The Startup
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[Part 1] 10 Things About Employment in Germany: The Ultimate Guide

Working permit, salary, health insurance, retirement, unemployment insurance, taxes, German IT

Germany is an attractive country for career and life. While living and working in Germany for 10 years now, I’ve been in different situations and worked for various companies. Here are is what I’ve learned and all you need to know.

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1. Working permit

If you are not an EU citizen, you would probably need a working permit in Germany. For people working in IT, it’s not going to be a big deal; still, if you are not familiar with the process, it can get quite overwhelming.

Germany has somewhat acknowledged the intensifying IT disaster and qualified staff shortage. You can get a long-term visa even from outside of the country. The local embassy issues this visa for 6 months for those who are currently outside Germany.

You would need to provide proof of degree and demonstrate that you have enough money for living in Germany for up to 6 months. Official documents state that this money needs to be on a blocked account, meaning you can withdraw funds from it only once a month proportionally to the duration of your stay, but in fact, some embassies do not require this. The amount blocked should be greater than 45 Euros per day for 6 months, meaning 8100 Euro is the minimum required for the period of your stay.

8k euro is a significant amount of money. That is why many do not even try to go this way. In reality, you need to show this money once when you need a visa, and then after all formalities are rounded up, you can find a part-time job remotely to cover the costs.

Bluecard is an international European long-term working permit, allowing you more flexible conditions than the national working visa, but it is harder to get. The main criterium for getting this visa is your annual salary, and there are two thresholds for it.

For “shortage occupations,” the threshold is 44.304 Euro yearly salary; for the rest, it's 56.800 Euro per year (state 2021). What are those shortage occupations? The whole list can be found here, but in short, it’s doctors, developers, and engineers. Your title must be as close to those listed as possible to be eligible for the reduced salary requirements. It won’t be a problem if you are a dev, but if you are, for example, a UX designer or project manager, make sure you have something with IT. Just try to become a user experience design developer.

This visa is the most popular among IT specialists, and you can find enough information about it on the Internet.

This one allows you to only work in Germany and has stricter conditions regarding the employer: unlike the blue card, which requires you to work for the same employer for the first year, for the national visa this term is 2 years and changing the employer is associated with more bureaucratic effort.

The national visa doesn’t declare salary thresholds, so if your salary is not enough for the blue card, you can apply for the national visa.

Most of the time, you will be assisted by your employer, and if you have a degree, the process will probably be very smooth for you.

2. Salary

Many come to Germany from abroad to start in a new position and sadly realize that Germany is a socialistic state, with a very inefficient and intransparent taxation system, causing the logical consequence — high taxes. Similar obligatory payments are very high here. Once you get your payslip, you might be very disappointed by how much different is the amount in cash from what you’ve expected.

Income tax, solidarity capping (reconstruction fund paid by the west to the east after the reunification, canceled starting 1.1.2021), health insurance, pension payments, unemployment insurance, care insurance. Paying public media is functioning just exactly like tax, isn’t just called that, which sums up to the bill. So with a regular developer salary, you end up with almost half of it going away for social payments and taxes.

My payslip from 2018. I worked part-time, and the regular payments to the state resulted in around 40% of my salary. With full time it would have been almost 50%

Some would argue that this is not “your” money, and they are, of course, partially right. But for the ex-pats, it looks different.

3. Health insurance

Before you realize the game rules, you start with “gesetzliche Krankenversicherung,” which is pretty much half commercial half public system of health insurance. The ministry of health defines a list of treatments and medications qualified to be covered. Some can add up special services for extra money, but it’s pretty much the same everywhere.

Once your annual income is above a certain amount (Versicherungspflichtgrenze it’s 64.350 Euro in 2021), you can switch to the “private Krankenversicherung,” private insurance, fully commercial and independent health insurance. This number is easily reached with a developer salary, but most don’t know about it, don’t bother, or just afraid of making a mistake. When you get over the top of 58.050 Euro annually, you pay the maximum of around 800–900 Euros per month (depends on your insurance company), and officially your employer pays half of it. The problem is that you can’t switch to private insurance so easily if you are already in the public one and employed: you can only do it when you are switching your job or are have insurance in the same company longer than 18 months (state February 2021).

Private insurance pays a lot wider spectrum of treatments, makes it easier for you to get a doctor’s appointment, and improves your experience with the German healthcare system. The biggest difference in comparison to public insurance is that your monthly fee is fixed and not connected to your income. So you can get the best service for 500 Euro per month. You have to be completely healthy when you start with it, though.

4. Retirement

Pension or retirement insurance will probably be the biggest payment on your payslip. It is proportional to your income and, of course, not optional.

The deal is, though, you might not need it. Most of the people who moved to Germany in recent years don’t plan to stay here forever, meaning they won’t get old here and won’t claim the money they paid to the German public retirement system. Additionally, for the year or two they spend in Germany, their pension will result in 10 Euro per month at most, so why not just keep that money? Well, it’s obligatory unless you are a freelancer.

5. Unemployment insurance

One more line in your payslip will be unemployment insurance. The payment is not that big but is also proportional to your income. This insurance guarantees you 60% of your monthly income once you get unemployed for the time, proportional to your employment's duration limited to one year. The unemployment insurance fund also covers the costs of “Kurzarbeit,” the model of securing the employees in a time of crisis (like pandemic).

Looks good on paper, but: if you are a migrant, it can backfire rapidly. Every time you apply for a visa prolongation, permanent residentship, or citizenship, the history of you requesting social help will be taken into account. While what actually was meant to be considered here is the second level of german social security paid from the taxes (Hartz IV), I have personally experienced a german bureaucrat claiming this might affect my citizenship application.

So although it is your money, which you are taking back in case of unemployment, be sure it won’t be forgotten.

6. Taxes

The main tax you will be paying as an employee is the income tax. Germany has a progressive tax system, meaning the more you earn, the bigger is the percentage of your salary you must pay as income tax.

The german taxation system is extremely tangled, confusing, and intransparent. Every year the government releases a table defining the income tax percentage, making zero to no sense to somebody not familiar with it from infancy.

Digitalization in Germany: PDF with percentages. Source: https://www.splittingtabelle.de/Splittingtabelle-2020.pdf

Additionally, your tax class also influences the amount of money you get “in cash.” This one is even trickier, and you have to know what you are doing. Tax class will only influence the amount of money directly deducted from your salary and transferred to the state, not the amount you have to pay at the end of the day. The final amount will be found out after your tax declaration, and if you are single, you are not obligated to do it.

1st class is for singles; you will get it automatically if you are not married. This class will cause the highest amount of direct deduction by the employer.

2nd class is for single parents programming subsidies for those needing extra protection.

3rd and 5th are for married with significantly different income, 4th for those with almost similar income. This one was thought to balance out not working spouses raising children, earning less than working ones.

6th class is a “punishment” class, which will be assigned to you if you are working at the second employment position or exceed 20 hours per week as a student. Germany literally punishes you if you want to work more than allowed.

All fine, but be careful with this one. Few know the real mechanics behind it, and especially paring 3 and 5 classes will lead you to the trap when the tax authority obligates you to make a tax declaration which mostly results in significant additional payments. In the first years after migration, a couple of thousands of euros of unpredicted costs can really make a difference. The obligation to declare taxes alone can be frightening enough.

Besides that, all of that extremely inefficient system tuned on a process instead of technology requires a tremendous amount of people serving it. Germany is extremely conservative and suspicious towards new technologies, driven by the lack of information, incompetent politicians, lacking the necessary understanding of the immediate benefits of digitalization. On the other hand, like many other industrially developed nations, German society is old. The gender age pyramid skewed toward the older generations, missing the good old days, will, and education to request a political change.

German gender-age pyramid demonstrating the gerontocratic plug in thinking. Source: https://www.populationpyramid.net/germany/2019/

One thing Germany is even more conservative about than new technologies is money. Before the COVID-19 pandemic, you could literally pay nowhere with a credit card. Besides the general skepticism of the citizens, the economy lives in a gray equilibrium: an inefficient taxation system cannot catch the cash-based underwater black economy, so the only way to compensate it is to increase taxes and further expand the number of rules and regulations, raising the bureaucratic burden on citizens and state. Burden means money and time, less transparency, more bureaucracy.

The illusion of control through implementing more and more processes and rules is a common pattern and innovation stopper in Germany. And even worse, instead of totally rethinking the system and base it on modern technologies, completely technologically incompetent german politicians aged in their 60s just by definition cannot adequately estimate the effort and plan the necessary measures. Instead, they turn to what they know good: process. And unfortunately, this has vast support from the voters.

7. Deutschtech

If you move to Germany planning to work in IT, prepare to experience a real downshift. Unfortunately, disruptive IT companies are not what you would find in Germany. If you take out Berlin, Germany still lives practically in the technological 1995. Deutschtech is a cluster fail, influenced by multiple factors throughout decades. The good thing is that the pandemic has shown the deficiency and wind slowly changes.

Most official communications happen on paper or… fax. People in Germany are still surprisingly convinced that this is the quick and secure communication the whole world still uses. They read the news on paper. SEPA direct debit is the most popular (digital) way of payment (no joke).

Expect German companies to use technologies of the pre-last generation:

  • deployment on bare metal over manual SSH login
  • no Docker, maybe virtual machines, no CI, forget Kubernetes or even docker-compose
  • framework versions from last decade, dead frameworks
  • no unit tests, no dedicated automated QA, but “in our company developers test.”
  • no 12 factors, no dynamic languages
  • no APM, no Sentry, but “we have logs, it’s enough” and “users will report the issue.”
  • email instead of messengers
  • dropbox or svn instead of git
  • be ready to face general skepticism against anything never used before and generally no request for innovation

Expect pre-retirement engineers to be in charge of technological decisions, picking ancient technological stack or obscure technologies not used anywhere but in Germany (DB2, for example). You will need to explain the benefits of the last decade's basic software development concepts, and people will generally be skeptical of anything newer than bash.

Expect German websites to look like they are from the 1990s. Almost nothing can be solved online, only by paper or calling on the phone.

Expect being micromanaged all the time. Outside of the hip Berlin startup scene, you will be asked to talk and dress in a specific way, be always on time, and track your working time down to minutes. Spreadsheets will be your new JIRA.

Expect the process to always win over technology. If Clara can send an Email once every third Friday at 10 am, they will spare money on programming a crontab. Expect support services to work on a flowchart. If you run out of a flowchart, then you don’t exist because the flowchart is flawless.

Data privacy will be used as an excuse for the legacy code base, inefficient processes, refusing to learn and adapt; data privacy is the holiest cow of Deutschtech. In reality, nothing but an unwillingness to leave the comfort zone will be behind it: The biggest proof of it is how Germany handled the pandemic; suddenly, you can send things online and have a zoom call instead of fax.

All of that will be downplayed by the engineers with the main argument, “it works as it is; why change it.” German landline internet is the worst on a continent. Mobile internet is literally not working anywhere, but in the big cities, none of Germany's technology companies have actually created a disruptive technology in decades.

Most Germans are ignorant about the state of IT in their country or live in constant denial and think that “made in Germany” is still a sign of quality.

And be prepared to fight against it daily.

Make sure to check out the final part 2.

Thanks for reading. Subscribe for more interesting content! In part 2: vacation, workers rights, contract termination, stay tuned

Also, check out my recent articles:

🍑 Fullstack my backend: why full stack developer is a myth

🕒 Why your software quality degrades with time: short story

😃 6 Important Programming Languages and Their Original Purpose

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