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EOR IN Germany
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A guide to employing and growing your team in Germany
Fast and compliant market entry. Hire top local talent without the need for a legal entity
Germany is the largest economy in Europe and the fourth-largest in the world by nominal GDP. Known for its industrial prowess, Germany is a global leader in sectors such as automotive, engineering, renewable energy, and chemicals. The country offers a robust welfare system with strong worker protections and a highly skilled labor force. Germany is also known for its high living standards, excellent healthcare, and education systems. The labor market is regulated by laws that ensure employees’ rights, including paid leave, health insurance, and retirement benefits, with extensive union participation in workplace matters.
Employer Contributions
Employer Social Security Contributions (IMSS): 20%
Severance Guarantee Fund (FGTS): 8%
Work Accident Risk Tax (RAT): 1%-3%
Social Assistance Fund: ~5.8%
Total Employer Contribution: ~34.8%-36.8%+
Employee Payroll Taxes
Social Security: ~20.525%
Unemployment Insurance: ~1.2%
Work Accident Insurance: ~0.5%
Total Employee Contribution: ~20.525% + applicable income tax
Employee Income Tax Rates
Up to 9,984 EUR: Exempt (basic allowance)
9,985 – 58,596 EUR: 14% to 42%
58,597 – 277,825 EUR: 42%
Above 277,825 EUR: 45%
Statutory Leave
In Germany, employees are entitled to 24 working days (4 weeks) of paid annual leave per year, as per statutory law. Many companies offer additional leave based on collective agreements. Public holidays range from 9 to 13 days annually, depending on the region, with some states having additional holidays. For sick leave, employees are entitled to up to 6 weeks of paid sick leave at 100% of their salary, provided they have a doctor’s note. After 6 weeks, employees receive compensation from health insurance at 70% of their salary.
Pregnancy and Maternity Leave
In Germany, female employees are entitled to 14 weeks of maternity leave: 6 weeks before the expected birth and 8 weeks after birth (or 12 weeks for multiple births). During this time, employees receive 100% of their salary, paid by the statutory health insurance system.
Paternity Leave
Fathers are entitled to up to 2 weeks of paid paternity leave, which must be taken within the first 8 weeks after the birth of the child.
Work-Related Injury Leave
In Germany, parents can take up to 3 years of unpaid parental leave per child, with the option to receive parental benefits (Elterngeld) at 65% to 67% of their previous net income. Employees are also entitled to paid personal leave for life events, such as 1 to 2 days for marriage, 2 to 3 days for bereavement, and 1 day for a child’s wedding. For work injury leave, employees injured at work are entitled to full compensation for medical expenses and a portion of lost wages through statutory accident insurance.
Termination Process
Dismissal for Personal Reasons: Requires a valid reason, such as poor performance, misconduct, or long-term illness. A formal warning is typically required before dismissal.
Dismissal for Economic Reasons: Occurs due to company downsizing or restructuring, but must follow legal procedures, including consultation with employee representatives (works council).
Severance Pay: If an employee is dismissed for economic reasons, they may be entitled to severance pay, usually half a month’s salary for each year of service.
Employees with more than 6 months of service are protected from dismissal under the German Protection Against Dismissal Act (KSchG)
Notice Period
In Germany, the notice period for fixed-term contracts is typically 1 month, unless otherwise agreed. For permanent contracts, the notice period is as follows:
Less than 2 years of service: 4 weeks’ notice
2 to 5 years of service: 1 month’s notice
5 to 8 years of service: 2 months’ notice
Over 8 years of service: 3 months’ notice
Probation Period
In Germany, the probation period for permanent employees is typically 6 months. During this period, employees can be dismissed more easily, with a 2-week notice required.