Germany contract: no pension, no holiday / travel allowance

Question

I am considering a mid-level engineering (IT) position in Germany. I am an EU citizen myself, but outside Germany, and unfamiliar with German companies or laws. Now, with regard to negotiating, I noted that the contract does not mention anything about 1) a pension fund, 2) holiday allowance (in terms of extra money), or 3) travel allowance (also in terms of money).

I'd like to know: - Is this normal for such position in Germany? - Am I missing something here? Am I just not getting these things or are they implicit, e.g. do they fall under some collective agreement or law?

Answer 1

Contributions to social security (including pension and healthcare) will be automatically deducted from your salary. You contract states your gross salary before any deductions. This is if your job is an actual full-time position (i.e. with a monthly salary, not some sort of freelance position). Note that that these deductions are quite substantial (deductions are at a fixed rate, e.g. 18.6 percent for the state-run pension fund, 14.6% health insurance, half of which will be paid by your employer etc. Unlike with taxes there is no progression, you pay that on the full amount of your gross salary), so if you do not know how this works you should really get up to speed before you sign anything (else you won't know how much money you have actually available per month).

Holiday allowance ("Urlaubsgeld") is a matter of negotiations (but while it was once customary it's for the most part an obscure thing of the past now). It's certainly not usual in IT position. In case that is not clear, "Urlaubsgeld" would be on top of your wages (your regular salary will be paid regardless).

"Weihnachtsgeld" (some extra money on your December salary) is a little more usual. However in IT this is usually not a part of the contract, rather the companies pay this on a "voluntary" basis (meaning they can choose not to pay it at all, e.g. if the business year wasn't that good).

Another thing to discuss would be "variable Gehaltsbestandteile" - bonuses, basically. However bonuses are more usual for sales people and managers, not so much for engineers.

One thing to keep in mind is that the tax system is progressive, so you will pay a disproportionate amount of taxes on bonuses. That's why many people prefer a somewhat higher base salary over bonuses (even if at face value the bonus would pay more; the monthly payout is more predictable, and you won't have to apply for a refund. The actual tax owed is of course the same for the same amount of money, no matter how it is distributed over the year).

Travel expenses are usually handled on a case by case basis, but you should ask during job negotiations if there is a budget for travel and on which basis this is allocated.

Answer 2

If something isn't specified in a German employment contract, it just defaults to "as required by law".

By law, you will be paid your normal salary during your 4 weeks of holiday, and during any and all bank holidays.

By law, you will get a pension.

By law, you will be reimbursed for certain travel expenses.

For a foreigner it's perfectly appropriate and not at all unexpected that they will ask the company about the details of these points before you sign the contract.

Answer 3

It goes without saying that you wont get what you do not ask for, and negotiation is normally done before signing, not after. I would expect at least assistance with flights and reallocation. Ask them before signing anything.

Furthermore, be very aware of "consulting" positions paid by the day, when you dilute the money over the usual non-working period throughout the year, it might mean you are only paid around 6-7 months, and that is even before considering sick days, project delays, or someone else vital to the project also taking holidays. Furthermore, those positions should be so much better paid than a stable position, if it is not, you are being exploited. It is not uncommon to get 400 euros per day for some IT positions, and it only goes up from that value. Anecdotally, I have a friend doing consulting in a relatively specialised field in the telecom field that charges 1k euros per day, and the guy is employed during the greater part of the year.

As a rule of thumb, if you are getting less than 60K-70K for a permanent position, it might not be worth it when relocating; you just do not want to live, you want to set a significant chunk of your salary aside. Be aware that German society is more structured than other countries, and the gap between skilled and non-skilled workers might not be that huge as in your home country. So salaries for technical people do no go that high unless you get into management , and cost of living is also higher.

Also try to do the math about the costs of living, and what the salary you save after salary minus taxes minus new significant expenses(accommodation) minus frequent travel. Do it in an excel, and do a serious research NOW. You might have an unpleasant surprise you either will be saving the same amount of money or even less.

Concerning contributions to retirement pension, they usually have a minimum of years before you are eligible in the host country. If you do not plan to stay that long and your country does not have an agreement with Germany into choosing into which country you want to pay it, factor it also as an extra expense.

Partly, Beware that in "consulting" positions daily paid, taxes and pension contributions are coming out of your own pocket. You do not get them in the contract, you negotiate a better rate to account for them.

My advice, get minimally informed of work law and account for the extra expenses. Talk with a friendly accountant if you have to, it will be money well spent.

Lastly, concerning holidays, while German is not one of the countries with less holidays, it is not uncommon for positions abroad to negotiate extra holiday days besides the required by law. Again the usual disclaimer, if in a daily consulting position, any extra holidays are coming out of your own pocket. Any worker is entitled to the legally minimum holidays per year, whether the contract mentions it or not.

PS As a citizen of a southern European country, I receive regular contacts of people fishing for cheaper resources...yesterday received a contact for a consulting position with Europol for at least 1/5 or of the real value it should be offered. Keep your options open and do your math.