Hiring employees in Germany means navigating complex local labor laws, payroll regulations, and tax requirements. Utilizing an employer of record, companies can easily manage employee regulations in Germany. The employer of record (EOR) model simplifies this process, allowing your company to hire talent in minutes.

As a global EOR expert in Germany, G-P manages payroll, employment contract best practices, statutory and market norm benefits, and employee expenses, and more via our global entity infrastructure. You can count on our team of dedicated employment experts to provide comprehensive support for every hire. 

With EOR solutions, you can focus on expanding without the obstacles of international compliance. This international approach enhances business reach and scalability by enabling hiring worldwide without a local entity.

Navigating employee leasing regulations in Germany (AUG license)

Germany has strict laws governing employee leasing, regulated by the German Employee Leasing Act (Arbeitnehmerüberlassungsgesetz – AÜG). Any company hiring individuals to work for another company must hold an AÜG license. Operating without this license can lead to significant penalties, including fines and the reclassification of the employment relationship directly to the end client.

Hiring in Germany with an EOR

As your EOR in Germany, G-P holds the necessary AÜG license, ensuring your hiring is compliant from day one. We take on the legal responsibility as the employer, allowing you to direct your German team's day-to-day work without bearing the direct legal and administrative burden of German employment law. Additionally, an EOR handles crucial aspects of employment such as payroll processing, managing leave requirements, administering benefits, overseeing offboarding procedures, and remitting payroll taxes. This significantly reduces the administrative burden for companies, eliminating the need for them to establish a legal entity in Germany.

Employment contracts in Germany

While oral agreements can be legally binding, German law requires employers to provide a written summary of the essential terms and conditions of employment, as stipulated by the Act on Proof of Essential Contractual Conditions (Nachweisgesetz). It is best practice to put a robust, locally compliant employment contract in place before an employee’s start date.

The contract must detail the employee's compensation, benefits, and termination requirements. All monetary amounts must be stated in euros (EUR).

An EOR in Germany drafts locally compliant employment contracts that reflect all mandatory terms under Germany's labor laws. These terms include salary, working hours, and notice periods, ensuring the contract adheres to local regulations.

Working hours in Germany

The standard workweek in Germany is typically 36 to 40 hours. The German Working Time Act (Arbeitszeitgesetz) strictly limits daily working hours to eight. This can be extended to 10 hours if the daily average does not exceed eight hours over a six-month or 24-week period. All work beyond this is considered overtime and is highly regulated.

Time off in Germany

An employer of record in Germany manages compliance with labor laws for public holidays, vacation, sick, and parental leave. They handle public holiday pay, calculate and track vacation, manage sick leave certificates and benefits, and ensure adherence to maternity and parental leave durations, including dismissal protection. This administrative oversight helps companies avoid penalties and ensures employee entitlements.

Public holidays in Germany

Germany observes 9 national public holidays, with additional holidays varying by federal state:

  • New Year's Day (Jan. 1)

  • Good Friday

  • Easter Monday

  • Labour Day (May 1)

  • Ascension Day

  • Whit Monday

  • Day of German Unity (Oct. 3)

  • Christmas Day (Dec. 25)

  • Second Day of Christmas (Dec. 26)

Paid vacation in Germany

The statutory minimum paid vacation is 20 days for a standard 5-day workweek and 24 days for a 6-day workweek. However, it is market practice for most full-time employees to receive 25 to 30 days of paid vacation annually. This entitlement is separate from public holidays and sick leave.

Statutory leave in Germany

Sick leave in Germany

Employees are entitled to up to six weeks of sick leave at full pay, provided they submit a medical certificate. While often requested after three days of absence, an employer can legally require a certificate from the first day. After six weeks, employees receive sickness benefits (Krankengeld) from their health insurance provider, typically at 70% of their gross salary (up to the social security ceiling), but not exceeding 90% of their net salary.

Germany maternity and parental leave

Pregnant employees are entitled to fully paid maternity leave (Mutterschutz) for six weeks before the birth and eight weeks after. This postpartum leave extends to 12 weeks for premature or multiple births. Following maternity leave, either parent can take parental leave (Elternzeit) until the child's third birthday. During this period, they can choose to work part-time for up to 32 hours per week. Additionally, a federal subsidy (Elterngeld) is available to new parents, replacing a portion of their income for up to 14 months.

Payroll and payroll taxes in Germany

An employer of record in Germany manages payroll and payroll taxes by handling mandatory national health insurance contributions for both employers and employees via social security. They also ensure compliance with Germany's progressive income tax system. The EOR manages employee contributions and employer contributions.

Social security in Germany

The German social security system is built on five pillars. Contributions are mandatory for both employers and employees and are generally split equally, with some exceptions.

  • Pension insurance (Rentenversicherung)

  • Health insurance (Krankenversicherung)

  • Unemployment insurance (Arbeitslosenversicherung)

  • Long-term care insurance (Pflegeversicherung)

  • Accident insurance (Unfallversicherung) - Covered by the employer only.

Employers also cover contributions for maternity and insolvency insurance. In total, employers can expect to contribute approximately 21% on top of an employee's gross salary, up to a certain threshold.

These social security contributions are capped at a maximum income level (Beitragsbemessungsgrenze). For 2025, the monthly ceilings are:

  • Pension and unemployment insurance: EUR 7,750

  • Statutory health and care insurance: EUR 5,362.50

As of Jan. 1, 2025, the contribution ceilings for pension and unemployment insurance have been unified across all of Germany, removing the previous distinction between East and West.

Termination and severance in Germany

Terminating employment in Germany is highly regulated by the Protection Against Dismissal Act (Kündigungsschutzgesetz), which applies to employees with more than six months of service in companies with more than 10 employees. In an ordinary dismissal, statutory minimum notice periods apply and increase with service length:

  • During a probationary period (up to 6 months): 2 weeks' notice

  • 0-2 years of service: 4 weeks' notice, to the 15th or end of the month

  • After 2 years' service: 1 month's notice, to the end of the month

  • After 5 years' service: 2 months' notice, to the end of the month

  • After 8 years' service: 3 months' notice, to the end of the month

  • After 10 years' service: 4 months' notice, to the end of the month

  • After 12 years' service: 5 months' notice, to the end of the month

  • After 15 years' service: 6 months' notice, to the end of the month

  • After 20 years' service: 7 months' notice, to the end of the month

While there is no statutory right to severance pay in an individual dismissal, employees can challenge the termination in court. Due to the high burden of proof on employers, most termination cases are settled, with the employee receiving a severance payment. A common, non-binding guideline for this payment is 0.5 months' salary per year of service.

Simplifying offboarding in Germany with an employer of record

Navigating Germany's complex termination procedures is a significant risk for foreign companies, particularly when not familiar with German labor laws. G-P's AI-powered EOR provides expert guidance and manages the process to ensure compliance and mitigate legal challenges.

How to choose the best employer of record in Germany

When selecting an employer of record in Germany, it is important to consider several key factors to ensure a successful partnership that supports your business goals and ensures compliance.

Key considerations for selecting a Germany EOR:

  • Compliance expertise: Your EOR must have a deep understanding of German labor laws, tax regulations, and social security contributions. A partner with a large team of local market HR and legal experts can proactively manage changes to ensure continuous compliance.

  • Comprehensive service offering: The best partners offer a full range of global employment products and EOR solutions. G-P’s global employment platform delivers everything you need to manage the full employee lifecycle, from payroll and benefits administration to expense management and compliant offboarding.

  • Local support and cultural understanding: While an EOR may be a global provider, it is essential they have dedicated experts who understand the nuances of the German market. This local insight is crucial for effective employee relations and navigating regional practices.

  • Technological capabilities: An EOR that uses advanced technology, like G-P’s AI-powered global employment platform, can streamline onboarding, management, and payment processes. This ensures secure and efficient management of employee data, payroll, and compliance.

  • Transparent cost structure: You need a clear understanding of the EOR's pricing model. Look for transparent costs without hidden fees to accurately budget for your global hiring initiatives.

  • Reputation and industry leadership: Research the EOR's reputation in the market. G-P is the recognized leader in global employment and is ranked No. 1 in every industry analyst report. Customer testimonials and case studies are also important when choosing an EOR.

  • Scalability and flexibility: The EOR should support your current hiring needs and accommodate future growth. Their platform and services should be scalable to match your business's expansion trajectory, whether you're hiring one employee or an entire team.

Why G-P EOR for hiring in Germany?

G-P EOR is the recognized leader in global employment, ranked No. 1 in every industry analyst report. G-P’s global employment platform delivers everything companies of all sizes need to manage the full employee lifecycle with its trusted Global HR Agent, G-P Gia, and AI-powered Employer of Record (EOR) and Contractor products. G-P supports teams in 180+ countries with more than a decade of global employment experience, the largest team of in-country HR, legal, and compliance experts, and its unmatched proprietary knowledge base.

G-P is also the preferred partner for leading HCM, PEO, and payroll platforms. Bring your workforce data together in one place to maintain existing workflows while guaranteeing consistent and accurate data across your integrated systems.


Request a proposal today to start hiring in Germany today.