Beyond borders: the future of hiring in Germany

Germany’s economic future is facing a looming crisis: a staggering shortage of 7 million skilled workers by 2035. As Economy Minister Robert Habeck pointed out last year, this workforce deficit will severely constrain growth in Europe’s largest economy. 

 

The evidence is stark: 700,000 skilled positions remain unfilled, the baby boomer generation is rapidly approaching retirement, and the projected economic growth for 2025 is at a mere 0.3%. Adding to the challenge, 2.6 million young adults lack the professional qualifications needed to fill these crucial roles. This skills gap presents a significant threat to Germany’s economic stability and competitiveness.

Not filling open positions quickly is also proving to be a major financial drain on companies. Take vacancy times: the time it takes to fill a role. In Germany, the average vacancy time has doubled in the past decade. This translates directly to costs. The longer a position sits empty, the more it bleeds your budget.

Let’s look at a hypothetical German tech company with 25 open positions where 10 of those roles could be filled remotely. With an average salary of €60,000 and a 100-day vacancy time, this company loses a staggering €328,767 just for those 10 remote positions due to slow hiring.

While Germany grapples with these challenges, forward-thinking HR leaders are turning them into opportunities. By thinking outside geographical borders and embracing international talent, companies can gain a competitive edge in the struggle for skills.

 

Using employer of record (EOR) solutions simplifies this process, eliminating the complexities of visa applications and foreign entity establishment. As Bastian Eichler, Vice President Product at WorkMotion, says, “We’re seeing a significant trend: companies are leveraging global talent to gain a competitive edge. By dismantling the limitations of national borders, they are strategically addressing labour shortages and securing top-tier professionals.” Companies that fail to adapt risk falling behind in today’s dynamic global market.

With an EOR, companies can easily fill their positions faster by hiring beyond national borders. A global hiring strategy unlocks a vast, worldwide talent pool. Even a 30 per cent reduction in vacancy time can lead to significant savings.

Eichler also observes a growing disconnect between employer expectations and the desires of young talent: “Businesses are reverting to restrictive practices, while Generation Z prioritizes flexibility above all else.”

To avoid alienating this crucial demographic, Eichler suggests companies adapt to the demands of a workforce that increasingly insists on remote work options. He warns that clinging to traditional models may leave businesses struggling to attract and retain top talent. “Even if every company doesn’t see this as the ideal solution,” Eichler says, “it may be the only solution to invite highly-skilled talent to work for you instead of your competitor.”

The other key challenge HR teams may face when hiring overseas is the paperwork. Contractual obligations, legal stipulations, compliance requirements, payroll challenges and other such concerns can be significant when a firm is recruiting abroad. But all this can be simplified by operating through an EOR. 

WorkMotion’s EOR service streamlines the process, enabling HR leaders to focus more on strategic matters and less on operational headaches. “We’re able to generate a locally compliant employment contract digitally. We did this in a record time of 11 minutes from the moment our customer started the process to the moment it was signed by the talent,” Eichler says. “There are lots of steps in between that are usually very manual and led by HR ops teams. We use technology to make this easier and to achieve an unmatched time to hire.” 

The system then follows the individual throughout their employment, simplifying payroll, benefits, expense claims and other processes. WorkMotion’s direct hiring solution is their unique alternative to the classic EOR model and helps European businesses to hire employees in a direct and flexible way, without any contractual intermediary while still avoiding the hassle of setting up an entity. 

Another important point to note here is the challenge of classifying workers correctly. Misclassifying an employee as a contractor can lead to massive fines and reputation loss. In Europe, the financial consequences of misclassification can be severe. Fines can reach up to €500,000 or more, and authorities can even seize profits generated through the use of misclassified workers. Countless employers have fallen victim to misclassification, facing costly legal battles and substantial financial penalties. This pervasive issue poses a significant threat to companies of all sizes, jeopardising their stability and reputation. 

In response to this growing challenge, WorkMotion now offers a comprehensive contractor management solution designed to ensure complete compliance and mitigate these risks. 

“We’ve seen the devastating impact of misclassification on companies firsthand. That’s why we’ve developed a solution that provides the clarity and expertise businesses need to hire international contractors compliantly, giving them the peace of mind to focus on growth.”

Attracting and retaining top talent isn’t just an HR task anymore. It’s a strategic must-have for any business that wants to thrive. In today’s competitive landscape, finding and keeping the best people is more crucial than ever. But HR leaders can turn this challenge into a major opportunity by tapping into the global talent pool and using innovative solutions such as WorkMotion.  

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To find out how WorkMotion automates tedious onboarding processes, making it a breeze to hire from more than 160 countries quickly, easily, and compliantly, head over to workmotion.com