Guide to employing in Germany

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The process of setting up a business entity in each location where you want to hire new employees can be time-consuming and costly. Moreover, understanding the details of local labour laws and employee expectations adds to the complexities of the process.

At XPANDIUM, we craft customised solutions for businesses seeking compliant and efficient employee hiring processes. Our expertise empowers organisations to navigate the intricacies of employment regulations in Germany without the need to establish an entity.

By partnering with XPANDIUM as your Employer of Record in Germany, our dedicated team takes care of every aspect, from ensuring onboarding and payroll management to handling tax payments and benefits through our EOR entity. This allows you to focus on the core aspects of your business – optimising your workforce and unlocking its potential.


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XPANDIUM – Hire your employees in Germany

Germany has labour laws that cover aspects of employment, including discrimination, maternity benefits, minimum wage and working hours. These laws apply to both citizens and foreign nationals working in Germany. However, understanding and complying with Germany's labour and employment laws can be quite challenging. That's where partnering with an Employer of Record (EOR), like XPANDIUM, can be extremely valuable when expanding your business to this country.

In Germany, when it comes to employment facilitated by an Employer of Record (EOR), it is governed by a labour leasing law called AÜG ("Arbeitnehmerüberlassungsgesetz"). This particular law sets a duration of 18 months for employee contracts. However, there are exceptions to this rule. For instance, if employees are hired by German companies that hold valid licenses to operate in Germany or consulting firms, they can enjoy the flexibility of having unlimited contract lengths.

XPANDIUM’s EOR experts provide a comprehensive understanding of German employment regulations and ensure a seamless employment process. Choose XPANDIUM for a successful expansion journey in hiring employees in Germany.

Germany panorama

The following information is a basic guideline for employing in German and the salary calculator can easily help you to understand the basic costs.

Employment Contract

German companies are only allowed to employ employees on behalf of another company under their Labour Leasing Law for a maximum of 18 months. Employees may have an unlimited contract length if they’re employed by a non-German company that is licensed to work in Germany.
Employment contracts need to be written in German.

Probation period

Probation period is optional and most commonly agreed in 3 months, still it cannot exceed 6 months.

Working hours

Full time employment is considered 8 hours per day and a maximum 40 hours per week with a minimum 11 hours resting time between 2 working days. Less hours means part-time work.
In German, overtime has to be specifically stated in an employee's contract, and higher wage earners are not eligible for overtime payments.

Minimum wage

The current minimum wage is 1,584 EUR that is 19,020 EUR per year, taking into account 12 payments per year.

13th month salary

Not mandatory, but a 13th salary can be paid as an end of year bonus in specially agreed arrangements.

Benefit package

In German, there are no obligatory fringe-benefits that an Employer should offer, however a custom voluntary plan may be set up.

Payroll Cycle

Salaries are paid on a monthly basis and employees receive their salary around the 25th of each month.


Employers often contribute to private pension funds on behalf of their employees.

Health and Safety Training

To be provided to employees as soon as possible during or immediately after start date.

Health insurance

It’s mandatory for health insurance to be provided to German employees. This can be provided through either a public or private outlet. It is uncommon to reimburse additional private insurances like dental and vision, and if so these would be taxable.

Non-compete agreements

In German, non-compete agreements have to be limited in scope and duration, and must include compensation for the entire non-compete period. Agreement must amount to at least 50% of the latest gross salary of the employee (including all bonus payments and gratuities).

The employer may waive the non-compete before termination or after in writing, but the obligation to pay the necessary compensation continues for a period of the agreements or 12 months following the declaration of the waiver.

Employer taxes

Approx 21%


Public Holidays




New Years Day

January 1



January 6

BW, BY & ST regions

Intl. Women’s Day

March 8

BE region

Good Friday

April 2


Easter Sunday

April 4

BB region

Easter Monday

April 5


May Day

May 1


Ascension Day

May 13


Whit Sunday

May 23

BB region

Whit Monday

May 24


Corpus Christi

June 3

Few regions only

All Saints’ Day

November 1

BW, BY, NW, RP & SL regions

Repentance Day

November 17

SN region

Christmas Day

December 25


Second Day of Christmas

December 26



Popular benefits in German

In Germany, there is a welfare system that includes social security benefits. Employers must provide these benefits to their employees, and both the employer and employee contribute equally towards them. The main elements of this social insurance structure include:

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 A fund for pensions

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National health insurance

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 Funds for unemployment support

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Long-term care coverage

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 Insurance for accidents

Voluntary, non-salary benefits may include:

  • 13th-month bonus
  • Additional annual leave
  •  Flexible working hours
  •  Remote working
  • Housing and child subsidy

Benefit planning process includes

When hiring employees in Germany, offering attractive benefits can help attract and retain top talent. XPANDIUM can assist with designing and implementing benefits programs for individuals or groups of employees. This process will include:

  1. Determine the total annual amount to offer employees and divide it into 12 equal payments to be integrated into the regular payroll.
  2. Select your company's voluntary benefits, such as medical insurance, extra time off, and flexible schedules.
  3. It is crucial to develop clear internal policies outlining the benefits plan, which should be communicated formally to relevant employees and integrated with the monthly payroll.
  4. Ensure employees complete their benefit statements accurately, specifying preferred benefits and respective amounts. These statements must be completed, signed and provided to the German Employer of Record for processing.

Types of Leaves

Paid leave

Full-time employees in German are entitled to a statutory minimum of 20 days of paid holiday per year, based on a five-day working week, or 25, based on a six-day working week.

Sick leave

Falling ill on a workday means that the worker must report to the employer. Workers who have been employed at a company for longer than four-weeks may take six weeks of sick pay. After the six-week period, they are entitled to sickness benefits.

Pregnancy and maternity leave

Becoming pregnant in German means that mothers are entitled to fourteen weeks of maternity leave. This includes six weeks before the child is born and eight weeks after. In case of premature birth, multiple births, or complications with childbirth, mothers are allowed eighteen weeks of leave from work.

Paternal leave

Under a new German law, fathers are also allowed to take leave from work in case of childbirth, under a general Parental Leave of up to 3 years to take care of a newborn until the child turns 3 years of age. Both parents can use the parental allowance to alleviate any loss of their earnings during this period. They can choose to avail the parental leave anytime between their child’s birth and third birthday and can take the leave simultaneously or separately. They are allowed to claim parental leave under special terms.


Employment termination

Employers have the below options to terminate an employment contract in German:


The employer may terminate the contract of employment unilaterally by either giving ordinary notice of termination observing the relevant notice period or by an extraordinary termination with immediate effect. Both, ordinary and extraordinary termination, are subject to legal restrictions.

Termination with immediate effect

Serious cause implies that, considering all the circumstances of the individual case and considering the interests of both of the contracting parties, the terminating party cannot be expected to continue the employment relationship to the end of the ordinary notice period or to the agreed end of the employment relationship. Furthermore, such termination notice must be served within a period of two weeks after the terminating party became aware of the reason ("cause") which justifies the dismissal.

Termination by notice

The basic notice period is four weeks effective as of either the fifteenth or the end of the calendar month. It may be reduced to two weeks during a probationary period of six months and it extends in steps after two years of service with the company up to seven months to the end of a calendar month (in case of twenty years of service, whereas the employment below the age of twenty-six are disregarded). Employer and employee may agree on longer notice periods.


How EOR works in Germany

By choosing XPANDIUM as your German Employer of Record (EOR), you can access our strategic solution for hiring, onboarding and supporting employees in Germany without establishing a legal entity. Our thorough understanding of German employment regulations can assist your company in simplifying its expansion process.

XPANDIUM will be responsible for ensuring your workforce is compliantly employed within the guidelines of the local labour laws, handling payroll, administration, salary payments and filing employee-related taxes.

Take the complexity out of hiring employees in Germany, and contact XPANDIUM for a tailored solution.


Payments to employees in Germany

Hiring workers in a foreign market can offer your business multiple advantages; however, efficiently managing their compensation can present many challenges. Navigating Germany’s payroll landscape will require extensive knowledge of the distinct payroll regulations.

In Germany, labour-related rules and benefits are overseen by the German Trade Union Federation and collective bargaining agreements. Legal requirements cover areas such as vacation time, maternity and parental leave and sick leave, which are detailed in the Federal Leave Act.

As your payroll service provider in Germany, XPANDIUM will ensure your workforce adheres to specific regulations, including:

  • Compensation
  • Taxation and deductions
  • Payroll cycles
  • Working hours
  • Holidays
  •  Maternity and sick leave
  • Termination and severance

Partner with XPANDIUM and experience the benefits of our expert payroll services in Germany.