Employer of Record (EOR) in Germany

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.

With G-P EOR, 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. 

Using an EOR, 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). A company supplying workers through employee leasing generally must hold an AÜG license before assignment. Genuine services or works contracts and statutory exceptions may not require one. Violations can trigger fines of up to EUR 30,000 and deemed employment with 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.

Watch how an EOR works

Employment contracts in Germany

While oral agreements can be legally binding, German law requires employers to document essential employment terms under the Act on Proof of Essential Contractual Conditions (Nachweisgesetz). A compliant employment contract can satisfy this requirement. 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. Monetary amounts may be stated in euros (EUR) or another agreed currency.

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

There is no single statutory standard workweek. Full-time contracts and collective agreements commonly set 35–40 hours per week. The German Working Time Act (Arbeitszeitgesetz) generally limits working time to eight hours per working day, excluding rest breaks. It can be extended to 10 hours if the average doesn't exceed eight hours over six calendar months or 24 weeks. 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 nationwide public holidays, with additional holidays varying by federal state and, occasionally, by municipality:

• 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 five-day workweek and 24 days for a six-day workweek. However, most full-time employees get 30 days of paid vacation yearly, with 25 to 30 days common depending on industry, collective agreement, and employer size. 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 of employer-paid sick leave, employees covered by statutory health insurance generally receive sickness benefits (Krankengeld). The amount is the lower of 70% of regular gross pay or 90% of regular net pay, subject to the statutory contribution ceiling.

Germany maternity and parental leave

Pregnant employees receive maternity allowance and an employer supplement during maternity leave (Mutterschutz) for six weeks before birth and eight weeks after. Postpartum leave extends to 12 weeks for premature or multiple births, or a medically diagnosed disability upon request.

Following maternity leave, each parent can take parental leave (Elternzeit) until the child's third birthday, with up to 24 months available between the third and eighth birthdays. During this period, parents can work part-time for up to 32 hours each week, averaged monthly, if the child was born on or after Sept. 1, 2021. For children born before that date, the limit is 30 hours per week.

Additionally, a federal benefit (Elterngeld) replaces part of new parents’ income. Parents can split up to 14 months, generally claiming two to 12 months each.

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.

The standard employer share for pension, unemployment, statutory health, and long-term care insurance is approximately 21.15% of gross salary outside Saxony, up to the applicable contribution assessment ceilings. This figure is before statutory accident insurance and employer-only levies. Costs vary depending on the employee's health fund, the accident insurer, and applicable levies. 

These social security contributions are capped at a maximum income level (Beitragsbemessungsgrenze). For 2026, the monthly ceilings are:

• Pension and unemployment insurance: EUR 8,450 
• Statutory health and care insurance: EUR 5,812.50 

The East-West distinction for pension and unemployment contribution ceilings was abolished in 2026, and the ceilings remain unified nationwide. Health and long-term care insurance use a separate ceiling.

Termination and severance in Germany

Terminating employment is highly regulated by the Protection Against Dismissal Act (Kündigungsschutzgesetz). It applies after more than six continuous months in organizations 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): two weeks' notice
• Up to two years of service: four weeks' notice, to the 15th or end of the month
• After two years' service: one month's notice, to the end of the month
• After five years' service: two months' notice, to the end of the month
• After eight years' service: three months' notice, to the end of the month
• After 10 years' service: four months' notice, to the end of the month
• After 12 years' service: five months' notice, to the end of the month
• After 15 years' service: six months' notice, to the end of the month
• More than 20 years' service: seven 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 is 0.5 months’ gross salary per year of service. Severance is not a general statutory entitlement.

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. 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 operate globally, 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, flat-rate pricing: Evaluate total cost predictability rather than low base rates. Look for standard, clear pricing models. Compare pricing structures carefully, as some EORs use percentage-of-payroll models that penalize high earners. Flat-rate pricing ensures long-term operating budget accuracy. The G-P EOR starting price of USD $599 monthly gives you full access to the G-P Global Employment Platform. We use a flat platform fee rather than charging a percentage of payroll.

• 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.

Simplify global hiring with G-P EOR

With G-P EOR, startups, SMBs, and enterprises can hire, manage, and pay professionals in 180+ countries, without setting up local entities. Our platform combines vetted employment expertise with intuitive AI and human support – so you can operate globally with ease.

G-P EOR is engineered to adapt entirely to you. Bring your workforce data together in one place to maintain existing workflows while keeping consistent and accurate data across your integrated systems.

Book a demo to hire globally without the delays, risks, or overhead of local entities.