Hire employees and manage payroll in Germany

Our guide to employing in Germany.

Country Facts

The Federal Republic of Germany is a member of the European Union and the Eurozone, the UN, the Group of Seven, the G20, NATO and the OECD. Its nominal GDP in 2021 was 4.319 trillion USD, which makes it the fourth largest economy in the world. Its Human Development Index is at 0.947, which is categorized as very high, with a global ranking of 6th.

country

Capital

Berlin

Currency

Euro (EUR)

Language spoken

German

Population size (2020)

83,24 million

Ease of doing business (world bank ranking)

22

Cost of living index(2021)

70,62

Payroll frequency

Monthly

VAT - standard rate

19%

GDP - real growth rate(2020)

-4,57%

Employing in Germany

To enable running a local payroll in Germany companies must register the new business with the local municipality’s authorities. These include:

  • Local Trade Office (Gewerbeamt)

  • Trade Register (Handelsregister)

  • Local Tax Office (Finanzamt)

  • Relevant Professional Chamber

  • Employer's Liability Insurance Association (Berufsgenossenschaft)


Although registration with the Trade Office automatically leads to the Tax Office, Trade Register and Employer’s Liability Insurance Association being informed, it is generally recommended to follow up on this as a company too, to ensure registrations are complete.


A local tax number (Steuernummer) is issued to the company once registered with the Tax Office. Similarly, a registration in the relevant Employer’s Liability Insurance Association leads to the company acquiring a membership number (Unfallversicherungsnummer) once its first employee is hired. It is also obligatory to register for an operation number (Betriebsnummer) at the job agency (Agentur für Arbeit).


These three (Steuernummer, Unfallversicherungsnummer and Betriebsnummer) are all required for correct communication and payments with respect to the company’s social security obligations.

Trade union (Gewerkschaft) membership is constitutionally protected in Germany and collective agreement are in most cases obligatory.
German employees must, by law, be given a written employment contract that mentions key components of the employment relationship. This includes:

  • Parties to the contract

  • The employee’s work tasks

  • Gross salary and benefits

  • Annual leave

  • Entitlement

  • Start date of employment

  • Working location

  • Notice periods


Usually, terms and conditions based on Collective Bargaining Agreements’ frameworks are also included.



The employer must register all new employees for social insurance. Such registration, (with a health insurance company) has to be completed within six weeks of the employee being hired.

Employers are also responsible, on behalf of the employee, for the continued collection of a so called “capital formation savings payment” (Vermögenswirksame Leistungen), which should be run through the payroll. The employee chooses what insurer he/she wants to use for this.

New employees must also be registered with Germany’s Electronic Payroll Tax Deduction Characteristics (known as ELStAM) before the first payroll is run.

List of Public Holidays - 2022

Date Holiday Name

1 January

New Years Day

15 April

April Good Friday

17 April

April Easter Sunday

18 April

Easter Monday

1 May

Labour Day

26 May

Ascension Day

6 June

Whit Monday

3 October

German Unity Day

25 December

Christmas Day

26 December

2nd Day of Christmas

Minimum wage

The Minimum Wage Act (Mindestlohngesetz- MiLoG) sets the National Minimum wage as 9.60 Euro / h, which is to be increased to 9.82 Euro / h on 1st January 2022 and to 10.45 Euro / h on 1st July 2022. On top of this many different minimum rates are applied due to sector-specific collective bargaining agreements.

Salary payouts

In Germany, salaries are typically paid out on a monthly basis, and usually on the 1st or 15th of month. Note that there is an additional 13th month pay period.

Taxes in Germany

Learn how employment taxes and statutory fees affect your payroll and your employees’ paychecks in Germany

Employer

Corporate income tax rate : Ca 22.83 - 36.83%

Corporation tax (Körperschaftsteuer) starts at a rate of 15%, with a so called solidarity surcharge added at 5.5% of this amount, which corresponds to a total rate of 15.825%. On top of this are the local trade taxes, depending on the municipality the company is located in, which varies between 7% and 21%.

Health insurance : 7.30%

Pension Insurance : 9.30%

Unemployment Insurance : 1.20%

Long-term care insurance (employees aged 23 or older) : 1.525%

Insolvency Charge : 0.12%

Total employer cost : 19.45%

Employee

Health insurance : 7.30%

Pension Insurance% : 9.30%

Health insurance : 7.30%

Unemployment Insurance : 1.20%

Care Insurance (employees aged 23 or older) : 1.525%

Long-term care insurance (employees aged 23 or older) : 1.525%

* (effective once the employee reaches 23 years of age and is increased to 1.775% for employees with no children

Total employer cost : 19.33%

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