As Human Resource Management (HRM) in Germany is deeply rooted in the German business culture, the HRM principles of the home company cannot simply be transferred to the German environment.
When a foreign company intends to employ personnel in Germany the management of HRM will require a good understanding of the pluralist style of the labour market institutions. The key labour market institutions include collective bargaining, co-determination, and initial vocational training.
A foreign company will experience that some HRM principles in Germany are similar to that of the home company but other principles will be in direct contrast. The key to understanding German HRM is that collective bargaining is the core of most of the HRM principles.
In Germany, wages and working hours are agreed with labour unions in a system of regional, industry-wide bargaining. Although unionization in German work life has dropped considerably since the 1970s, and in 1994 was down to 30 percent, over 90 percent of the workforce is covered by collective bargaining agreements. The well-known German system of co-determination requires employers to maintain positive relations with the works councils. Works counsel employee-elected bodies are legally entitled to co-determination, consultation, and access to important information, and hence restrict the degree of managerial autonomy.
With Frankfurt contending to become Europe’s new financial hub, the Germany Government is considering changing some rigid labour laws to make it easier for financial institutions to do business there.
These workers are independent contractors and are personally responsible for their own taxes and insurance.
When a company expanding to Europe, decides to hire full or part-time employees it will place a number of obligations on the company. The company must, among other things, deduct taxes and health insurance premiums from their pay, provide vacation each year, and follow labour law principles. This is highly regulated and many companies offer services to ensure that all procedures are managed correctly.
The main difference here is that the employment contracts and working conditions are not as regulated by the unions and the worker’s councils have little to no influence on the employment or working conditions of managers. A contract might stipulate that a manager will work for 40 hours per week but should the person work much longer this is mostly not an issue whereas with employees this will be an issue.