COUNTRY GUIDELINES GERMANY

AN OVERVIEW OF EMPLOYING IN GERMANY

 

1. CURRENCY -Euros (€)
2. PAY DATE -
   The salaries are paid on the last working day of the month.
3. SALARY-
   Salary in Germany is paid in 12 equal installments throughout the year. The statutory
   Minimum wage for employees in Germany in 2025 is EUR 12.82 per hour, €2,161 per month, 25,932 euros per year. 
   The minimum wage has already been approved to increase to €13.90/hour from 1 January 2026, and further to €14.60/hour from 1 Jan 2027. The rise to €13.90/hour from Jan 2026 will increase the baseline monthly salary to approximately €2,410/month, which affects overall employer cost (especially social security)
4. SOCIAL SECURITY SYSTEM-
   The German social security system consists of five elements:
   
   1. Health insurance
   2. Accident insurance (covers occupational accidents, commuting accidents and occupational diseases, as required by German law)
   3. Unemployment insurance
   4. Pension insurance
   5. Nursing care insurance
5. HEALTHCARE-
   The healthcare system is financed by Statutory Health Insurance (SHI) and Private Health Insurance (PHI). 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 are legally required to register with one of the statutory Healthcare providers in Germany. Employees who meet certain criteria (a minimum salary of €73,800 per year (2025)) can choose to enroll in Private Health Insurance (PHI). Employees with annual income lying below this threshold are required to join Statutory Health Insurance (SHI).
6. EMPLOYERS’ COSTS-
   The costs for Health Insurance, Nursing Care Insurance, Pension Insurance 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 Employers’ Contributions	Employers’ Costs (%)
   Health Insurance	7.30%
   Additional Healthcare Contribution	1.25%
   Long Term Nursing Care Insurance	1.80%
   Pension Insurance	9.30%
   Unemployment Insurance	1.30%

   In Germany, the contribution assessment ceilings (Beitragsbemessungsgrenzen) determine the maximum income on which social security contributions are calculated.

   
   The contribution assessment ceilings for statutory pension and unemployment insurance have been standardized nationwide from 2025 onwards. The social security thresholds as of 2025 are as follows: 

   Contributions	Monthly	Yearly
   Pension and Unemployment Insurance	€8,050	€96,600
   Healthcare and Nursing Care Insurance	€5,512.50	€66,150

   Employees with gross monthly earnings exceeding these ceilings will only pay social
   security contributions up to the respective ceiling amounts. Earnings above these thresholds are exempt from social security contributions.

   In addition, there are nominal employers’ costs to be paid such as:
   
   1. U1 Levy (Continued payment of income in case of sickness) – the rate varies by health insurance 
   2. U2 Levy (Continued payment of income in case of maternity rate) – the rate varies by health insurance
   3.; Insolvency Insurance

AN OVERVIEW OF THE MAIN STATUTORY BENEFITS

1. PENSION-
   Under the German Income Tax Act, it is a requirement for employers to pay 15% of the amount deferred
   by an employee under a salary sacrifice contract concluded on or after January 1, 2019, through a direct
   insurance, traditional pension fund, or capital market-oriented pension fund, only if the employer saves
   social security contributions (salaries below 7,450 EUR monthly) because of salary sacrifice. 4% of the
   German state pension contribution limit is free from social security contributions, €322 per month in
   2025.
2. SICKNESS
   Under the Remuneration Continuation Act, employees are entitled to sick pay from their employers for a period of up to 6 weeks for the same illness. Employees are required to obtain a medical certificate or a doctor’s note for any inability to work that lasts more than 3 calendar days. Sick pay is available to all employees who have completed 4 weeks of service. The amount is equal to the employee's usual
   remuneration, i.e., 100% salary.
   
   If six weeks have expired and the employee continues to be sick, an employee who is a member of the statutory health insurance system is entitled to sick pay from their health insurance provider for a maximum period of 72 additional weeks. This sick pay amounts to 70% of the employee's gross pay, but no more than 90% of the employee's net pay, in each case up to the contribution assessment ceiling in the statutory health insurance system (€66,150 in 2025). This is also based on the insured employee’s fund
   level, for up to 78 weeks (first 6 weeks by employer and 72 weeks by healthcare provider) in three years for incapacity caused by the same illness, calculated from the first day of sickness.
   
   

MATERNITY & PATERNITY LEAVE

Maternity Leave: 

Maternity leave commences 6 weeks before expected childbirth and ends 8 weeks after childbirth (12 weeks in the case of multiple births, pre-term births or if a disability of the child is determined within 8 weeks of birth). During maternity leave, the employee receives maternity pay from her statutory health insurance provider or the government, and the employer is required to make up the difference between maternity pay and the average net remuneration. Remuneration during the 14 weeks’ maternity leave should be equal to the last salary received prior to maternity leave.

As mandated by the German Expenditure Compensation Act, employers who pay the U2 levy are entitled to full reimbursement for maternity-related salary payments. The U2 system is a statutory scheme that compensates employers for paying employees' salaries during maternity leave. Under this system, employers receive 100% reimbursement for:

• The full salary paid during the maternity protection period (typically six weeks before and eight weeks after childbirth)
• The employer's contributions to social security during this period

Paternity Leave

A statutory paid two-week paternity leave (Vaterschaftsfreistellung) has been officially passed and will come into effect from 2026 (exact date pending confirmation, likely Jan 1). Under the existing legal framework, fathers or second parents can take parental leave, which is unpaid and can be taken for up to three years per child. This leave can be taken by either parent, in part or full, and can be shared between parents. 

Parental leave

Parental leave may be taken if an employee lives with, cares for and educates their child. Parental leave can be taken until the child's third birthday. Up to 24 months' parental leave may be taken after the child's third birthday but before their eighth birthday. Parental leave is unpaid by the employer; however, a government benefit of up to €1,800 per month, is available to the parents for a maximum period of 12 months or, if each parent takes at least two months' parental leave, 14 months. Employees are entitled to work up to 32 hours per week during parental leave.

Parental Allowance (Elterngeld) Income Threshold Reduction

From 1 April 2025, the joint income cap for Elterngeld eligibility is reduced to €175,000 (previously€300,000)

CONTRACTUAL PROVISIONS

Digital Employment Documentation (Nachweisgesetz Amendment – 2025)

As of Jan 2025, employment terms and documentation can now be provided electronically (e.g., PDF/email) instead of paper, except in certain sectors (e.g., construction).

Probationary Period 

Probation periods are generally set within the collective agreements or employment contracts. The probationary period should generally not exceed 6 months. During this period, the statutory notice period for termination is 2 weeks.

Rest Breaks:

Employees are entitled to a rest break of 30 minutes after 6 hours of continuous work, and 45 minutes for a period of work exceeding 9 hours. Rest break may be divided, provided that each individual break period is 15 minutes long. In accordance with the Working Time Act, all employees are entitled to 11 hours’ uninterrupted rest break after the end oftheir daily working time (between one working day and the next). During this time, the employee must not be subjected to any obligations from their employer.

TERMINATION

As the Employer of Record, the responsibility for assessing the legal basis and issuing appropriate legal documentation for a potential termination is owned by TopSource Worldwide. It is imperative that the work side employer (client) consults TopSource Worldwide prior to any individual discussions taking place around possible termination of contracts.

The termination process varies according to the employment agreement and collective agreement and is based on the type of contract and reason for termination. After the first six months of employment, employees are protected by the German Termination Protection Act.

As of 1 Jan 2025, the favourable taxation for severance (Fünftelregelung) must be claimed by
employees via their tax return. Employers no longer apply it directly in payroll.

HOLIDAY ENTITLEMENT

In Germany, employees are entitled to the following annual holiday (excluding Public Holidays):

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

Note, that it is customary to offer more than the standard minimum. It would not be unusual to offer employees in Germany at least 22 days’ holiday rising to 30 days per year, depending on the level of seniority.
Carry over leave is permissible, must be agreed by both the employer and employee. Any leave carried over must be used by March of the following year.

During the first 6 months of the employment relationship, vacation accrues at a rate of 1/12 of the annual vacation per completed month. After 6 months of service, employees are entitled to the full annual vacation. Severely disabled employees are entitled to 5 days' additional paid vacation per year (based on a 5 day working week) 

PUBLIC HOLIDAYS

Holidays are always observed on the day on which they fall, even if they fall on a weekend. Holidays are not moved to the nearest Monday, nor do employees get a free day in compensation for a holiday falling on a non-workday.

Germany observes 9 nationwide public holidays, but the total number varies by federal state, with some states granting up to 13 holidays.

PUBLIC HOLIDAY DATES 2025