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Global Payroll Team
Written by Global Payroll Team
Last updated May 7, 2026
Expert Reviewed
Payroll in Germany
Tax in Germany
Immigration in Germany

Germany map

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Mercans offers complete payroll, PEO and HR services in Ger4 weeks prior noticemany

Germany shares borders with nine neighboring European countries. Europe’s largest economy continues to be supported by excellent infrastructure, a highly developed corporate sector, strong vocational training and higher education systems, and globally competitive industries such as automotive, mechanical engineering, chemicals, electrical equipment, software and industrial technology.

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Doing Business in Germany

More than 99% of all German businesses are small to mid-sized enterprises. Germany’s infrastructure, stable legal framework and broad public support system for research, innovation and investment make it attractive for domestic and foreign companies alike.

Entity Registration and Incorporation Requirements

Setting up a new business or expanding an existing one in Germany is straightforward. Choose how your company operates from a range of entity types which suit your individual circumstance.

Banking

Banks are open from Monday to Friday 8:30 am to 4 pm.

Working Week

The standard working week is often around 38 to 40 hours, usually worked from Monday to Friday, although the legal working time rules are based on daily limits rather than a single statutory weekly standard.

Labor Law

The Skilled Immigration Act continues to support the entry of non-EU skilled workers into the German labour market. It is now easier for many qualified workers with vocational or academic training from non-EU countries to migrate to Germany for employment, subject to recognition and residence rules.

Main Industries

Automotive, mechanical engineering, chemicals, electrical equipment, software, industrial technology and business services

GDP Growth

0.2%

Dates & Numbers

yyyy-mm-dd

Official State Name

The Federal Republic of Germany

Population

83.5 million

Capital

Berlin

Major Languages

German

Currency

Euro

Internet Domain

.de

International Dialing Code

+49

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Germany
Berlin, DE
9:15 pm, May 12, 2026
7°C
light intensity shower rain
91 %
Wind Gust: 20 mph
Clouds: 75%
Sunrise: 5:15 am
Sunset: 8:50 pm

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Payroll

Germany has a well-developed system that provides people with financial security in times of illness, unemployment and retirement. Companies that operate global payroll, whether in house or through a payroll provider, should take note of the distinction between taxes and social security contributions.

It is acceptable to provide employees with online pay slips

Payslip

Payroll reports must generally be kept for at least 6 years, while some payroll-related business records may need to be retained for 10 years

Reports

24 working days

Annual Leave

6 weeks fully paid leave

Sick Leave

14 weeks of paid maternity leave. There is no general statutory paid paternity leave, but parental leave and parental benefit rules apply

Maternity & Paternity Leave

On provision of four weeks’ prior notice to the 15th or the end of a calendar month, with longer notice periods for employers based on service

Employee Termination

A 13th salary is not required by law, but an additional Christmas payment is common in some sectors and companies

13th Salary

€13.90 per hour

Minimum Wage

Max 8h/day, up to 10h if averaged; OT by agreement.

Overtime

There is no general statutory severance pay entitlement, although severance may arise by agreement, social plan, collective arrangement or court settlement

Severance Pay

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Tax and Social Security

The most important tax for employees is income tax, which is dependent on income and influenced by factors such as marital status and children. Germany also applies comprehensive social security contributions covering health insurance, long-term care insurance, pension insurance, unemployment insurance and accident insurance.

Tax

An individual’s income tax return is submitted to the tax office. In many cases this is voluntary, but in others it is compulsory. Germany applies a 15% corporate income tax rate at federal level, with trade tax and solidarity surcharge increasing the effective burden, while the top personal income tax rate is 45% and the standard VAT rate is 19%.

15% + surcharges

Corporate Income Tax Rate

45%

Personal Income Tax Rate

19%

Sales Tax

19%

VAT

Social Security

Employees who earn above the relevant thresholds are generally subject to social security contributions including statutory health insurance, long-term care insurance, pension insurance and unemployment insurance. Contribution rates vary due to health insurance add-on rates and long-term care surcharges.

40%+

Social Security Rate

20%+

Social Security Rate for Employers

20%+

Social Security Rate for Employees

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Employment Law

Germany has one of the lowest unemployment rates in Europe. When an individual signs an employment contract, the contract will usually state the gross salary, while the amount actually received is net of deductions for income tax and statutory social security contributions. There are comparatively generous vacation entitlements and public holidays, although public holidays vary by federal state.

Employment Agreement

The written employment agreement remains the standard approach and should contain information such as commencement date, time limits, probation period, place of work, remuneration, leave, notice period and more. Where collective bargaining agreements or company agreements are used, special regulations may apply.

Working condition

Working conditions are generally strong, with daily working time usually limited to 8 hours, extendable to 10 hours under statutory averaging rules. Collective labour agreements may reduce the practical weekly workload to around 35 to 40 hours in some sectors.

Leaves

In addition to annual leave and sick leave, any individual who has a German employment contract is generally entitled to parental leave. This entitlement exists until the child reaches the age of three, with some flexibility for postponement under statutory rules.

Employment termination

German employers are subject to legal regulations which must be followed when hiring and terminating international professionals. The relevant Foreigners’ Authority generally must be notified in the event of early termination of certain residence-linked employment relationships.

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4 weeks

Minimum notice period for terminating an employee

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9 Days

Total number of public holidays applying nationwide

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40

Working hours per week

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Not specified

Total number of days for Compassionate & Bereavement Leave

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Immigration

There are a number of different visa types including work visas for qualified professionals and the EU Blue Card. There are also visas for IT professionals, jobseekers, self-employment, training and study, among others.

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Residency Permits

There are a few requirements to receive a work visa or residence permit. Qualifications generally need to be recognized in Germany or comparable to German standards where recognition is required. If an individual has received a job offer, the recognized qualifications must enable them to perform the job for which they are hired. Depending on the residence route, salary thresholds and other specific requirements may apply.

Work Permit validity

Up to four years

Required Documents

Proof of financial stability where required

Valid health insurance

Recognized or comparable professional qualifications where required

Applicable German visa such as employment visa or other relevant entry visa

Applicable residence permit such as a standard employment residence permit or EU Blue Card

Valid employment contract or binding job offer

Compliant, reliable, error-free and touchless payroll in Germany

Build the best team and hire top talent compliantly in Germany. Get in touch with Germany payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    What is an Employer of Record (EOR) in Germany and how does it work for foreign companies?

    An Employer of Record in Germany acts as the legal employer for your staff in Germany. It manages contracts, payroll, tax withholdings, social contributions and ensures compliance with German employment law, while your company directs the employees’ day-to-day work.

    Why should businesses use an EOR instead of establishing a legal entity in Germany?

    Using an EOR lets your business begin hiring in Germany without the time, cost and complexity of setting up a local subsidiary. It provides quick market access and shifts administrative responsibility to the EOR.

    How does payroll outsourcing in Germany ensure compliance with tax and labor laws?

    Payroll outsourcing in Germany ensures salary payments, tax deductions, social insurance contributions and mandatory filings are handled correctly according to German regulatory requirements, thereby reducing the risk of non-compliance.

    Can an Employer of Record in Germany hire employees and manage work permits for international companies?

    Yes, an EOR in Germany can legally hire employees on behalf of a foreign company and help manage work permits and residence authorisations for non-German nationals while overseeing HR and payroll functions.

    What are the main benefits of using EOR and payroll services in Germany for global expansion?

    Key benefits include rapid hiring and onboarding, full compliance with German labor and tax law, lower risk and administrative burden, access to local employment expertise and the ability to focus resources on core business rather than entity setup.

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