Employing in Germany

Some might think that Germany, being a country with strict rules, would be an unattractive place for foreign companies to want to have employees. However, our experience is that having very clear, unambiguous regulations makes it easier to stay compliant.

In Germany, things tend to be black and white — compliant or not compliant — and business leaders appreciate knowing where they stand. Germany also has Europe’s strongest economy and its highest GDP, as well as a highly skilled workforce and developed transport infrastructure. Clearly, it ticks a lot of boxes, which is why it falls within the TopSource Worldwide top three favourable destinations for employment in Europe.

Labour in Germany is highly regulated and companies wanting to carry out labour leasing (also known as a co-employment relationship) are subject to strict regulations under the German Personnel Leasing Regulations (Arbeitnehmerüberlassung).

Companies wanting to lease labour to their clients must hold an AüG licence, which is issued by the German Labour Ministry (Bundesagentur für Arbeit) and governs what can and cannot be done.  Although it’s complex, TopSource Worldwide has extensive experience of labour leasing in Germany, and our experienced staff will be able to steer you through the key points without issue.

A couple of notable points are:
  • 18 Month Maximum Term: Under Arbeitnehmerüberlassung law, employees can only be leased for a maximum of 18 months. After this, they must be hired permanently by the client (lessee) or let go.
  • No Chain Leasing: It is a requirement of the company holding the licence to contract directly with the party receiving the labour. This means no agencies, intermediaries or MSPs in the direct contractual chain.
  • Equal Treatment: All employees leased to a client should receive the same benefits/comparable terms as the clients’ ‘native’ employees. This forms part of the contract and due diligence must be carried out by both the lessor and lessee.

Our Expertise

Managing a global workforce in Germany

Managing a workforce in Germany demands a deep understanding of its distinctive employment landscape. TopSource Worldwide's comprehensive services cater to these needs, offering end-to-end solutions for seamless global EOR and payroll management. Our local expertise in Germany ensures full compliance with regulatory requirements, providing peace of mind and allowing your business to focus on growth and innovation within the German market.


Extensive expertise

Our team of experienced, knowledgeable staff collectively provide up-to-date employment information across 180 countries, so you can always get accurate advice.


Entity-free employment

Feel free to hire employees from all over the world without being weighed down by setting up entities, running complex payroll or recruiting a hiring team.


Payroll without hassle

Have the confidence that your staff will always be paid accurately and on time, so that you can focus on your core business activities and work towards your success. 


Always-on support

Access helpful, relevant, personalised advice whenever you need it, along with expert-led recruitment policies and tried-and-tested HR best practices.


Global Employee Cost Calculator

Estimate the cost of your new hire with our calculator. Simply enter their location and salary information in to this handy tool to see what will be spent in employment costs each month.

server render fail/waiting for island-1ee2c1i1R0 (separate island render, inside)


Hear from our clients about our EOR solutions in Germany

"With TopSource we were able to have employees hired or maintained in Nutreco without having to establish an entity in these countries for only 1-2 employees. I think most countries are covered by TopSource, so they can help us with almost all cases. Good advice on conditions and direct contact with employees. Invoicing done directly to the company. An easy process compared to hiring employees by ourselves."

Annette van Duijnhoven

”We searched the market for a local payroll vendor in 2014 and we chose TopSource as our partner. We were looking for error-free and timely payroll processing and TopSource Worldwide delivers this, saving us time and money. We have worked together for 8 years now and would recommend them to anyone."

Praveen Lihinar

”TopSource Worldwide has a detailed and methodical onboarding process that made it easy for us to get set up and running with our UK employees. They were able to take the worry out of trying to comply with all local laws and regulations. Because they have this knowledge we do not have to research on our own and hope we are in compliance. This has saved us hours of time and gives both the company and employees a sense of security."

Client based in Ft Worth, Texas, USA

Personalised Employer of Record services in Germany

TopSource Worldwide offers personalised Employer of Record (EOR) services tailored to meet the specific needs of your business in Germany. This includes handling employee onboarding, payroll processing, tax compliance, employee benefits management, and HR support. Our EOR services ensure that your business meets all legal and regulatory requirements, providing a hassle-free solution to manage your Germany-based employees.

wallet-color wallet-hover

End-to-end [COUNTRY] payroll services

Looking to expand into Germany? Our unparalleled expertise in global payroll services ensures that your business can seamlessly navigate the complexities of payroll on a global scale, supporting your Germany expansion initiatives.

industry-big adaptive-white-1

Global entity management

Venturing into the German market can be both exciting and challenging. With distinct business regulations, cultural nuances, and economic landscapes, it's essential to have a clear roadmap for your business establishment journey.

pay-3 pay-white-2


Whether your goal is to process your purchase-to-pay transactions with minimum errors or manage your expense claim procedure, our team of experts can handle your accounting responsibilities, allowing you to focus on your core business and save time and money.

woman_and_man_figures human-hover

Global EOR services

Managing a diverse global workforce can be complex. This is where TopSource steps in as an invaluable employer of record services partner for companies seeking to expand their global reach while ensuring compliance with local employment laws and regulations.

Global Expansion Simplified

How to do business in Germany

Entering the German market presents a mix of excitement and challenges. Given unique business regulations, cultural intricacies, and economic dynamics, a well-defined roadmap is crucial for a successful business establishment.

TopSource Worldwide is with you at every stage. Whether it's navigating local regulations or facilitating seamless operational transitions, our expertise ensures a swift and efficient process for establishing your business in Germany.


Germany Insights

Key insights into Germany's landscape


VAT rates: Germany has a standard VAT rate of 19%, with a reduced rate of 7% for specific goods and services.


Ease of Doing Business rank: Germany ranks 22nd in the World Bank's Ease of Doing Business Index, showcasing a highly favourable business environment.


Consumer Confidence Index: As of 2022, Germany's Consumer Confidence Index was 99.3, reflecting robust economic sentiment.


Employee maternity/paternity leave: Maternity leave is 14 weeks, and paternity leave is 2 months, emphasising work-life balance and parental support.


Employee termination period: Standard notice for termination varies but commonly ranges from 1 to 6 months, depending on the length of employment.


Employee salary pay date: Wages are typically paid monthly, with specific pay dates outlined in employment contracts and adhering to labour regulations.


Bank holidays: Germany observes national holidays, including New Year's Day, Unity Day, and Christmas, with a total of 9 to 13 public holidays depending on the federal state.

Overview of Germany social security

Dating back to the late 1880s, the German healthcare system is one of the world’s oldest social health insurance systems and is comprised of two separate pillars:

  1. Gesetzliche Krankenversicherung — GKV (Statutory Health Insurance). It is estimated that around 90% of Germany’s population is covered by statutory health insurance.
  2. Private Krankenversicherung — PKV (Private Health Insurance). Around 10% of the German population (those on higher incomes and self-employed) enjoy this type of health insurance cover.

In Germany, the social security system consists of five main pillars:

  • Healthcare
  • Long-term nursing care
  • Pension insurance
  • Unemployment insurance
  • Accident insurance — which covers occupational accidents, commuting accidents and occupational diseases as required by German law.

Employees are legally required to register with one of the statutory healthcare providers in Germany. Germany has a universal multi-payer health care system paid for by a combination of statutory health insurance (Gesetzliche Krankenversicherung) — officially called “sickness funds” (Krankenkassen) — and private health insurance (Private Krankenversicherung), also known as “(private) sickness funds”.

Employees who meet certain criteria (such as a minimum salary) can choose to enrol in the private healthcare system.

Costs for healthcare, long-term nursing care, pension and unemployment insurance are split equally between the employee and employer, whereas accident insurance premiums are met in full entirely by the employer and paid annually to the Berufsgenossenschaft in Germany.

Statutory Employer’s Costs
Employer’s Cost %
Thresholds (Monthly)
7.3 + ind. % for each health insurance (on average 0.65%)
Euros 4,837.50
Long-term nursing care
Euros 4,837.50
Pension insurance
Euros 7,100
Unemployment insurance
Euros 7,100

In addition, there are nominal employer’s costs to be paid such as:

  • U1 Levy (continued payment of income in case of sickness). The rate varies by health insurance.
  • U2 Levy (continued payment of income in case of maternity rate). The rate varies by health insurance.
  • Insolvency insurance (0.06%).

Employing in Germany

labour contract

It is a legal requirement in Germany to have a locally compliant labour contract. TopSource Worldwide provides a dual-language contract as standard.

Fixed-Term Contracts

It is really important for fixed-term contracts to be signed by the employee well before the employment start date, otherwise the contract could be deemed to be indefinite.

Bonus Payments in Germany

In Germany, when offering bonus schemes to employees, it is really important to include such provisions in the contract and for the measurables and targets to be really clear.

If this is not clearly defined, the employee-friendly courts in Germany could deem that the bonus is guaranteed, and the employee could be awarded the full amount even if they had not been eligible under the scheme.

If you want to offer a bonus to your German employees, our onboarding team will guide you through this process.

Sick Leave

Employees in Germany are entitled to six weeks continuation of remuneration (sick pay) once they have been employed for four weeks. This is met in full by the employer.

Employees who are sick beyond this period will continue to receive sick pay from their health insurance; however, this is usually capped. A doctor’s note has to be provided if their sickness lasts more than three days.

Holiday Entitlement

In Germany, employees are entitled to the following annual holiday (excluding public holidays):

  • 6-day working week — 24 days per annum
  • 5-day working week — 20 days per annum

Note that it is customary to offer more than the standard minimum.


Generally, once a probationary period has been surpassed, termination of employment can only be affected respecting at least the statutory minimum notice of four weeks (to either the 15th or end of a calendar month).

The employer must, therefore, keep the effective date of employment termination in mind when determining when to deliver the notice of termination. The employee must be given a written notice of termination (in its original form), and the document has to be signed by the employer. All other forms of notice of termination (i.e., those given orally or by email or fax) are void and must be redone in the correct way for them to be effective.

The German Termination Protection Act heavily protects the employee from unfair dismissals, and it can be difficult to dismiss an employee once the six-month probationary period has passed. Please speak to a member of TopSource Worldwide’s global support team should you be considering dismissal.

Employ and pay anywhere

Specialising in multi-country payroll solutions

TopSource Worldwide offers comprehensive payroll outsourcing services, ensuring seamless and accurate management of your organisation's payroll functions. With cutting-edge technology and a team of experienced professionals, we handle payroll processing, tax compliance, and regulatory requirements with precision.

Calculate Your Employer of Record Taxes in Seconds

Employment Cost Calculator in Germany

Our Employment Cost Calculator simplifies complex tax calculations for global businesses. Accurately assess tax obligations, ensuring compliance with local regulations. Streamline payroll management effortlessly with our user-friendly tool, providing transparency and efficiency in international workforce taxation.

In addition to calculating your EOR taxes, our calculator can also help you:

  • Understand the different types of EOR taxes
  • Stay up-to-date on the latest changes to EOR tax regulations
  • Avoid penalties for non-compliance
Our author

Mark Robbins

Global Sales Director

Mark is the Sales Director at Topsource Worldwide. He has been a pioneering figure in the global expansion space since 2013. He is the first salesperson to sell EOR services in Europe, a feat he accomplished in 2013. 

Published 2023-11-14 00:00:00

Updated 2023-11-15 00:00:00

Adrian Cooney

Reviewed by:

Adrian Cooney

Adrian Cooney

Fact checked by:

Adrian Cooney

Employer of Record FAQ

Frequently Asked Questions about German employment solutions

What is an Employer of Record in Germany?

An Employer of Record (EOR) is a professional services provider that assumes the responsibility of being the legal employer for a company's workforce in Germany. This entails managing tasks such as payroll processing, tax withholding, benefits administration, and ensuring compliance with local labour laws and regulations.

How do global employment services work?

Global employment services operate as a comprehensive solution for businesses seeking to expand their workforce across borders. These services, often provided by Employer of Record (EOR) companies like TopSource Worldwide, streamline the complexities of international employment.

What are the benefits of working with an Employer of Record in Germany?

Employer of Record companies assume the legal responsibilities associated with employment, alleviating the burden of compliance, payroll, and HR management in Germany. This allows companies to expand globally without the complexities of establishing legal entities in each location.

What is the difference between EOR & PEO?

An EOR acts as the legal employer, handling tasks like payroll, tax compliance, and benefits administration. This allows companies to expand internationally without establishing legal entities. On the other hand, a PEO shares employer responsibilities with the client company, often co-employing workers.

How are employer payroll taxes calculated in Germany?

Calculating employer payroll taxes involves understanding the various taxes associated with employing workers and complying with tax regulations in Germany. Key components include federal and state income taxes, Social Security, Medicare, and unemployment taxes.

What global employment solutions does TopSource offer?

TopSource Worldwide facilitates hassle-free global expansion by acting as the legal employer, handling payroll, tax obligations, and HR responsibilities. With expertise in global entity management, TopSource assists businesses in navigating the intricacies of legal structures across borders.

Let's get started