One in ten small and medium-sized enterprises employ foreign workers

Eleven and a half percent of Germany's small and medium-sized enterprises (SMEs) currently employ foreign workers, according to a study by KfW Research. This reliance on international labor is seen as a key strategy to address emerging skills shortages driven by demographic change.

The survey revealed that larger SMEs, particularly those with 50 or more employees, are most active in hiring foreign nationals. Manufacturing firms reported the highest rate of employing foreign workers at 21 percent, followed by the retail and wholesale trade sector (14.3 percent) and the construction industry (13.3 percent).

Significant barriers to hiring foreign staff were identified, with 69.1 percent of businesses citing language barriers as a challenge. Additionally, 47.5 percent pointed to bureaucratic and legal hurdles, such as complex procedures for residence and work permits, as deterrents.

Geographically, differences between eastern and western Germany in employing foreign workers were minimal. Western German firms reported a slightly higher employment rate (11.9 percent) compared to eastern firms (9.6 percent), a disparity largely attributed to the prevalence of larger SMEs in western Germany's industrial and service sectors.

Dirk Schumacher, KfW's Chief Economist, noted that while the current economic slowdown has temporarily eased the skills shortage, the need for foreign labor is expected to rise again with economic recovery. He advocated for the systematic dismantling of administrative obstacles to facilitate the hiring of foreign workers.