How to Hire in Germany Without a Local Entity

For many global businesses, hiring in Germany is a priority, but setting up a GmbH or a branch feels like too much, too soon. The good news is that you can legally employ people in Germany without a local entity, as long as you choose a compliant structure and respect German labor, tax, and social‑security rules from day one.​

Why businesses look at hiring in Germany without an entity

Germany is an attractive market, but incorporating a local company demands time, capital, and ongoing administration. If you are only making one or two strategic hires or testing demand, hiring in Germany through lighter-weight structures is often more efficient than jumping straight to aGmbH.​

However, German authorities still expect correct registration, payroll, and contributions for anyone employed there, regardless of whether you have a subsidiary. That is why informal arrangements can quickly create risk around misclassification, permanent establishment, and unpaid social security.​

Option 1 – Employer of Record (EOR)

Using an Employer of Record is the most straightforward way to hire in Germany without establishing a local entity. An EOR becomes the legal employer in Germany, issuing compliant contracts, running payroll, and handling tax and social‑security, while your company directs the employee’s day-to-daywork.​

In Germany, a compliant EOR operates under local registrations and, where relevant, an AÜG labor‑leasing licence when seconding employees to client companies. With Agility’s Employer of Record solution in Germany, your hire receives an employment contract governed by German law and the associated statutory protections, while you retain control over day‑to‑day duties, performance expectations, and company culture.

Option 2 – Foreign employer registration / permanent representative

Another way of hiring in Germany without incorporating aGmbH is to register your existing company as a foreign employer, sometimes with a permanent representative structure. In this model, your overseas entity registers with German tax and social‑security authorities and may appoint are presentative to coordinate payroll and reporting.​

This allows you to employ staff directly under your own name without establishing a full subsidiary. It can be useful if you foresee growth but are not ready for a full local company, though you must manage administration carefully and monitor any risk of creating a taxable permanent establishment in Germany.​

Option 3 – Genuine independent contractors

Some organizations initially use independent contractors asa way into hiring in Germany without an entity. This can work if the relationship is genuinely freelance: multiple clients, control over schedule, own equipment, and freedom to accept or refuse work.​

German authorities are strict on misclassification, and a contractor who works only for your company, follows your instructions, and is integrated into your team may be treated as an employee. That can lead to back‑payments of income tax, social contributions, and benefits, so contractor-only models should be used cautiously and with clear legal guidance.​

Why EOR is often the best fit

For most international employers, an EOR offers the best balance of speed, compliance, and flexibility when hiring in Germany without a local entity. You can onboard employees in weeks rather than months, avoid entity setup costs, and delegate German contracts, payroll, and filings to specialists.​

Compared to other routes, an EOR helps you:

• Move quickly while you test or scale your German presence.
• Reduce the risk of misclassification and permanent‑establishment issues.
• Keep internal teams focused on operations instead of navigating German bureaucracy.

Agility’s Employer of Record in Germany page explains this model in more depth, including key AÜG requirements, typical employment‑related costs, and the usual duration of EOR assignments.

Practical steps for hiring in Germany without an entity

To turn this into a clear plan for hiring in Germany, you can follow a simple sequence.

1. Define your hiring needs. Decide how many roles you need in Germany, what skills they require, and how long you expect to keep them.​

2. Choose your structure. For most early-stage or smaller teams, partnering with an EOR is the cleanest way of hiring in Germany without a local entity; foreign‑employer registration or permanent representative models may suit specific, more established scenarios.​

3. Agree on contracts and onboarding. Work with your chosen provider to issue German‑law contracts, confirm salary and benefits, and design an onboarding journey aligned with your internal processes and culture.​

4. Run local payroll and contributions. Ensure payroll, tax, and social‑security are processed inGermany every month, with payslips and filings that meet local standards.​

5. Review as you grow. As your head count and revenue in Germany increase, reassess whether to continue hiring in Germany through an EOR or foreign‑employer model, or move to a GmbH and transfer employees.​