main Sectors of the German Economy

Machinery, Automotive, and Aviation – This sector drives the nation’s reputation as in high-tech innovations, like robotics. The country has a strong engineering tradition and takes the lead in modern manufacturing solutions. The sector currently employs more than 6,400 people and generates approximately 498 billion euros per year.

The Germans lead in both production and sales in the European automotive industry. There is also considerable investment in this sector for both the qualifications of the workforce and improvements in infrastructure. In the case of aviation, it is on a constant rise, with projections of Germany producing approximately 35,000 new aircrafts within the next 20 years.

A competitive advantage for this sector is its combination of the available talent pool, the country’s powerful manufacturing base, and cost efficiency. 

Chemical and Medical – This industry in Germany also takes the lead in Europe in terms of sales within Europe and exports to other continents, with medical equipment and pharmaceutical good among the top exports.

The country benefits from a well-developed chemical research and development infrastructure, with the education system producing quality graduates that are ready to work and provides a fertile and ready market for investors.

In 2021, this sector is estimated to bring in an estimated revenue of the industry in 176.3 billion euros and currently employs over 450,000 people. The country also invests billions into research and development.

Consumers and Services Industry – Germany is Europe’s largest consumer goods producer and market in terms of population and purchasing power. The country also has the vantage position to access both Western and Eastern European consumer markets. The leading consumer industries include food and beverage, textiles, garments, shoes, office supplies, computers, telecommunication equipment, furniture, tourism, and home improvements.

Food and beverages are the largest consumer industry in Germany, with textiles, garments, and shoes being the second largest. Germany also ranks fourth globally in the export of clothes and textile products. Germany’s tourism industry, which is based on both domestic and international tourism, also generates over 90 billion euros in revenue.

The continue growth of this industry is due to flexible retailers with both online and offline systems, as well as the increasing tech-savvy customers. Most retailers have a ROPO (Research Online and Purchase Offline) effect, which bodes well with local consumers.

Starting a business in Germany
Expanding into Germany

Energy – Germany is a leader in the production of green energy and environmental technologies. The country has investments in offshore wind energy, solar panels, bioenergy, photovoltaics, energy grids, electric vehicles, charging infrastructure, and energy storage projects.

The country also provides incentives, infrastructure, and a good environment for photovoltaic investments and energy storage. The industry recorded 121.7 thousand jobs in 2019.

Electronics and ICT – Germany has the fifth-largest electrical and electronic industry in the world, receiving a revenue of 162.1 billion euros in 2020. This industry develops a variety of products, such as home appliances, nanotechnology equipment, commercial lighting, automation systems, and luminaries (among other products).

This industry employs about 29% of all Research and Development employees in Germany and accounts for over 12,000 new patents annually.

For ICT, the country enjoys the largest market of its kind in Europe. Most ICT firms and startups are products of Mittelstands (family-owned, small to medium-sized companies). Young people are spearheading the ICT sector, offering solutions to save industries money as well as offer government solutions for service delivery.

Contracts Law in Germany

In Germany, an employment contract is required by law to be concluded in writing, and this must be given to the employee no later than one month after the commencement of their employment. All employment contracts must contain the following:

  • Name and address of the employer and the employee
  • Information about the commencement date of employment
  • Anticipated duration of employment (for fixed-term contracts only)
  • The place of work
  • The nature of the activity involved
  • The composition and amount of the employee’s salary
  • The working hours
  • The duration of annual leave
  • The notice period
  • A reference to any collective bargaining agreements, works or services agreements that apply to the employment relationship (if there are any)

Also, to avoid any miscommunications or disputes, a version of this contract must be translated into German. Two types of contracts can be found in Germany:

Indefinite employment contract – It is the standard type of employment contract in Germany, and as a general rule, employment contracts are entered into for an unlimited period. Termination of this contract requires a notice period and a set of dismissal policies.

Fixed-term employment contract – Fixed-term contracts are possible as long as the employment term is agreed upon in writing before the employment relationship commences. Fixed-term relationships must be justified on objective grounds – such as a temporary increase in workload or substitution of an employee on parental leave. A fixed-term contract is limited to a maximum of two years and ends automatically without written notice at the end of its term.

Tax and Labour Authorities in Germany

Tax Authorities

The Federal Central Tax Office/BZSt (Bundeszentralamt für Steuern) – is a branch of the German Federal Ministry of Finance, which deals with national tax matters such as issuing Tax IDs and VAT numbers for entrepreneurs, supporting anti-fraud initiatives in each German state, and providing information for foreign investors.

The Tax Office (Finanzmat)– is the local authority that administers taxes on behalf of the municipality, federal state, and federal government. There are 650 tax offices across Germany, which are responsible for collecting several taxes for individuals and businesses, processing annual tax returns, and registering freelancers and new businesses.

The Online Tax Office (ELSTER) – is an online platform created by the BZSt for managing an individual’s or business’ tax affairs.

Labour Authorities

The Federal Employment Agency (Bundesagentur für Arbeit) – is the contact point for both people and employers on anything to do with German employment. The agency offers job and training placements, financial support such as unemployment and child benefits, and consultation and mediation services.

The Federal Ministry of Labour and Social Affairs (Bundesministerium fur Arbeit und Soziales) – identifies inter-ministerial solutions to labour and social issues and liaises with the relevant states and municipalities to implement the new measures. Its policy implementation depends on cooperation with the Committee on Labour and Social Affairs, the primary parliamentary decision-making body.


For more information, download our free guide or get in touch with our consultants here