German labor law is a complex issue. Let’s talk about the generic issues that exist all over the seascape of payroll in Germany first in order to get us familiarized with the framework.
We are one of the companies that provides different payroll solutions. SeaPay® however does subcontract renown companies in our sphere of work. But when these companies come back to us saying they can’t help us, we are certainly perplexed and entertained at the same time. This is the case with German Crew Payroll for German flagged vessels.
Crew payroll refers to the process of managing and processing the wages and allotments for crew members, ensuring timely and accurate payment for their services. In Germany, this process is intricately tied to the country’s detailed employment and tax regulations.
Payroll Accounting in Germany
Payroll accounting in Germany, known as “Lohnabrechnung” or “Gehaltsabrechnung,” is a critical function for employers, documenting an employee’s wage or salary composition over a certain period. This documentation serves as proof of wages or salary and breaks down the net wage/salary components for the employee.
- Wages vs. Salary: A crucial distinction in Germany is between wages (“Lohn”), calculated based on actual hours worked, and salary (“Gehalt”), a fixed monthly amount regardless of hours worked. This distinction must be clearly indicated on every payroll slip.
Taxes and Social Security Contributions
The payroll process in Germany involves deducting taxes and social security contributions from the gross salary:
- Wage Tax: There are six wage tax categories, with the basic tax-free allowance set at €9,000 per person per year, or €18,000 for life partners or spouses.
- Church Tax: Linked to the wage tax, its rate varies by state, being 8% in Bavaria and Baden-Württemberg and 9% elsewhere.
- Solidarity Surcharge: A tax introduced to cover the costs of German reunification, generally 5.5% of the wage tax.
- Social Security Contributions: Include unemployment insurance, pension insurance, and long-term care insurance, with contributions paid via payroll.
Maritime Payroll Specifics
For seafarers, payroll processing must ensure timely and accurate wage and allotment processing, considering the unique aspects of maritime employment. German tax regulations specify that seafarers only pay taxes on income generated within German territorial waters.
Per Diem Rates
Germany sets fixed per diem rates for business travel to cover travel expenses, simplifying the process for companies. However, the rules governing these rates can be complex, and businesses often struggle to follow them accurately.
Generic Issues for Employers
Crew payroll in Germany is a complex process, governed by detailed employment laws, tax regulations, and social security contributions. Employers must navigate these intricacies to ensure compliance and accurate, timely payment to their crew members.
Also we should remember that penalties for non-compliance are punitive and, as we say, not corrective. There’s not such a tendency to explain what’s wrong but rather punish for it. That’s not the case in many other jurisdictions we work with, however there are still cases of an “All German approach” so we must comply.
Having said this, and in order to conclude we must acknowledge the fact that Germany is not the most competitive jurisdiction for maritime affairs and is a very stringent country when applying its regulations. Endorsements are difficult to attain, hiring foreigners (non-German residents) equals traumatizing compliance efforts and very vague replies from the German flag authorities.
In order to avoid these issues, all crew shall be German residents and be fully compliant with the local labor laws which is not so cost effective, however noble it might seem for a German tax payer.
We at SeaPay® provide German payroll services in conjunction with German HR services. This is something unavoidable for German flagged vessels, especially commercial ones, and helps save a lot on penalties and confusion. Flying a German flag is a reputable adventure and raises very few questions among tax authorities around the world.