German Labour Market Analysis: Europe’s Powerhouse Rolls On

As 2023 begins, much of Europe runs dangerously close to economic calamity, a situation compounded by the escalation of the war in Ukraine. As the region’s economic powerhouse however, Germany is more resilient to the wider environment. As such, the demand for professionals is at a historical high point and, with a thriving start-up sector, companies are experiencing wide-ranging skills shortages across most industries.

Macro Environment in Germany

The shortage of skilled workers (Fachkräftemangel) has been highlighted as a major issue. So much so, that the German government is looking to open up immigration rules regarding skilled worker migration requirements, with a draft law currently being discussed and progress expected in 2023 or 2024. The government hopes this will help alleviate the skills shortage, with the country in need of as many as 400,000 workers from abroad every year, according to the Federal Labour Office. Most come from within the EU, but they will not be enough to relieve the shortage in the longer-term given that most of the other large EU countries are facing similar demographic challenges.

At the same time, some German companies are exacerbating the shortage of skilled workers by taking a traditional stance on work from home and requiring a constant, in-office presence. In the IT sector, where work can be done from anywhere, a rigid RTO (Return to Office) stance often results in workers changing jobs or accepting a role with remote options when weighing multiple offers. 

Another major trend in Germany has seen the government closely monitor companies that treat freelancers as de facto full-time employees. There has been a concerted effort to clamp down on this practice, to protect workers from a situation that is not working in their favor. As part of the greater monitoring, benefits such as a company car, office space or even a company-registered email address cannot be legally provided to freelancers, and failure to comply results in significant fines. Companies are aware of these restrictions but still engage with freelancers that are interested in long-term assignments.  

Skills in Demand in Germany

Cybersecurity has become a key aspect in the Germany labour market. While the demand already existed, increasing rates of cyberattacks on private institutions and infrastructure, particularly in the wake of the Ukraine war, has led to greater focus on this area and resulted in a rise in the importance of this specialization. 

In addition, there is demand for specialized technological skill sets, particularly within the managerial domain. While there is an abundance of general coding skills at the lower experience levels, this hasn’t yet fed through to the more senior, specialist or managerial positions, which are still proving challenging to source.   

Remuneration and Benefits in Germany

Due to such a tight labour market, even the largest companies cannot rely solely on their brand name to retain talent:

• Borders and boundaries have been opened, and workers benefit from choice as they are enticed by multiple offers
• There has been a dramatic increase in wage expectations in Germany, particularly in IT, where the region is historically known for having rigid salary policies.  
• Remote work is seeing further demand – on par with monetary remuneration as a key perk.

As a result of this challenging labour environment, an increasing number of job listings offer a hybrid scenario, and the fierce battle for talent has led many organizations to offer more fully remote roles.  

Download the Full Report for More

For more analysis of the European labour market, download our new report. The Winter 2023 Europe Labour Market Report features analysis on high-level trends across Europe, as well as a deep dive on Europe’s major markets. Discover the specific situation in each market, as well as best-practice tips for sourcing talent in Europe today.

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Disclaimer: The content in this blog post is for informational purposes only and cannot be construed as specific legal advice or as a substitute for legal advice. The blog post reflects the opinion of Magnit and is not to be construed as legal solutions and positions. Contact an attorney for specific advice and guidance for specific issues or questions.