🦜 PerchPulse - The Germany Market Update September 2023 🦜

A warm welcome to the September issue of PerchPeek’s Germany Market Monthly update! 

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Here’s where you’ll find the hottest updates around employee relocation and international talent strategy, insights from our experts on housing and cost-of-living news affecting your staff, the latest trends in global mobility, and tips and tricks on ways to support your teams.

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A fly-by summary

• German government announces plans for migration agreements with six new countries including Georgia and Moldova - how this could impact talent recruitment strategy

• 90% of companies in Germany are struggling to recruit qualified candidates for open roles, a new study reveals - key stats for GM leaders, and advice for recruitment tactics
• Latest Immowelt data shows rental prices in smaller cities are up more than +6.4% YoY, outpacing consumer inflation - key rental market knowledge for HR leaders
• Germany’s child benefit system to be streamlined as of 2025, but allowance amounts unlikely to rise - how to help relocating employees with children access child benefits

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Talent strategy: Germany reveals plans for new migration agreements with six countries - how this could impact HR and recruitment strategy

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While the Immigration Act is under way, the government is working on extra measures to boost migration and help plug the worker shortage, through country-specific migration agreements. Here’s the full lowdown and the potential impact for People Leaders seeking talent from abroad!

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The government has recently announced that it is in, or planning to enter, negotiations with six countries for new migration agreements. These countries are Georgia, Moldova, Uzbekistan, Kyrgyzstan, Kenya and Morocco, as per information released by the Ministry of the Interior.

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These agreements are in addition to the measures that form the new Immigration Act, including the introduction of the points-based Chancenkarte and the easing of EU Blue Card rules. Check out our July issue for more details on these changes, set to come in March 2024!

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Two key factors driving this move

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1. Tackling Germany’s worker shortage

Germany is experiencing a severe labour shortage, estimated to be costing the country €86 billion per year. As such, there’s an urgent need to recruit workers from overseas to fill the gaps, and immigration reform should make it easier and quicker to do this. 

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2. Reducing illegal immigration

By offering new legal routes for foreign citizens to move to Germany, the government is hoping to reduce instances of illegal immigration and take pressure off local authorities (who are already swamped with immigration and residency paperwork!) 

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According to Andrea Nahles, director of Germany’s Federal Employment Agency:

“Even if Germany leverages all domestic potential, this will not be possible [to fill all vacant positions] without further immigration, also for demographic reasons. We need both labourers and skilled workers.” 

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PerchPeek insights

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Germany's move to establish migration agreements with these countries is positive news for HR professionals. These agreements would simplify the often tricky processes of talent acquisition across borders, meaning smoother sailing for HR teams tapping into international talent pools.

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These pending agreements also highlight Germany's growing dedication to fostering cultural exchange and economic cooperation, and attracting fresh talent from overseas to boost the workforce. Keeping a keen eye on these developments is likely to play a big part in ensuring that your organisation stays agile and competitive in the race for top talent.

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Talent strategy: Nine out of 10 companies in Germany can’t find suitable candidates for roles, a survey reveals - key stats for GM Leaders

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Having touched on Germany’s major worker shortage, we’re now digging into the data further as a new study reveals that a shocking 90% of companies are struggling to recruit qualified candidates! Here’s a summary of the key findings, to help inform global mobility strategy.

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Job platform Stepstone recently conducted a labour market study of 10,000 respondents in Germany, including 2,800 executives and HR managers. The results are eye-opening when it comes to the skills shortages being felt, and make for crucial reading for People leaders.

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Summary of key findings

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• 90% of companies complain that they are having difficulty locating suitable candidates
• Due to a lack of staff, 76% of companies are reporting losses in overall productivity
• This figure is 16 percentage points higher than before the pandemic
• Fewer than 50% of companies are using artificial intelligence to automate processes

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Migration targets

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Due to factors such as Germany’s birth rate being at a 10-year low, an ageing population and high emigration, the country’s workforce is suffering. As a result, economist Monika Schnitzer states that the country should aim to attract 1.5 million new migrants every year so that public services and businesses have sufficient staff to run effectively and meet their targets.

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PerchPeek insights

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The revelation that a whopping 90% of German companies are struggling to find qualified candidates underscores a pressing challenge, but also an opportunity for HR and Global Mobility professionals to expand horizons and look beyond borders. 

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With local talent in short supply, the global stage beckons and to make the most of this situation, a strategic approach is crucial. PerchPeek’s top tips for success include:

• Crafting recruitment strategies that specifically target international talent
• Leveraging technology for international talent scouting and onboarding
• Streamlining internal processes and stay up-to-date on visa regulations

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As the skills shortages continue to worsen, becoming a global talent matchmaker is not just an option but a necessity in navigating the evolving German job market and filling open roles.

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Home-finding: Rent rising faster than current 6.4% inflation rate in smaller cities - key rental market trend knowledge for HR Leaders

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As always, the summer months have been an especially busy time in the world of relocation. Many people move over July and August, meaning that September sees a very high number of people seeking long-term accommodation! To provide GM leaders with the latest knowledge and guidance, we’re putting the spotlight on the latest rental price trends and are providing our top tips on supporting home-hunting employees, especially those moving to smaller cities.

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Immowelt study shows rental prices rising faster than inflation in smaller cities

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The latest annual rental market study by property platform Immowelt shows that:

• Rent continues to rise in Germany’s major cities - in Munich, rental prices are up +5.2% YoY, while the annual increase in Berlin and Hamburg was +3.9% YoY
• Outside the major cities, annual rental growth has been even higher. In 10 of the 80 cities examined in the study, including Aachen, Oldenburg and Siegen, the year-on-year average rent price increase was more than +6.4%, the current rate of consumer inflation

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In the last year there has been a notable increase in the number of renters moving outside major cities to suburbs and smaller towns, in search of lower rental prices. This data shows that seeking lower prices in less populated areas is becoming more and more of a challenge.

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“The record influx to Germany and the slump in residential construction are putting additional pressure on the already strained rental markets.” - Felix Kusch, MD, Immowelt

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PerchPeek insights and advice for People Leaders

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The challenges posed by the rental market demand proactive solutions from HR leaders. As rent continues to rise and finding affordable accommodation even in less populated areas is more and more difficult, providing support to relocating employees is incredibly important. Here are three essential ways HR and global mobility professionals can offer their support:

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• Leverage local real estate partnerships to give employees a competitive advantage in securing affordable and suitable housing, particularly in smaller, close-knit communities
• Offer lease negotiation support to relocators - in smaller cities, landlords may be more flexible on lease terms due to the smaller (though rising) pool of potential tenants
• Launch cultural integration initiatives to help employees understand the nuances of the German rental market and their new city, especially if it’s a smaller, less well known area 

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By adopting these strategies, HR and GM professionals can not only help relocating employees find homes, but also reinforce their organisation's commitment to employee well-being.

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Support your talent: New, simplified child benefit payment system to be launched in 2025 - key guidance to share with employees with children

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Relocating to a new city can be challenging for most people, but for those with children there’s the extra layer of complexity of arranging childcare, and all the admin that comes with it! There’s hope on the horizon, however, that this area of bureaucracy will be simplified in the future. Here’s the latest on the German childcare system, for HR leaders to share with employees.

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It’s been announced by the government that the German child benefit system is to be simplified by reducing the various allowances available to just one bundle payment. However, it’s important to note that this doesn’t necessarily mean the allowance amount will be increased.

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What will change?

• The current four different child benefit allowances will be replaced by one payment called Kindergrundsicherung (Basic Child Allowance)
• The basic amount available is to be confirmed, but should at least correspond to the current Kindergeld child benefit of €250 per child per month
• This amount is to be adjusted every two years, based on the federal government's minimum subsistence report

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Supporting relocating employees with children

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As HR and global mobility professionals, providing support and guidance to your relocating employees with children is bound to make a huge positive impact on their relocation experience. 

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Those new to Germany are likely to be unfamiliar with how the system works and the correct authorities to contact. And while the news that the system is to be simplified, it’s quite a while until this will be rolled out in 2025! Here are PerchPeek’s tips for supporting parents right now:

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• Make sure employees are aware of the parent/child benefits available to them
• Provide them with clear, comprehensive information on the correct processes
• Where possible, arrange for a German speaker to help check their application
• Direct employees to free advice services such as Pro Familia 

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We hope you enjoyed this month’s update! 

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If you have any feedback, comments or questions about what's happening in your location, feel free to reach out via the form at the bottom of this page.

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Thanks for reading, and see you next month!

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