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Employer of Record Germany

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Employer of Record Germany

Finding a compliant hiring solution in Germany can be difficult due to restrictions in place. With our fully compliant entity, Agility can offer you the solution to hire talent locally. 

Currency

Euro

Population

83 Million

Capital City

Berlin

Minimum Wage

EUR 12.41 per hour

Local Language

German

Working Hours

36 – 40 hours per week

In Germany, an Employer of Record is considered a temporary agency and must have an AUG (Arbeitsnehmerüberlassung) licence to hire workers compliantly.

Once in place, the Employer of Record can legally hire the employee on a fixed-term contract for up to 18 months. 

Employer of record responsibilities

  • Remitting all tax and social security contributions for the employer and employee
  • Providing employee payslips
  • Making salary payments
  • Compliantly employing a worker (as per AUG licensing requirements)

How does an Employer of Record Germany work?

Agility

Compliantly employ a worker as a temp agency under the AUG licence, a requirement for any company in Germany hiring workers on behalf of a client company. The worker is hired on a fixed-term 18 month contract.

Company

Under the AUG licence. the client company must sign an additional agreement confirming the equal treatment and fair recruitment process of the employee.

Employee

The employee will sign the contract with the Employer of Record but performs all work -related activity for the client company.

Cost Calculator

Use our easy calculator to explore the employment costs in Germany. Share a bit more information, and we’ll deliver a detailed salary breakdown straight to your inbox.

Payment Frequency

Employees are paid monthly, by the last working day of the month. There is no requirement for a 13th/14th month salary in Germany. 

 

Employee Tax – 20 to 65%

  • Personal income tax is calculated on a progressive rate from 14%-42%
  • Employee social security contributions amount to circa 19.5% (subject to maximum thresholds).
  • Employees may also be subject to Church Tax (8-9%).

 

Employer Tax – 19.3%

  • Healthcare insurance: 7.3%
  • Pension: 9.3% 
  • Unemployment insurance: 1.3%
  • Long-term care insurance: 1.525%
  • Additional health levies may be applied (dependent on the employee’s health insurance policy.
  • Insolvency Levy: 0.09%

Maximum thresholds vary for contributions and East and West Germany. 

  • Pension and Unemployment Insurance: €7550 (West), €7450 (East)
  • Health and nursing care insurance: €5175

 

Probation Period

The probationary period in Germany is up to 6 months for employees with an 18-month fixed-term contract. 

 

Employment Law

  • Written employment contract – in line with AUG (Arbeitsnehmerüberlassung) license
  • German Working Time Act (Arbeitszeitgesetz – ArbZG)
  • Flexible working
  • Unfair dismissal protection
  • Monthly payslip
  • GDPR
  • Discrimination protection
  • Whistleblowing
  • Equal treatment

 

Employee Termination

Terminations in Germany are restricted by the Dismissals Protection Act, awarding greater protection to employees and making the dismissal process very complex. Termination via a mutual settlement agreement is common in Germany due to the high levels of protection. 

German labor laws distinguish between ordinary and extraordinary terminations. In the case of ordinary termination, the employer is obliged to provide the statutory notice period. Extraordinary dismissals are only justifiable in the case of gross misconduct or ‘serious cause’ and the employment is terminated with immediate effect. The notice period in Germany is effective from either the 15th or last day of the calendar month.

Severance payments are not a mandatory requirement, provided the termination is justified and the correct notice and procedure is followed. It is not uncommon for severance to be offered as part of a mutual settlement agreement to avoid an unjustified termination.

Employee Benefits

Statutory Benefits

  • Healthcare
  • Pension
  • Accident Insurance

Common Additional Benefits

  • Car allowance
  • Home-working allowance
  • Additional Holidays
  • Flexible Working
  • Dental Plan
  • Stock Options
  • Transport Allowance
  • Supplementary Pension
  • Supplementary Healthcare Insurance
  • Life insurance

Statutory Leave

Holiday Allowance – 20 days
Sick leave – 6 weeks
Parental Leave – up to 3 years (unpaid leave; employees may claim parental allowance "Elterngeld"
Maternity leave – 14 weeks
Paternity Leave – 10 days (effective early 2024)

FAQ

Think of it like this: Agility EOR becomes the legal employer of your employees, taking care of all the paperwork and compliance headaches.

Agility EOR
  • We manage the onboarding process and ensure everything’s in order before your employee starts
  • We make sure your employees are treated fairly and compliantly in their relevant territory
  • We take care of all HR matters, and can answer any and all HR queries you may have e.g. maternity/paternity leave, holidays, sick pay, and more
  • We provide compliant contracts, process local payroll, and file taxes
  • We issue payslips and handle payments to the employee and authorities
Your Company
  • You find and manage your employees’ daily tasks
  • You support their development through their work
  • You follow our guidance on employment laws and best practices
  • You ensure payroll bills are paid to Agility EOR on time

 

Benefits of using an Employer of Record (EOR)

  • Faster and easier hiring: No need to set up your own legal entity.
  • Reduced risk and compliance burden: We handle the legal and administrative complexities.
  • More time and resources: Focus on your core business while we manage your employees.

There are a number of different ways to employ people in Germany with different levels of compliance, and different costs.

Employee is employed by you and paid by you from your overseas Company

Pros: Seems to be a cost-effective solution

Cons: Option is only compliant if the company registers the employee and company for tax and social security deductions. The contract of employment will be bound by German legislation.

 

Using an Employer of Record

Pros: The Employer of Record (EOR) Germany  can streamline your operations by handling all the payroll, HR, and compliance tasks for you. This can be the most cost-effective way to set up a legal employer-employee relationship, especially if you have a small team (under 15 employees) and want to save time and money.

Cons: The solution proves expensive with more than 15 employees.

 

Entity Set-up

Pros: With 15 or more employees, this becomes the most cost-effective choice.

Cons: Compliance with employment and tax laws can be a hurdle and very costly. Requirement to stay on-top of changes in regulations.

 

Hire a contractor in Germany

Pros: Is an easy and cost effective solution if the worker isn’t working solely for one company, Responsibility for registration and taxes is borne by worker.

Cons: Hiring a contractor who works solely for one company is illegal in Germany. Contractors are classified differently to employees and workers do not receive the same protection and benefits.

Provided the worker is correctly registered as self-employed either as a freelancer (Freiberufler) or tradesperson (Gewerbetreibender) and is not working solely for your company, you may hire a contracted worker in Germany.

The worker must be correctly registered with the IHK and is responsible for filing their own taxes and social security contributions.

When hiring independent contractors in Germany, you should provide a service contract or Werkvertrag. The worker must have the freedom to perform tasks on their own schedule and must not be integrated into the workplace. Breach of this risks misclassification of the worker and the company will be required to award all benefits and entitlements.

Companies in Germany must be correctly registered in accordance with the German Commercial Code (HGB – §§ 1 – 104).

A registered address must be provided and the company must be registered, by a notary, in the local jurisdiction (Handelsreigster). Articles of association and shareholder details must also be notarised.

The German company must then be registered locally for tax and payroll with the local and federal tax offices (Finanzamt and BZSt)

Hiring employees in Germany comes with specific legal responsibilities. HR compliance simply means making sure your company follows all the rules and regulations regarding employment and work practices.

Compliance protects both your employees and your business, ensuring your workers receive the working conditions and statutory benefits they are entitled to.  This not only creates a happy workplace, but it also shields you from hefty fines, legal trouble, and headaches down the road.

When you use Agility EOR as your Employer of Record in Germany, we handle everything related to filing and paying your employees’ taxes and social insurance contributions. We ensure everything is compliant and you don’t have to worry about a thing.

Though Agility EOR handles German employment law and compliance, your company retains responsibility for day-to-day management and communication with your team. This includes informing employees about performance issues or disciplinary actions.

Put simply, Agility EOR takes care of the legal paperwork, while you manage the people and their day-to-day work.

In Germany, both employers and employees contribute to the social and tax system.

Employers: Pension, unemployment insurance, health insurance, nursing insurance

Employees: Income tax, Church tax (if applicable), Pension, unemployment insurance, health insurance, nursing insurance,

German employment law fully protects employees hired through an Employer of Record (EOR). They receive a legally compliant local contract, statutory benefits including maternity leave, annual leave, and illness payments, along with relevant tax credits. 

Agility EOR takes care of your HR compliance headaches. Here’s how:

Trusted Partners: We team up with top employment lawyers and advisors in Germany, ensuring your contracts and documents meet all local requirements.

In-Depth Knowledge: We stay updated on complex topics like payroll, social security, data privacy, notice periods, and remote work regulations.

Swift Action: If an issue arises, our internal team immediately contacts our Irish experts for prompt resolution.

Wondering if expanding in Germany is right for you?

Read on or speak to a member of our team now

Germany Employer of Record Benefits

When you choose Agility EOR to expand in Germany, we guarantee an EOR Service tailored to the needs of your business

Compliance

We are on top of regulatory changes in Germany so you can relax.

Cost reduction

Allow our economies of scale to work in your favour.

High Service Levels

You and your employees have a dedicated account manager.

Fixed Cost Pricing

We will agree our professional fees up front based on your needs – no nasty surprises!

Consolidated Invoicing & Payments

Make one monthly payment to cover all your tax, social and wages costs from one to one thousand employees.

Fast delivery

You can have 'boots on the ground' within days on our infrastructure.

Reduced Risk

All wage taxes are remitted in full to the German authorities by professionals ensuring liabilities are met, giving you peace of mind.

Supply Chain Transparency

We only pay employees through local full employed solutions meaning German payroll tax is paid on all funds.

Save Time and Money

Our expertise is at your disposal. The need for you to have internal HR, Payroll and admin staff is eliminated.

Download our full Germany Employment Guide

Find out all about employing in Germany

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