Currency, Euro

83.19 million


4.26 trillion



Ease of Doing Business




Payroll Cycle

Grow your team in Germany

Benefits of hiring in Germany

Germany is Europe’s top economy and the world’s fourth largest. The country sits at the center of a dense transportation network. Its well-connected roads, railways, and airports make transporting goods throughout Europe easier than many other nations on the continent.

Germany has been named the fourth-most innovative country in the world.

Germany is one of the easiest countries in which to do business, according to the World Bank’s latest Doing Business report.

Germany is the sixth-most promising market for tech firms considering global expansion, according to Velocity Global’s Global Expansion Tech Index™.

Home to Europe’s largest population, Germany’s government is one of the world’s most politically, socially, and economically stable nations, according to The Fund For Peace’s 2021 Fragile States Index. Companies can expect a business-friendly environment backed by a resilient, dynamic economy and robust public services.

Germany’s government is one of the world’s most politically, socially, and economically stable nations.

Challenges of hiring in Germany

While Germany is a top international destination for growing businesses, navigating the country’s tax structures creates challenges. Companies must anticipate paying nine tax payments annually, totaling more than 200 hours of work. Relying on an EOR in Germany ensures compliance with the complex tax structure.

Additionally, property registration for businesses is a lengthy process. It involves an extract from the land registry, a notarized transfer agreement, pre-emption of rights waiver from the appropriate local municipality, and a transfer tax. Companies can expect to invest more than 50 days into registering a property for their business.

When entering Germany, businesses must learn the significance of the German works council, the most important employee representation organization.

While Germany is a top international destination for growing businesses, navigating the country’s tax structures creates challenges.

Cultural nuances of doing business in Germany

Use formal gendered titles and last names to greet colleagues and during conversation. The use of professional titles is required, both in-person and in digital communication. First names are withheld from business and usually used by family members or close friends. It’s common for colleagues who have worked together for years to still call each other by their last names. German professionals expect and appreciate formality.

In general, Germans are typically conservative as far as physical gesturing is concerned. Germans value and keep a larger personal space around them compared to residents of other European countries.

In business communication situations, shake hands both at the beginning and end of a meeting. Colleagues who have worked together for years still shake hands each morning as if it were the first time they have met. Additionally, a handshake may be accompanied with a slight bow or head nod. Reciprocating this action is a way to make a good impression, as failure to respond, especially to a superior, can be perceived as impolite.

Germans value order, privacy, and punctuality. Close adherence to time schedules is vital when doing business in Germany.

Interpersonal relationships play a secondary role during business. In Germany, there is a strong separation between work and personal life. Business relationships are based on mutual advantage, with the overall task as the central focus.

Following established methods is critical to building and maintaining business rapport. As a group, Germans are suspicious of exaggerations or grand emotional displays. Business communication is very formal and direct.

German business culture has a strict, vertically structured hierarchy with clearly defined differences. German management style has a reputation for being risk-averse.

Germans display great respect for authority, so it is imperative that they understand your professional level relative to their own.

In Germany, there is a sense of community, social conscience, and a strong desire for belonging. A well-oiled machine team atmosphere is expected in the workplace.

In Germany, there is a sense of community, social conscience, and a strong desire for belonging. A well-oiled machine team atmosphere is expected in the workplace.

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Hiring in Germany

When employing an individual in Germany, the terms of employment are usually agreed to in a written employment agreement. Except for fixed-term employment and non-compete obligations, which must be in writing, verbal agreements are permissible but not recommended.

  • Employment agreements in Germany

    The employer must provide a written statement of the employment terms to the employee within one month of starting employment. The written statement must include the following:

    • Employment start date
    • Usual work location
    • Brief job description
    • Salary and other elements of remuneration
    • Working hours
    • Annual holidays
    • Notice period
    • Applicable collective bargaining agreements
  • Probationary period in Germany

    Probationary periods in Germany are fairly common. They usually last no longer than six months but are not required by statute.


Easily navigate payroll laws, contributions, and requirements in Germany

August 31

Tax due date in Germany

Non-residents of Germany only pay income tax on the income earned in Germany. Individuals are considered German residents if they have spent 183 days in the country within a tax year.


Payroll cycle in Germany

The payroll cycle in Germany is generally a monthly cycle, with wages paid around the end of each month. 


Average working hours in Germany

Under the Working Hours Act, daily working hours must not exceed eight hours. Based on six working days per week, employees can't exceed 48 hours per week.

  • Minimum wages and salaries in Germany

    Germany introduced a statutory minimum wage in 2015. Previously, minimum wages in Germany were set exclusively by collective bargaining agreements. Since January 1, 2015, the Minimum Wage Act (Mindestlohngesetz) applies to all employees employed in Germany and is reassessed every two years. As of June 10, 2022, Germany’s parliament approved an increase of the minimum wage to EUR12 gross per hour, beginning October 1, 2022.

  • Bonus payments in Germany

    It is common in Germany to reward employees through contractual or discretionary bonus payments. However, it is not required by law. Employers must carefully review when scheduling a contractual bonus as changes to the plan are very restricted. If the contractual bonus plan is not met, employees can claim damages, often resulting in the payment of the on-target bonus amount. Payment of a discretionary bonus is decided at the end of each fiscal year.

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Taxes and social security in Germany


Non-residents of Germany only pay income tax on the income earned in Germany. Individuals are considered German residents if they have spent 183 days in the country within a tax year. Germany has entered into double taxation treaties (DTT) with many countries, so these principles must also be taken into account for tax purposes.

Tax thresholds in Germany

As of 2022, the income tax rates in Germany are:

  • 0% for income up to EUR9,984
  • 14%-42% for income between EUR9,985 and up to EUR58,596
  • 42% for income between EUR58,597 and up to EUR277,825
  • 45% for income over EUR277,826

Social security contributions are paid upon employees’ gross annual earnings, where the contributions are shared equally between the employer and the employee.

  • National pension: 18.6% contribution
  • National health insurance: 14.6% contribution
  • National unemployment insurance: 2.5% contribution
  • Old-age nursing care: 3.05% contribution

Health insurance in Germany

Germany’s national health system (Gesetzliche Krankenversicherung (GKV) provides universal health coverage, which ensures anyone who works for an employer in Germany will have their medical expenses covered from the day they start working. This system covers workers in case of injury, illness, maternity, paternity, disability, and death. An employee’s family can also benefit from this coverage. The medical expenses covered in full or in part include:

  • Medical and paramedical expenses
  • Prescription medication expenses
  • Hospital expenses

Pension in Germany

In Germany, the statutory old-age insurance fund ensures that employees can maintain an appropriate standard of living when they retire. Payments are generally made starting at age 67, and the maximum payout currently amounts to 67% of the average net income during the insured employee’s working life.


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Leave entitlements in Germany

  • Annual leave in Germany

    Under the Federal Holiday Act (Bundesurlaubsgesetz), the minimum annual leave entitlement is 20 days issued upon a five-day working week and 24 days issued upon a six-day working week. However, most employers usually give between 27 and 30 days of annual leave in Germany.

  • Parental and maternity leave in Germany

    Maternity protection is for employees who are pregnant or breastfeeding a child. This includes the protection of health in the workplace combined with a right to working conditions that are appropriate for maternity care, protection against dismissal, and income protection.

    The maternity leave period in Germany is the time during which employees are not allowed to work before and after birth. This usually begins six weeks before the expected due date and ends eight weeks after the birth.

    Employers must allow employees to leave for medical examinations related to pregnancy. Employers are not able to reduce wages or salary for this leave.

    Until the child’s first birthday, employers must give employees time off to breastfeed if they wish.

    In addition to maternity leave, both female and male employees are entitled to take a supplementary parental leave up to each child’s third birthday. The employee and employer can agree to transfer up to 24 months of parental leave up to the child’s eighth birthday.

    A parental allowance is paid by the government, not the employer, for a maximum duration of 12 months. Employees are entitled to a parental allowance of 65% of the last net income, but not more than EUR1,800 per month. Under the Parental Allowance Plus system, employees will receive the same amount of remuneration but stretched over a 24-month period.

    Parental leave in Germany is one of the most progressive policy plans in the world. German citizens benefit from the scale of paid leave, employment protections, benefits regardless of employment status, and considerations for both mothers and fathers, as well as separated parents, single parents, adoptive parents, and widows.

  • Sick leave in Germany

    The Continued Remuneration Act (Entgeltfortzahlungsgesetz) grants employees six weeks of statutory sick pay upon four weeks of employment. Employers with fewer than 30 employees can apply to the employers’ cost-sharing fund (Aufwendungsausgleichsgesetz), where they can recover sick pay.

  • Regional and national holidays in Germany

    Germany has 13 public holidays, which are not included in the minimum paid leave entitlement. However, employers generally give their employees all of Germany’s public holidays off work. The 13 national holidays in Germany are:

    • New Year’s Day (January 1)
    • Epiphany (January 6)
    • Good Friday (April, the specific day fluctuates each year)
    • Easter Monday (April, the specific day fluctuates each year)
    • Labor Day (May 1)
    • Ascension Day (May, the specific day fluctuates each year)
    • Whit Monday (May or June, the specific day fluctuates each year)
    • Corpus Christi (June 11)
    • Day of German Unity (October 3)
    • Day of Reformation (October 31)
    • All Saints Day (November 1)
    • Christmas Day (December 25)
    • St. Stephen’s Day (December 26)

Employment benefits in Germany

Employee benefits in Germany include comprehensive social security and health insurance that covers all life risks for residents. Employed residents and their families are fully eligible for Germany’s social security system, which includes:

  • Health, maternity, paternity, disability, and death insurance
  • Occupational accident and illness insurance
  • Government pension contributions
  • Family allowances
  • Unemployment benefits

Termination and notice period in Germany

The statutory notice period an employer must observe when terminating employment varies. It can range from two weeks during a six-month probation period to four weeks for employees on passing their probation and up to seven months after 20 years of service. The employment agreement can allow for longer notice periods, and collective bargaining agreements can allow for shorter notice periods.

An employer cannot pay an employee instead of providing notice. If a severe breach of contract occurred, the employer can immediately terminate employment. This immediate termination notice must be served within two weeks of the employer gaining knowledge of what caused the dismissal.

There is no statutory severance in Germany. Employees are only entitled to severance under an agreement with the German works council. However, many employers and employees agree on severance pay to avoid lengthy court proceedings. This severance usually amounts to 50% of the monthly salary per year of service. The severance pay varies significantly depending on the strength of the case for dismissal and the previous practice of the employer.


  • What is an employer of record in Germany?

    An employer of record (EOR) in Germany is a third-party organization that becomes the full legal employer of your in-country workforce. The EOR compliantly handles employer-related responsibilities like onboarding, pay, and benefits while enabling you to continue managing the day-to-day operations of your team.

  • How does an employer of record in Germany help hire talent?

    An EOR enables you to hire in Germany without going through the complexities and restrictions of setting up a legal entity. As an EOR, Velocity Global acts as the legal employer, hiring your new team members through local, compliant employment contracts—you get back the time and flexibility to focus on your growing business.

  • Can an employer of record run payroll in Germany?

    When you work with Velocity Global’s EOR solution in Germany, our experts compliantly handle all payroll and benefits for your team members in the country.

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