SME - Small and Medium-sized Enterprises

SME are small and medium-sized enterprises with a maximum business size of 249 employees and a maximum annual turnover of 500 million euros. Alternatively, they show a balance sheet total with no more than 43 million euros.


When is a company a SME?

The classification as a small or medium-sized enterprise is based on quantitative and qualitative parameters. Quantitative characteristics include the number of employees, revenue, and total assets.

A qualitative criterion is independence. There should be no partnership with another company, and if there is a connection with another company, the ownership should be less than 25 percent.

In Germany, SMEs make up more than 99 percent of all companies subject to value-added tax.

  • They employ over 59 percent of all workers who are subject to social security contributions.
  • SMEs provide training for approximately 82 percent of all apprentices.
  • Their economic turnover is over 35 percent.

Digitalization of SMEs

Digital transformation within companies refers to the use of digital content and technologies to fundamentally improve and streamline business processes. This digital shift requires companies to be willing to optimize their workflows through modern information technology and the internet.

Analog structures are transformed into digital data, and processes are gradually implemented digitally. As a result, numerous workflows can be simplified and to some extent fully automated.

Significance of Digital Processes for Companies

Digitalization is an ongoing process aimed at advancing SMEs economically. It also serves to explore new complementary business areas. Digital technologies are meant to improve internal business processes and customer interactions.

Furthermore, they allow for centralized access to information and significantly reduce overall company costs. Production processes can be made much more efficient, and services and productions can be provided more quickly.

Challenges of Digitalization

Today's customers have entirely different expectations for companies than in previous years. They are well-connected and accustomed to operating in a digital environment. Consequently, SMEs are expected to provide rapid responses and digital visibility for products, services, contact options, and transaction processes.

Especially in light of the COVID-19 crisis, SMEs must face these challenges. Online shopping options and online appointment scheduling are just some examples. If companies are unable to present their offerings digitally and digitize their own processes, they will not be able to compete with businesses using digital marketing strategies in the long run.

Benefits of Digital HR Management

Digital personnel management offers significant advantages for a company's HR processes, since it allows for the entire administrative work to be efficiently done on one platform.

Personnel costs are significantly reduced by software solutions that decrease the substantial time needed for personnel administration. Depending on access rights, employees can coordinate selected personnel processes and edit data digitally. Workflows and information are no longer stored in different systems but are consistently to be found centrally and accessible from anywhere at any given time.

SME Grants

The government currently provides subsidies of up to 50,000 euros for digital projects. Funding is available for business investments in digital technologies and training for employees on digital topics. The funding amount is based on investment costs and the number of employees.


We would like to point out that our website provides non-binding information, which under no circumstances constitutes legal advice. This also, and especially, applies to topics within the sphere of legal HR advise. The content of this contribution cannot and is not intended to replace individual and binding legal advice. For this reason, all information provided is without guarantee of correctness and completeness, but always researched with the utmost care.

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