Employer of Record in Germany: 2026 Cost and Compliance Guide

Germany is Europe's largest economy and a deep market for engineering, product and enterprise sales talent, centred on Berlin, Munich, Hamburg and Frankfurt. Employer social security is moderate by European standards at roughly 21–23%, and contribution ceilings cap it further for senior salaries.

An Employer of Record (EOR) can employ your hire in Germany under a German contract and run payroll and social insurance, so you can hire without forming a GmbH. But Germany is one of the few countries where EOR arrangements face a hard legal limit: under the Temporary Employment Act (Arbeitnehmerüberlassungsgesetz, AÜG), an EOR set-up is usually treated as employee leasing. That requires a licence and is generally limited to 18 months per worker.

This guide covers the full cost picture, the AÜG rules you need to plan around, key German employment rules, how providers compare on published pricing, and when to set up a GmbH. Figures link to official sources. We do not test or use the providers listed; see our methodology.

An Employer of Record is a company with a German entity that employs staff for foreign businesses. It issues the German employment contract, registers the employee with a statutory health insurer (Krankenkasse), which collects all social insurance contributions, withholds wage tax (Lohnsteuer), and handles payroll, leave, sick pay and terminations under German law.

Because your company directs the employee's daily work while the EOR is the legal employer, German authorities generally treat this as employee leasing (Arbeitnehmerüberlassung) under the AÜG. The EOR must hold a leasing licence from the Federal Employment Agency (Bundesagentur für Arbeit). The same worker can generally be placed with the same client for a maximum of 18 consecutive months, and equal pay with comparable employees applies, at the latest after nine months where a temporary-work collective agreement is used.

Breaching the AÜG can have serious consequences. These include the employment relationship transferring to your company by law, fines, and back-payment of social contributions. In practice, an EOR in Germany is a bridge: ideal for the first hires and for testing the market, but something to plan beyond.

German employment cost has three layers: gross salary (normally paid in 12 monthly instalments), employer social insurance (around 21–23% up to the contribution ceilings) and the EOR fee.

Health and long-term care contributions stop at €69,750 a year and pension and unemployment contributions at €101,400, so the employer percentage falls noticeably for senior salaries. The tables and estimator apply both ceilings.

Annual cost at example salaries

What these figures include and exclude

• Contribution ceilings: health and care contributions apply up to €69,750 a year, pension and unemployment up to €101,400 (2026).
• The health insurance additional contribution (Zusatzbeitrag) varies by insurer. The model uses the 2026 average of 2.9% (employer pays half).
• Employee contributions (about 20–21% of gross up to the ceilings) and wage tax are deducted from gross pay and are not employer costs.
• Employers continue full pay for up to six weeks of sickness (Entgeltfortzahlung), which is a real cost not shown in these tables.
• Common voluntary benefits include a 13th month, company pension (bAV, with a mandatory 15% employer subsidy on salary-conversion schemes), and public transport tickets.

Estimate your own cost

Enter a salary to see the estimated annual cost, including mandatory employer contributions and an EOR fee. Change the fee to match the quotes you receive.

German employment law is protective and formal. Collective agreements (Tarifverträge) apply in many sectors, and companies with five or more employees can elect a works council (Betriebsrat) with significant co-determination rights.

EOR / employee leasing (AÜG)

An EOR arrangement is usually treated as employee leasing. The provider needs a licence, and the same worker can generally be placed with the same client for up to 18 months.[2]

Equal pay with comparable permanent staff applies from the start, unless a temporary-work collective agreement applies; that can defer equal pay for the first nine months (up to 15 under strict conditions). Collective agreements can also vary the 18-month limit. Non-compliance can make your company the legal employer.

Employment contracts

Essential terms must be documented in writing under the Evidence Act (Nachweisgesetz). Fixed-term contracts without objective reason are limited to two years.[13]Verify

Probation period

Up to 6 months, during which either side can terminate with 2 weeks' notice.[9]Verify

Working time

Up to 8 hours a day, extendable to 10 if the average over six months stays at 8. Employers must record working time.[11]Verify

Annual leave

At least 20 working days a year on a five-day week (24 on a six-day week). 25–30 days is the market norm for professional roles.[10]Verify

Public holidays

Between 9 and 13 paid public holidays depending on the federal state.Verify

Sick pay

The employer pays 100% of salary for up to six weeks per illness. After that, the health insurer pays sickness benefit.[12]Verify

Parental leave

Up to three years of job-protected parental leave per child. Parental allowance (Elterngeld) is paid by the state, not the employer.Verify

Notice periods

Statutory notice is 4 weeks to the 15th or end of a month, rising with length of service up to 7 months' notice from the employer.[9]Verify

Protection against dismissal

After six months' service in businesses with more than 10 employees, dismissal must be socially justified (conduct, capability or operational reasons).[8]Verify

There is no general statutory severance, but settlements of about half a month's salary per year of service are a common benchmark in negotiations.

These EOR providers publish information about employing in Germany. Prices are their own published starting rates in USD. Germany is often quoted above the global starting rate, so confirm with a country-specific quote.

For Germany, the most important questions are about the AÜG licence and the 18-month limit. Ask whether the provider holds its own licence in Germany or uses a partner, and what it offers when the limit approaches.

For Germany-specific selection criteria and a shortlist, see best EOR providers in Germany. For each provider's products and pricing model, see the provider directory.

The standard alternative is a Gesellschaft mit beschränkter Haftung (GmbH), Germany's limited company. It needs €25,000 share capital (at least €12,500 paid in at formation), a notarised founding deed and registration in the commercial register, followed by tax and social insurance registrations. A UG (haftungsbeschränkt) can be formed with €1, but carries reserve obligations and less credibility.

Running costs include a tax adviser (Steuerberater), payroll, statutory bookkeeping and financial statements, the trade tax and corporate tax filings, and a registered business address. Combined corporate and trade tax is roughly 30% of profit.

For a step-by-step version of this calculation, see EOR vs local entity: a break-even framework.

1. 1

   Define the role, salary and timelineDay 0

   Agree an annual gross salary and decide whether you expect the person to stay beyond 18 months. If so, plan the GmbH or transition route now.

2. 2

   Check collective agreements

   Ask whether a Tarifvertrag applies to the role or sector. It can set minimum pay, hours and bonuses.

3. 3

   Compare itemised quotes and AÜG status2–5 days

   Request Germany-specific quotes and a copy of each provider's AÜG licence. Ask about equal-pay handling at 9 months and the process at 18 months. Use the estimator to sanity-check totals.

4. 4

   Sign the service agreement

   Review liability for settlements, IP assignment, data protection (GDPR) and transfer fees to your future GmbH.

5. 5

   German contract and onboarding3–10 days

   The employee receives a German-law contract. They provide their tax ID (Steuer-ID), social insurance number, health insurer choice and bank details.

6. 6

   Registration with social insurance

   The EOR registers the employee with the chosen Krankenkasse, which handles all social insurance registrations and collections.

7. 7

   Payroll and ongoing administrationMonthly

   Monthly payroll with wage tax and social insurance. The EOR also handles working-time records, sick notes and leave tracking, and monitors the assignment duration.

Rates and rules on this page are based on the following official sources. Numbers in brackets in the tables above link to these entries.

1. 1
   Rechengrößen der Sozialversicherung 2026

   Deutsche Rentenversicherung

   2026 ceilings: €69,750 (health and care) and €101,400 (pension and unemployment).

2. 2
   Temporary Employment Act (Arbeitnehmerüberlassungsgesetz, AÜG)

   Federal Ministry of Justice (gesetze-im-internet.de)

   § 1(1): leasing requires a licence; § 1(1b): no more than 18 consecutive months with the same client; § 8: equal pay from the start, which a collective agreement may defer for the first nine months.

3. 3
   Employee leasing licence (Arbeitnehmerüberlassung)

   Bundesagentur für Arbeit

   The authority that issues and supervises AÜG licences.

4. 4
   Werte der Rentenversicherung (rates and ceilings 2026)

   Deutsche Rentenversicherung

   2026 contribution rates (pension 18.6%, unemployment 2.6%, health 14.6%, care 3.6%) and the €8,450 monthly pension ceiling.

5. 5
   Durchschnittlicher Zusatzbeitragssatz 2026 (BAnz AT 10.11.2025 B7)

   Bundesministerium für Gesundheit (Bundesanzeiger)

   Sets the 2026 average additional health contribution at 2.9%.

6. 6
   Statutory accident insurance

   Deutsche Gesetzliche Unfallversicherung (DGUV)

   Employer-funded accident insurance through the trade associations (Berufsgenossenschaften).

7. 7
   Statutory minimum wage

   Bundesministerium für Arbeit und Soziales (BMAS)

   Current minimum wage and the adjustment schedule.

8. 8
   Protection Against Dismissal Act (KSchG)

   gesetze-im-internet.de

   When dismissal must be socially justified.

9. 9
   Civil Code (BGB) §§ 611a–630: employment contracts and notice

   gesetze-im-internet.de

   Statutory notice periods, including during probation.

10. 10
    Federal Leave Act (BUrlG)

    gesetze-im-internet.de

    Minimum statutory annual leave.

11. 11
    Working Hours Act (ArbZG)

    gesetze-im-internet.de

    Daily working-time limits and rest periods.

12. 12
    Continued Remuneration Act (EntgFG)

    gesetze-im-internet.de

    Employer-paid sick pay for up to six weeks.

13. 13
    Evidence Act (Nachweisgesetz)

    gesetze-im-internet.de

    Written documentation of essential employment terms.

An Employer of Record is an effective way to make your first hires in Germany quickly, with a total cost of roughly 1.2–1.4× gross salary including the EOR fee. The lower end applies to senior salaries, where the contribution ceilings take effect.

Unlike most countries, Germany puts a clock on the arrangement: the AÜG generally limits an EOR placement to 18 months. Choose a provider that can show its licence and explain its 9- and 18-month processes, and plan your GmbH or transition route early.

If you're building a long-term German team, compare the numbers with our EOR vs local entity guide, and see the Netherlands for a neighbouring market.