Germany is Europe's largest economy and its largest talent market, with strong worker protections and a social-insurance system split roughly in half between employer and employee. All-in employer cost runs around 1.2x the gross salary, and dismissal is closely regulated once someone is past probation. Here is what to know before your first German hire.
Employment is governed by a mix of federal statutes (the Civil Code, the Protection Against Dismissal Act, the Federal Leave Act) and, in many sectors, collective agreements. Contracts are typically in German, working time is capped at 8 hours a day under the Working Time Act, and social-insurance registration is mandatory. Hiring through an EOR means that registration, payroll, and compliance sit with us.
The statutory minimum wage is €12.82 per hour as of 2025*, reviewed by a federal commission. Professional salaries sit well above the floor, but the minimum sets a hard baseline for every contract.
Monthly payroll, 12 payments a year. There is no statutory 13th salary, though a 13th month, holiday pay (Urlaubsgeld), or Christmas bonus (Weihnachtsgeld) is common by contract or collective agreement.
Nine nationwide public holidays, plus additional regional holidays set by each federal state (Bundesland), so the total ranges from about 9 to 13 depending on where the employee lives.
A written contract is standard and the key terms must be documented. Probation (Probezeit) runs up to six months, with a shortened two-week notice period on either side during that time.
Germany funds social insurance through contributions split roughly evenly between employer and employee, on earnings up to annual contribution ceilings. The employer share lands at about 21% on top of gross salary.
Pension and unemployment contributions apply up to one earnings ceiling, health and long-term care up to a lower one. Above those thresholds the percentages stop accruing, so very high salaries carry a smaller effective burden.
Employees pay wage tax (Lohnsteuer) on a progressive scale from 0% up to 45%*, plus a solidarity surcharge for higher earners and optional church tax of 8-9%. Withholding is the employer's job, which under EOR means ours.
The statutory minimum is 20 paid days on a five-day week (24 on a six-day week). Market practice is more generous, with 25 to 30 days typical in professional roles.
Fourteen weeks of protected leave, six before and eight after birth (longer for multiple or premature births), paid through a maternity benefit topped up by the employer to full pay.
Each parent can take job-protected parental leave until the child turns three. Income is partly replaced by state parental allowance (Elterngeld) for up to 14 months shared between parents.
The employer continues full pay for up to six weeks of illness (Entgeltfortzahlung). After that, statutory health insurance pays sick pay (Krankengeld) at roughly 70% of gross.
Statutory notice starts at four weeks and rises with tenure up to seven months for long service. In businesses with more than ten employees, the Protection Against Dismissal Act requires a valid reason once someone is past six months.
There is no automatic statutory severance. In practice it is often negotiated (Abfindung), with a common rule of thumb of about half a month's pay per year of service, frequently settled through a termination agreement.
Up to six months, during which either side can end the contract on two weeks' notice without needing to show cause.
Engaging a freelancer who works like an employee (set hours, one client, your direction) risks a finding of false self-employment (Scheinselbstständigkeit), with back social-security contributions for up to four years plus penalties.
*All figures are estimates from public sources (2025-26), pending ops verification - same basis as the EOR cost calculator. Not tax or legal advice.
Compliant German employment contract, payroll, social insurance, and statutory benefits, handled. One invoice, flat $399 per month.