Do you need employment law services for your business in Germany?

Do you need employment law services for your business in Germany?

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German employment law is said to be complex and often referred to as “employee protection law”. Our certified specialists provide practical advice on all relevant legal questions and assist you in handling employment matters as smoothly as possible. Need more information? Get in touch with our expert team.

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What to expect when hiring in Germany?

What is the best corporate setup? Should we hire employees or independent freelancers? How do we comply with anti-discrimination rules in the hiring process, in particular in job advertisements and job interviews? We advise international clients on all aspects of German employment and provide practical answers to all your questions.

What to observe regarding offer letters, employment and service agreements?

We are happy to provide you with well-drafted and tailor-made employment contracts at short notice. Employment contracts are a well-tested tool to impose obligations on employees that go beyond the legal requirements. In addition, with effect as of August 1st, 2022, the German Verification Act has been tightened considerably and employers now have to provide extensive information on the terms and conditions to their employees in writing (“wet ink”).

What to observe from an employment law perspective in restructuring projects and transactions?

As far as restructuring projects and transactions include changes of the works force, e.g. business transfers, downsizing, re-organization etc., it is essential for the company’s management to involve employment law experts right from the beginning. Need more information? Get in touch.

How to terminate employment in Germany?

German employment law is often referred to as “employee protection law” and there are high requirements for unilateral termination of employment by the employer. Our experienced employment team assists you in terminating employment smoothly and avoid time-consuming termination proceedings and costly severance payments.

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 Christoph Valentin
 Christoph Valentin

Your expert for employment law in Germany

Christoph Valentin

COUNSEL | LAWYER | CERTIFIED SPECIALIST LAWYER FOR EMPLOYMENT LAW | Lecturer at Fresenius University of Applied Sciences

Christoph advises national and international clients comprehensively on all aspects of German employment law with a focus on restructuring and related negotiations with trade unions and works councils. Furthermore, Christoph handles strategic litigation and representation of its clients before all German labor and regional courts and also advises in the areas of contract drafting, variable remuneration schemes and compliance.

Even before joining Lutz Abel, Christoph had many years of professional experience in a major international law firm based in the United Kingdom.

In addition to his practice-oriented approach, his clients particularly appreciate his negotiating skills in those moments when it counts.

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Internationally active and award-winning

Your law firm for employment law in Germany

JUVE 2018/2019 - Publisher and provider of a leading industry ranking

Evaluation: For a long time, the labor law practice mainly focused on advising works councils, but now it is mainly active on the employers' side. Also, the focus of their work is not co-determination issues, but employee data protection and compliance with labor law. In addition to project consulting for well-known clients such as "Osram and Heraeus", the team (…) also advises numerous high-growth venture capital companies from the very beginning on all employment law matters. The healthcare industry in particular is increasingly relying on practice. Recently, in addition to several biotech companies, the Hamburg team was approached by a large health insurance company, AOK Nordwest, for the first time, and the Munich-based company worked for a clinic on compliance issues for the first time.

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LUTZ | ABEL specialises in advising mostly medium-sized employers and covers the entire spectrum of individual and collective employment law. Our main areas of focus include reorganisations and restructurings, the use of external staff, New Work / Work 4.0, and employee data protection. Our services range from individual case-related employment law advice to the development and implementation of corporate employment law strategies. We have been assisting most of our clients for many years and therefore, are very familiar with the companies and their individual characteristics. Further, we are happy to assist you in any employment law matters as advisors, negotiators as well as implementers. In detail, you will benefit from our negotiation expertise, our experience in strategic long-term counselling, our multi-layered industry knowledge and our specialised know-how in all core and ancillary areas of employment law.

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13.07.2022

Employment Law

New Verification Act (Nachweisgesetz) from 1 August 2022 - NEED FOR ACTION FOR ALL EMPLOYERS

I. Implementation of the Working Conditions Directive

Due to the implementation of the European Union (EU) Directive on transparent and reliable working conditions (EU Directive 2019/1152 -), the German legislator has,…

30.06.2022

Employment Law

Changes to German law on employment contracts

Changes to German law on employment contracts

New Verification Act (Nachweisgesetz) applies from 1 August 2022

  • As a result of the implementation of the European Union (EU) Directives on Transparent…

Employment contract

Under German employment law, the employer has no obligation to provide a detailed employment contract. However, employees have a right to, and will expect, a written summary of the main terms of employment.

Main terms of employment

In Germany, the employer is required to put down in writing the main terms of the employment no later than one month after the agreed commencement of the employment relationship, to sign the written record and to hand it over to the employee. The written record must include at least:

  • the name and address of the contracting parties,
  • the start date of the employment relationship,
  • in case of fixed-term employment: the expected duration of the employment,
  • the place of work,
  • a brief characterization or description of the work to be performed by the employee,
  • the composition and amount of the remuneration, including supplements, allowances, bonuses and special payments, as well as other components of the remuneration and their due date,
  • the agreed working time,
  • the duration of the annual vacation,
  • the terms of termination of the employment relationship,
  • a general reference to the collective agreements, works agreements or service agreements applicable to the employment relationship.

A written summary of the main terms of employment will help an employer to avoid claims for damages by employees resulting from a lack of information. For example, a claim may arise if an employee does not assert claims under a collective bargaining agreement in time because he was not aware of the applicability of the collective bargaining agreement.

Written Employment Contract

Although there is no legal obligation, there are good reasons for finalizing a detailed employment contract that goes beyond the minimum requirements of the Verification Act:

  • A detailed employment contract avoids ambiguities regarding the employee's entitlements. For example, it should be explicitly stated under which conditions the employee is entitled to variable remuneration, whether and to what extent overtime will be remunerated, and so forth.

Fixed-term employment contract

In Germany, the parties to an employment contract usually agree on an indefinite employment. However, employers increasingly use fixed-term employment contracts as an extended probationary period, for flexible personnel planning and often also to comply with internal staffing guidelines. Fixed-term employment contracts terminate automatically and, thus, the employer is not required to issue a termination notice or make any severance payments to terminate them.

Fixed-term contracts are subject to the restrictions of the German Part-Time and Fixed-term Employment Act (Teilzeit- und Befristungsgesetz “TzBfG”). For Instance, fixed-term employment contracts must always be concluded in writing, otherwise they are deemed to be for an indefinite period.

Exception for start-ups: During the first four years after the start of a company, fixed-term contracts without “valid reason” are permissible for a term of up to four years.

Part-time employment contract

Part-time work is also governed by the German Part-Time and Fixed-term Employment Act (Teilzeit- und Befristungsgesetz - TzBfG). Employees are entitled to request a reduction to their contractually agreed working hours if they have worked with the company for more than six months and if the company usually employs more than 15 employees. The employer can deny the employee’s request for part-time work if there is a valid operational reason. Such a reason may exist if the part-time work significantly interferes with the organization of the enterprise, the work process or safety aspects, or if it causes disproportionate costs for the employer.

The employer and the employee must negotiate the request to reach an agreement on the number of weekly working hours and the distribution of working time. If they cannot agree on a reduction in working hours, the employer is obliged to notify the employee in writing about his decision to reject the request. This has to be done at least one month prior to the start of the part-time work requested by the employee. If the employer fails to give this notice, the request for part-time work is automatically implemented and cannot be unilaterally changed by the employer.

Employees must not be discriminated against because of their part-time employment. Therefore, part-time workers are entitled to similar benefits as comparable full-time workers and receive pro-rated payments and benefits.

Do you have any questions about this topic?

Termination of employment

Under German employment law, employees enjoy strong protection against termination. Protection against termination is divided into general protection against termination under the Act on Protection against Dismissal (Kündigungsschutzgesetz) and special protection against termination. The latter applies to certain groups of employees, such as severely disabled employees, and women during pregnancy and four months after childbirth. In addition, there are some formal requirements that employers must observe. In the following, we provide a basic overview of the dismissal process in Germany.

Ordinary termination observing the notice period vs. termination for good cause

German employment law makes a distinction between ordinary termination observing the applicable notice period (ordentliche Kündigung), whereby the employment relationship terminates upon expiry of the notice period, and termination for good cause (außerordentliche Kündigung). Termination for cause requires a severe breach of duty and leads to an immediate termination of the employment relationship. In both cases, termination at the employer's initiative is (strictly) limited by law.

In addition, the employer must provide notice of the termination of employment within 2 weeks of becoming aware of the relevant circumstances justifying said termination with immediate effect.

Termination observing the applicable notice period

In the case of an ordinary termination the employer must observe the applicable notice period and – if general protection against unfair dismissal applies – he needs a specific reason to justify the termination.

The statutory notice periods are staggered as follows, depending on the length of employment:

Less than 2 years 4 weeks to the 15th or the end of a calendar month
2 years 1 month to the end of a calendar month
5 years 2 months to the end of a calendar month
8 years 3 months to the end of a calendar month
10 years 4 months to the end of a calendar month
12 years 5 months to the end of a calendar month
15 years 6 months to the end of a calendar month
20 years 7 months to the end of a calendar month


In practice, employer and employee regularly agree on a longer notice period. However, the notice period to be observed by the employee may not exceed the one for termination by the employer.

Unlike in other jurisdictions, German employment law does not recognize the concept of “pay in lieu of notice”. The employer must instead abide by the statutory or contractually agreed notice period. The employees receive their regular salary during this time.

General Protection against dismissal

Under the German Dismissal Protection Act, the freedom of the employer to dismiss an employee is substantially restricted. If an employer employs more than 10 employees and if the relevant employee has been employed for more than six months, the employer may ordinarily give notice to terminate only if the termination is justified by a vaild reason.

The employer must be able to explain and justify the weighting of the four criteria mentioned above or any additional criteria used to arrive at a specific decision. However, if the employer and the works council manage to agree on a list of the workers to be dismissed, then social justification is presupposed and can only be challenged in court on the grounds of gross misjudgment. Generally speaking, the implied social basis of the mechanism tends to protect more vulnerable employees. 

Although the three reasons for a termination (person-related reasons, conduct related reasons and operational reasons) seem to be quite manageable at first glance, the German courts, driven by the highest German employment court, the Federal Labour Court (Bundesarbeitsgericht), have developed complex case-law and a strict standard for interpreting these three grounds.


Special Protection against termination

Certain groups of employees enjoy special protection against dismissal. For example, the dismissal of a female employee is prohibited during pregnancy and the four-month period after childbirth if the employer, when giving notice, was aware of the pregnancy or childbirth or if the company is informed thereof within two weeks of receipt of the notice by the employee. 

Information of the works council

If a works council has been established, the works council needs to be consulted before any dismissal as otherwise the dismissal is void. The employer must inform the works council of all reasons for the dismissal. A dismissal that is made without (properly) consulting the works council is invalid. 

Since case-law has developed high requirements for this proper consultation, the employer must be extremely careful when preparing the information letter for the works council.

Since case-law has developed high requirements for this proper consultation, the employer must be extremely careful when preparing the information letter for the works council.


Form requirements

To be legally effective, the termination notice must be signed by a person who is authorized to represent the company by its sole signature (e.g., managing director, CEO) or whose authority to give notice is generally known within the company. 

Notice of termination must be given in written form, and must include an actual, hand-written signature, as opposed to a digital one. All other forms of notice (i.e. those given orally or by e-mail, scan or fax or DocuSign, etc.) are void.

 

Termination Agreement and Severance Payment

Invalid terminations by the employer will result in reinstatement by the labor court unless the parties agree on a mutual termination agreement that provides for a severance payment to settle a termination dispute.  This is due to the high requirements for valid terminations by the employer and the fact that the German labor courts make very employee-friendly decisions.

The amount of severance pay is subject to negotiation between the parties and is calculated as follows:

monthly gross salary * years of employment ´* factor x

As a rule of thumb, factor x usually ranges between 0.5 and 1.5, depending on the circumstances of the individual case, the employee’ s role and the business sector, but can be lower or higher, depending on the employee’s chances of success in a (possible) lawsuit.

Do you have any questions about this topic?

Restructuring

Companies carry out restructuring to avoid future crises, overcome existing ones or generally improve their competitiveness. In almost all cases, the necessary restructuring measures also affect ongoing employment relationships. During a crisis, measures to reduce the workforce are often inevitable. In most of the cases the restructuring of companies fulfills the criteria of a so-called “operational change” according to the German Works Councils Constitution Act (Betriebsverfassungsgesetz – BetrVG). Operational change is the pivotal legal concept, which comes very close to a comprehensive definition of restructuring.

When restructuring projects involve changes in the workforce, it is essential for management to consider the requirements of labor and employment law from the outset.




Reconciliation of Interests

A reconciliation of interests is an agreement between the employer and the works council on whether, when and how a change in operations proposed by the employer can be implemented. The reconciliation of interests is intended to ensure that disadvantages for the employees affected by the change in operations do not arise in the first place or are at least kept within reasonable limits.

Although the reconciliation of interests and social plan (i.e., agreement between the employer and the works council on the compensation or mitigation of the economic disadvantages) are legally independent of each other, they are usually negotiated in parallel. Concessions by the works council in the reconciliation of interests often come with demands for a higher social plan budget and vice versa

While the social plan can be enforced by the works council even against the employer’s will, the conclusion of a reconciliation of interests cannot be enforced by the works council. 

The works council can significantly delay the implementation of the operational change. Companies should be prepared for all conceivable delaying tactics and take these into account in the time and action plan from the outset.


Social Plan

A social plan is the agreement between the employer and the works council on the compensation or mitigation of the economic disadvantages suffered by the employees as a result of the proposed operational change. In contrast to the reconciliation of interests, the social plan can be enforced in co-determination proceedings.

In practice, the following rule applies: the faster the reconciliation of interests is to be agreed upon, the more generous the social plan must be.


The core element of social plans are severance payments as a compensation for the job loss. In addition, social plans provide for other cash benefits such as relocation allowances, additional payments for severely disabled employees and for employees with dependent children, hardship funds, retention bonuses and volunteer programs. Social plans have become increasingly innovative in the way that provisions for re-training and outplacement services often complement severance payments.

Collective Dismissal / Mass Layoff

A collective dismissal or mass layoff under German employment law occurs when a large number of employees are dismissed within 30 calendar days. The minimum number of dismissals required for a mass dismissal depends on the size of the business and is specified in section 17 of the Dismissal Protection Act.

Number of employees in the operation Number of employees to be dismissed
21 to 59 > 5
60 to 499 10% or > 25
> 499 > 30

In such scenario, the employer is obliged to

  • inform the works council “in due time” about the proposed dismissals, and
  • inform the employment agency before dismissing the employees.

Failure to give notification or giving incorrect notification may result in the invalidity of the dismissals.

Collective dismissals qualify as an operation change within the meaning of sec. 111 of the German Work Constitution Act, so that the reconciliation of interests procedure applies. If certain additional criteria are met, the employer must enter into a social plan relating to the collective dismissals. 

If the number of redundancies in a workforce reduction exceeds the statutory thresholds within 30 calendar days, the regulations on the mass redundancy procedure must be included in the restructuring process.


Short-time work (Kurzarbeit) and staff reductions

Short-time working is intended to provide temporary economic relief for the company by reducing personnel costs. At the same time, the jobs of the employees affected are to be retained for the duration of the short-time work. Short-time work is therefore necessarily only considered in the event of a temporary shortfall in work. In contrast, terminations for operational reasons may have to be considered if the shortfall in work is likely to be permanent.

Both short-time work and staff reduction can be effective and supplementary means of successfully restructuring a company.


Do you have any questions about this topic?

Transfer of business

The transfer of a business or part of a business to a new owner by way of agreement is subject to sec. 613a of the German Civil Code (the German TUPE provision). Business sales and restructuring measures e.g., when unprofitable (parts of) operations are sold or spun off into so-called shared service centers or subsidiaries to improve profitability, often qualify as a transfer of business (Betriebsübergang) according to sec. 613a of the German Civil Code (Bürgerliches Gesetzbuch – BGB).

The legal analysis of whether the transfer of assets constitutes an economic unit which is continued by the new owner is highly dependent on individual circumstances.

613a of the German Civil Code does generally not apply to:

  • transfers of assets that do not form an "economic entity" or where such economic is not continued by the new owner,
  • transfers exclusively by an act of public authority.

Transfer of Employment Relationships

A transfer of business results in the automatic transfer of all employment relationships of the individuals employed in the transferred entity from the transferor to the transferee. The employment is transferred by virtue of law to the transferee “as is”, i.e., including all employment terms, regardless of their legal basis. As a rule, this means that the employment relationship continues with the same rights and obligations as before the transfer of the business.

Termination of Employment

Sec. 613a (4) BGB prohibits the termination of employment due to the transfer of business, but explicitly allows the termination of employment (in connection with the transfer) for other legitimate reasons. This means that all employees of the transferred business or part of the business are transferred and the transferor may not terminate the employment relationship in order to allow the transferee to take over only certain employees or to employ them under changed conditions. However, both the transferor and the transferee may terminate the employment relationship for other legitimate reasons under the German Protection Against Dismissal Act.

Employers’ obligation to inform Employees

Pursuant to section 613a (5) BGB, the employees affected by the transfer of business must be informed in writing by the transferor or the transferee of the transfer of their employment relationship. This notification must contain

  • the time or the envisaged time of the transfer,
  • the reason for the transfer,
  • the legal, economic and social effects of the transfer on the employees and
  • the envisaged measures towards the employees.

Employees’ right to object to the transfer of employment

Employees have the right to object to the automatic transfer of their employment relationship to the transferee. The objection must be made within one-month of receiving detailed information about the planned transfer. If they object, their employment relationship will not transfer to the transferee and they will remain employed by the transferor. However, the transferor may terminate an employee's employment for operational reasons if the employee's job in the company has been eliminated as a result of the transfer and there is no possibility of placing the employee in another vacant job. 

The one-month period for objection only begins if the information provided to the employee is correct. 

Do you have any questions about this topic?

Anti-discrimination

Under the General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz, AGG) employers are obliged to refrain from discrimination and, in addition, the employer has several organizational obligations to protect his employees from discrimination at the workplace.

Employers’ Obligations

Employers are expressly prohibited from discriminating against job applicants and all employees on the basis of

  • gender,
  • race or ethnic origin,
  • religion or belief,
  • age,
  • disability, or
  • sexual orientation.

Employers must observe the ban on discrimination when publishing job advertisements and also during the application procedure.

A job advertisement seeking a “friendly young waitress” demonstrates two forms of discrimination: the term “young” is a form of discrimination on grounds of age, while the female form “waitress” can be equated with discrimination on grounds of sex.



In a job interview, it would be unfair to ask a female applicant about her plans for a family.

However, the employees - women and men - are also entitled to be protected against discrimination in existing employment relationships.




For example, promoting employees automatically once they have reached a certain age constitutes discrimination against younger employees.

Employers must ensure that discrimination does not take place. In addition, they are obliged to take measures against employees who discriminate against other colleagues. The possible measures for this purpose range from a transfer to another post to a reprimand up to a termination of employment.

Works council

German employment law provides a complex system of employee representation. Employee representation at the operational level is guaranteed by the works council. Works councils guarantee employees far-reaching rights of participation and co-determination in social, personnel and economic matters and are the primary partners of employers in negotiating restructuring. Works councils are an integral part of the employment law framework in Germany and a source of constant concern for (foreign) HR managers.

Establishment of works councils

In Germany, the employer is not obliged to establish a works council. A works council is only established by election on the initiative of the employees or a trade union represented in the operation. The size of the works council depends on the number of employees in the operation and can consist of up to 35 members.

However, the employer may not prevent the election of a works council - interference may even have criminal consequences.

A works council can be elected in any operation (Betrieb) that employs at least five employees over the age of 18, including three employees who are eligible to vote for a works council. 

Once in place, regular works council elections take place every four years.


Social matters

With regards to social matters, the works council has a comprehensive co-determination right.

Amongst others, social matters include:

  • Company rules: e.g., code of conduct, smoking ban, dress code,
  • start and end of daily working hours and breaks,
  • temporary reduction or extension of working time, e.g., overtime,
  • issues relating to the company wage structure, in particular the distribution of bonuses, premiums and other performance-related benefits.

Any decisions concerning a social matter implemented without the proper involvement of the works council are null and void.

Personnel Matters

The works council has the right to be involved in personnel matters, e.g., personnel planning, the introduction of employee questionnaires, selection guidelines etc. The employer is obligated to inform the works council before hiring or transferring an employee and to submit the necessary documents to the works council. If the works council refuses its consent to the aforementioned personnel measures, the employer is obligated to obtain such consent to the personnel measures in court.

The process of obtaining the consent to personnel matters in court can be not only very costly but also very time-consuming.


The works council must be consulted in detail prior to each individual dismissal and can object to it for certain reasons. However, the works council’s objection has no influence on the effectiveness of the notice of termination. A dismissal made without (proper) consultation of the works council is invalid.


In practice, incorrect consultation of the works council prior to the termination of employment is one of the most frequent reasons for the invalidity of termination. This process requires utmost diligence and legal support.


Economic Matters / Operational changes

In companies that regularly employ more than 20 employees who are eligible to vote, the works council has to be informed and consulted at an early stage of the employer´s deliberations on operational changes. The employer and works council have to negotiate a reconciliation of interests (Interessenausgleich) and to agree on a social plan (Sozialplan)

Works council agreements (Betriebsvereinbarungen)

The works council and the employer usually conclude Works council agreements on various working conditions, such as regulations on the start and end of daily working hours. 

Works council agreements with the works council cannot be concluded if the matter is already regulated by law or collective agreement.

Works council agreements have a direct impact on the employment relationships of individual employees, as works agreements are binding on all employees, except for executive level and managing directors.

Protection of works council members

Members of the works council enjoy special protection against dismissal and can only be given notice for good cause, i.e., if the employee has seriously violated obligations under the employment contract. In practice, these requirements will only be met in a few rare cases. Even where cause exists, the works council's or the labor court's prior consent is required.

Works council members enjoy special protection against dismissal for a period of one year following the end of their term of office.


Do you have any questions about this topic?

Trade unions and employers’ associations

Trade unions are organized by sector, rather than on the basis of political orientation or white/blue collar status. Other than works councils, trade unions are rarely involved in a company’s day-to-day issues. However, Trade unions in Germany have a history reaching back to the German revolution in 1848, and still play an important role in German economy and society: Approximately 80% of all employment relationships are subject to collective bargaining agreements.

Trade Unions

The main function of trade unions is to negotiate and conclude collective bargaining agreements with employers' associations. They bargain over pay and working conditions (including, for example, notice periods and employment protection for employees with long service), and they may initiate the election of works councils. Trade unions do not have co-determination rights within a company. However, they support the works council and individual employees, e.g., by providing legal advice. Their advice to and support for works councils are crucial when it comes to negotiations on restructuring.

Collective Bargaining Agreements

According to section 1 of the German Collective Bargaining Act (TVG), a collective bargaining agreement is a written contract between one or more employers or employers' associations and one or more trade unions. Collective bargaining agreements contains provisions on the content, conclusion and termination of employment relationships as well as on operational and works constitutional issues. Collective agreements set minimum working conditions, so that more favorable provisions for employees can be regulated in the employment contracts.

The provisions set forth in a collective bargaining agreement apply directly and in mandatory form to an employee if they are a member of a trade union and the employers themselves have concluded a collective bargaining agreement with said union or are a member of an employers’ association which concludes collective bargaining agreements in their name. In addition, the application of a collective bargaining agreement or individual provisions of a collective bargaining agreement can be agreed between the employer and the employee in the employment contract. In practice, where collective bargaining agreements are implemented, employees who are not organized in trade unions are usually treated in the same way as unionized employees. 

Do you have any questions about this topic?

Social security

    Social security in Germany is largely organized in the form of a contributions system in which the risks are borne collectively by all insured persons. Irrespective of their individual income and contributions, all insurants are largely and comprehensively protected against various life risks. The vast majority of the German population is insured under the social insurance system, either on a voluntary or compulsory basis.

    The mandatory Social Security System in Germany consists of five branches:

    • Health insurance
    • Nursing care insurance
    • Pension insurance
    • Unemployment insurance
    • Accident insurance

    Social security contributions for health, nursing, unemployment and pension insurance are roughly shared equally by employer and employee. The costs for accident insurance are exclusively borne by the employer. In total, the employer's share of social insurance contributions amount to approximately 22 percent of the employee's gross wage, with the employee additionally adding about the same amount. 

    The employer withholds the employee’s share of social insurance contributions, adds the employer’s share and then pays the full amount to the respective social insurance carriers.

    photo credit: f11photo/ shutterstock.com