Hire employees in Germany

Quick answers

The questions leadership teams ask first, answered directly. Detail follows further down the page.

Hiring routes compared

Foreign companies have to weigh corporate presence requirements, licensing, speed to market and permanent establishment risk. Here is how the three routes stack up.

What an employee costs in Germany

Germany funds its social system through five mandatory insurance pillars, split roughly 50/50 between employer and employee, except accident insurance, which the employer funds entirely. Employer contributions are capped at annual assessment ceilings (Beitragsbemessungsgrenzen), so the percentages below apply up to those caps.

For an employee on €70,000 gross, budget roughly €86,000 to €90,000 all-in. Ask us for a country-specific cost model with current ceilings applied.

Payroll and tax

German payroll runs strictly monthly, usually processed between the 25th and 28th. Social contributions must reach the employee's health insurance fund (Krankenkasse) by the third-to-last banking day of the month. Every employee receives an itemised payslip (Entgeltabrechnung) under § 108 of the Industrial Code showing gross pay, each of the five social deductions, wage tax, solidarity surcharge and net.

Wage tax and ELStAM

The employer is the withholding agent for the Tax Office. Deduction criteria are pulled automatically from the Federal Central Tax Office through the ELStAM system using the employee's tax ID and date of birth. Income tax is progressive, from 0% at the basic allowance to 42% at the top rate and 45% for very high earners. A solidarity surcharge of up to 5.5% of wage tax applies only above high income thresholds, and church tax of 8% or 9% of wage tax is withheld for registered members of recognised religious communities.

Statutory minimum wage

Germany sets a single nationwide hourly minimum wage under the Mindestlohngesetz, reviewed every two years by the Minimum Wage Commission. One-off payments and discretionary bonuses do not count toward it. Because Dryft's German EOR model operates under the AÜG, the separate leased-worker wage floor and the equal-pay rule after 9 months of assignment also apply to our clients.

Leave and mandatory benefits

• Paid vacation. Statutory minimum of 20 working days on a 5-day week (24 on a 6-day week) under the Bundesurlaubsgesetz. Market standard in tech and professional roles is 28 to 30. Unused days do not expire unless the employer has warned the employee in writing.
• Public holidays. 9 nationwide, plus 1 to 5 more set by each federal state. Berlin has 10, Bavaria 13 to 14.
• Sick pay. 100% of salary paid by the employer for up to 6 weeks per illness. After that the health fund pays Krankengeld (around 70% of gross) for up to 78 weeks. Small employers recover 40% to 80% of sick pay through the U1 levy pool.
• Maternity. Mandatory leave 6 weeks before and 8 weeks after birth (12 for premature or multiple births), fully paid, with the employer top-up reimbursed through the U2 levy.
• Parental leave. Up to 3 years of job-protected leave per child, per parent, until the child turns 8. Dismissal during parental leave is prohibited. The state pays Elterngeld of 65% to 100% of prior net earnings.
• Company pension. Employers must add a 15% subsidy to any employee salary-sacrifice pension contribution under the Betriebsrentengesetz.
• Working time. Maximum 8 hours a day (extendable to 10), 11 consecutive hours of rest, restricted Sunday and holiday work. Since a 2022 Federal Labour Court ruling, working time must be recorded objectively.

Termination and notice periods

After a probation period of at most 6 months there is no at-will employment. In establishments regularly employing more than 10 people, employees with 6 months of service can only be dismissed for operational reasons (the role is permanently eliminated and a social selection has been run), conduct reasons (after a prior written warning), or personal reasons (typically long-term illness with a poor prognosis).

• Written form is absolute. Terminations and separation agreements must carry an original handwritten signature on paper (§ 623 BGB). Email, PDF, e-signature, SMS or verbal notice is void.
• Works council consultation. If a works council exists it must be heard before every dismissal (§ 102 BetrVG). Skip it and the dismissal is void.
• 3-week deadline, reinstatement risk. Employees have exactly 3 weeks to file with the Labour Court. If the court finds the dismissal unfair, the remedy is reinstatement with back pay, not damages. That is why over 80% of exits are negotiated Aufhebungsverträge, typically at 0.5 to 1.5 months of gross salary per year of service.
• Special protection. Pregnant employees and mothers to 4 months post-birth, anyone on parental leave, severely disabled employees and works council members cannot be dismissed by ordinary notice without prior authority approval.
• Mass dismissals. Above thresholds set by establishment size, dismissals within 30 days require works council consultation and a formal notification to the Employment Agency, or every dismissal is void.

Can I use independent contractors?

Only for genuinely independent specialists, and Germany polices this hard. If a contractor is integrated into your workflows, uses your hardware, reports to your managers, works fixed hours or earns more than five sixths of their income from you without employing anyone themselves, the German Pension Insurance will reclassify them as an employee, either in an audit or through a formal status assessment procedure (§ 7a SGB IV). Bogus self-employment (Scheinselbständigkeit) carries retroactive employer social contributions for up to 4 years (30 if intentional), interest, wage tax penalties and possible criminal liability under § 266a of the Criminal Code. An EOR is the compliant alternative for anyone who works like an employee.

The legal framework in brief

German employment law is heavily codified, layered with EU directives, sector collective agreements and extensive Federal Labour Court case law. The statutes you will hear referenced most:

• Civil Code (BGB). § 611a defines the employment relationship, § 622 sets notice periods, § 623 mandates written form for terminations.
• Dismissal Protection Act (KSchG). Socially justified dismissal in establishments with more than 10 employees.
• Nachweisgesetz (NachwG). Written documentation and delivery deadlines for all essential employment terms, implementing EU Directive 2019/1152.
• Working Time Act (ArbZG). Daily limits, breaks, rest periods, Sunday and holiday work.
• Continued Remuneration Act (EFZG). Six weeks of employer-paid sick leave, paid public holidays.
• Federal Vacation Act (BUrlG). Minimum paid annual leave.
• Works Constitution Act (BetrVG). Works council formation and co-determination rights.
• Employee Leasing Act (AÜG). The framework Dryft's German EOR operates under.
• General Equal Treatment Act (AGG). Anti-discrimination across hiring, pay, promotion and dismissal, with the burden of proof shifting to the employer once indicators are shown.
• GDPR and Federal Data Protection Act (BDSG). § 26 BDSG restricts employee data processing to what the employment relationship strictly requires; covert monitoring is unlawful.

Where the talent is

Germany is the largest economy in the EU and the fourth largest in the world. Its workforce combines deep industrial engineering, strong software and enterprise SaaS talent, vocational excellence through the dual education system, and world-class research universities. English is the working language in Berlin startups, Munich tech and multinational headquarters, but German remains the legal language for contracts, registrations and statutory notices.

This guide is general information, not legal, tax or immigration advice. German employment, tax and social security rules change regularly through statutory adjustment and court interpretation. Confirm current figures with a qualified adviser or with Dryft before acting. Last reviewed September 2026.