Employer of Record in Germany

An Employer of Record (EOR) in Germany is a company that legally employs workers on your behalf. This means they handle all the German legal and HR responsibilities of employment. You still manage your employee's day-to-day work. An EOR like Rivermate lets you hire talent in Germany without setting up a local entity. This saves you time and money.

How an Employer of Record (EOR) Works in Germany

Using an EOR in Germany simplifies hiring. Here is how it works:

• You find the candidate. You recruit the person you want to hire in Germany.
• The EOR hires the employee. The EOR becomes the legal employer. They create a German-compliant employment contract.
• The EOR handles HR and legal tasks. This includes payroll, taxes, benefits, and social security contributions. They make sure everything follows German labor law.
• You manage the employee's work. You direct their daily tasks and projects. The EOR handles the administrative side of employment.

Why use an Employer of Record in Germany

Using an EOR in Germany helps you expand your business quickly and compliantly. It removes the need to navigate complex German employment laws on your own.

Here are some key benefits:

• Enter the market faster. You can hire employees in Germany without the lengthy process of establishing a legal entity.
• Ensure compliance. German labor law is complex. An EOR understands the regulations and ensures you meet all legal requirements. This includes rules on working hours, vacation, and termination.
• Simplify payroll and benefits. The EOR manages all aspects of payroll, including taxes and social security. They can also provide your employees with competitive benefits packages.
• Reduce risk. An EOR takes on the legal risks of employment. This gives you peace of mind and lets you focus on your business goals.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Germany includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Germany.

Hiring in Germany is a process with clear rules and strong protections for workers. The German labor market is known for its skilled workforce and emphasis on work-life balance. When you hire here, you'll find that employment relationships are highly regulated by law. This means you need to pay close attention to legal requirements from the start.

Employment contracts & must-have clauses

In Germany, it's best practice to have a written employment contract. While verbal agreements can be valid, a written contract avoids misunderstandings. By law, you must provide the main terms of employment in writing within one month of the employee's start date.

Your employment contracts should be detailed and clear. It's a good idea to have them reviewed by a German lawyer to ensure they comply with local laws.

Here are some essential clauses to include:

• Parties to the contract Name and address of both the employer and employee.
• Start date and duration The start date of employment and, if it's a fixed-term contract, the end date.
• Job description A brief summary of the employee's duties.
• Place of work Where the employee will be based.
• Working hours The agreed-upon daily and weekly working hours.
• Remuneration The amount of salary, any bonuses or allowances, and when it will be paid.
• Vacation leave The amount of annual paid leave.
• Notice periods The notice period for termination.
• Probationary period If applicable, the length of the probation period.

Probation periods

In Germany, you can include a probationary period in the employment contract. This gives both you and the employee time to see if the job is a good fit.

• Length The maximum probation period is six months. For fixed-term contracts, the probation period should be proportional to the contract's length.
• Notice period During the probation period, the notice period for termination is shorter, typically two weeks.
• Not mandatory Probation periods are not required by law for most workers, but they are common practice.

Working hours & overtime

Germany has clear laws on working hours to promote a healthy work-life balance.

• Standard hours The standard workday is eight hours, and the standard workweek is Monday to Saturday, making a 48-hour week. However, most office-based roles work a 40-hour week, Monday to Friday.
• Extension You can extend the workday to 10 hours, but the average daily hours over six months must not exceed eight.
• Rest periods Employees must have an uninterrupted rest period of at least 11 hours between workdays.
• Overtime There is no legal requirement for overtime pay. Compensation for overtime is usually determined by the employment contract or a collective agreement. It can be paid time off or a higher hourly rate.

Public & regional holidays

Germany has both national and regional public holidays. The only national public holiday is the Day of German Unity. All other holidays are determined by the individual states.

Here is a list of the main public holidays:

Some of the key regional holidays include Epiphany, Corpus Christi, and Reformation Day. The number of public holidays an employee gets depends on the state where they work.

Hiring contractors in Germany

When you hire independent contractors in Germany, you need to be careful about worker classification. The law makes a clear distinction between independent contractors and employees. Misclassifying an employee as a contractor can lead to significant penalties.

An independent contractor is self-employed and has the freedom to decide how and when they work. They are not integrated into the employer's business and often work for multiple clients.

The risk of misclassification is high. If a court determines that a contractor is actually an employee, you could be liable for back payments of social security contributions, taxes, and fines. In serious cases, there can even be criminal charges.

An Employer of Record (EOR) can help you mitigate this risk. An EOR legally employs workers on your behalf, taking on the responsibility for compliance with local labor laws. This includes handling payroll, taxes, and social security contributions. By using an EOR, you can hire talent in Germany without the risk of misclassification.

Navigating compensation and payroll in Germany requires understanding its structured system. You'll find that salaries are often negotiated between you and your employees, but they must adhere to German labor laws. Your employment contracts need to clearly outline the entire compensation package, including benefits, taxes, and any other contributions.

Payroll cycles & wage structure

In Germany, you typically process payroll monthly, with payments often made on the 25th of the month. It's also common to provide a 13th-month salary, which is often detailed in collective agreements.

A typical German wage structure includes:

• Monthly base salary: This is determined by factors like seniority, industry, and education.
• Benefits-in-kind: These are non-cash benefits that can be part of the compensation package.
• Bonuses: Performance-based bonuses and Christmas bonuses are common.
• Holiday pay: Employees are entitled to paid leave.

Overtime & minimums

The national minimum wage in Germany is €12.82 per hour as of 2025. Be aware that some industries may have different minimum wages due to collective bargaining agreements.

The standard workweek is typically 40 hours, with a legal maximum of 48 hours per week. Daily working hours are capped at eight hours but can be extended to ten if the average over six months remains at eight hours per day. There are no universal rules for overtime pay; instead, these terms are usually agreed upon through work councils and collective bargaining.

Employer taxes and contributions

As an employer in Germany, you are responsible for withholding taxes from your employees' gross pay and submitting them to the tax office by the 10th of the following month. You also make several social security contributions.

Source: CloudPay

Employee taxes and deductions

Employees also contribute to social security and pay income tax. The income tax rate is progressive, ranging from 0% to 45%.

Source: CloudPay, Ravio

Germany has a strong culture of employee wellbeing. This means you will find comprehensive benefits and generous leave policies. Understanding these benefits is key to attracting and keeping top talent. Many companies offer more than the legal minimum to stay competitive.

Statutory Leave

German law provides several types of mandatory leave.

• Annual Leave: You must provide a minimum of 20 paid vacation days each year for employees working a five day week. This increases to 24 days for those working a six day week. However, most companies offer 25 to 30 days to attract skilled workers.
• Sick Leave: Employees are entitled to six weeks of paid sick leave for each illness. To claim this, an employee usually needs to provide a doctor's note for any absence longer than three days.
• Maternity Leave: Pregnant employees receive 14 weeks of paid maternity leave. This is typically split into six weeks before the due date and eight weeks after. The leave extends to 12 weeks after birth for premature or multiple births.
• Parental Leave: After a child is born, both parents can take up to three years of parental leave per child. The government provides a parental allowance during a portion of this leave.

Public Holidays & Regional Holidays

Germany has national public holidays and holidays that are specific to certain states. The Day of German Unity is the only holiday established by federal law.

Typical Supplemental Benefits

You must provide statutory benefits. Many employers offer extra benefits to create a more attractive package.

How an EOR Can Help with Setting Up Benefits

Setting up a compliant and competitive benefits package in Germany is complex. You need to navigate national laws, collective agreements, and local expectations.

An Employer of Record (EOR) simplifies this entire process. We handle the administration of all statutory benefits for your German employees. We ensure you are fully compliant with German labor law. An EOR can also advise you on supplemental benefits that will attract the right talent in your industry. This lets you focus on growing your business while we take care of the details.

Ending a working relationship in Germany has clear rules. The process, known as termination and offboarding, is designed to be fair to both employees and employers. German law puts a strong emphasis on protecting employees, so you need to follow specific steps. This means you must have a valid reason for ending the contract, give proper notice, and follow all the correct procedures.

Notice periods

When you end an employment contract in Germany, you must provide a notice period. This is the time between when you inform an employee of their termination and their last day of work. The length of this period usually depends on how long the employee has worked for your company.

During a probationary period, which is typically the first six months, the notice period is shorter, usually two weeks. After the probationary period, the notice period increases with the employee's length of service. For example, an employee who has worked for the company for two years is entitled to a one-month notice period. This can extend up to seven months for very long-term employees.

Here is a general idea of how notice periods increase over time:

It is important to note that the termination notice must be in writing and physically signed. An email or a copy will not be sufficient.

Severance pay

In Germany, severance pay is not a legal requirement in most cases. However, it is common in certain situations, especially in cases of operational dismissals or when both parties agree to a mutual termination.

A common practice for calculating severance is the "half-a-month" rule. This means half a month's salary for each year the employee has worked for the company. If a company has a works council, they are often involved in negotiating severance packages, especially during mass layoffs. In these situations, a "social plan" may be created to provide severance and other support to the affected employees.

How Rivermate handles compliant exits

Navigating the rules for termination and offboarding in Germany can be complex. At Rivermate, we simplify this for you. We ensure that every step of the process is fully compliant with German labor laws.

Here’s how we help:

• Legal Compliance: We make sure that all terminations have a legally sound reason and that the correct procedures are followed.
• Notice Periods: We manage the notice periods, ensuring they are calculated correctly based on each employee's tenure.
• Severance Negotiations: We can guide you through severance pay negotiations to ensure they are fair and in line with common practices.
• Works Council: If your company has a works council, we handle the necessary consultations.
• Documentation: We prepare all the necessary written documents, making sure everything is in order for a smooth exit process.

By handling these details, we help you avoid potential legal issues and ensure a respectful and compliant offboarding for your employees. This lets you focus on your business while we take care of the complexities of German employment law.

Navigating Germany's visa and work permit system can feel complex. It's a common hurdle for companies looking to hire talent in the country. The key is understanding that for non-EU citizens, a job offer is just the first step. They will need the right documentation to legally work and live in Germany. This usually involves a work visa to enter the country, followed by a residence permit that allows for long-term employment.

Employment visas & sponsorship realities

An Employer of Record (EOR) can help you hire employees in Germany, and some can sponsor work visas. This is a practical option if you don't have a legal entity in the country. However, there are some realities to keep in mind.

An EOR in Germany operates under the country's labor leasing laws. This means there can be a limit on how long an employee can be contracted through an EOR, often up to 18 months. After this period, you might need to hire the employee through your own German entity.

Here are some of the common visa routes:

• EU Blue Card: This is for highly skilled workers with a university degree and a job offer that meets a minimum salary threshold.
• Work Visa for Qualified Professionals: This is for individuals with a recognized vocational or academic qualification.

An EOR can guide you through the complexities of these visa types and help determine the best path for your employee.

Business travel compliance

For short-term business trips, the rules are more straightforward. Germany is part of the Schengen Area, which allows for free movement between member countries.

Many non-EU nationals, including citizens of the United States, Canada, and Australia, can enter Germany for business for up to 90 days within a 180-day period without a visa. These trips are typically for activities like meetings, negotiations, or attending conferences.

Keep in mind:

• Permissible Activities: Business trips should not involve actual employment. The line can be thin, so it's important to ensure the employee's activities fall within the scope of a business visit.
• Schengen Visa: If your employee is not from a visa-exempt country, they will need to apply for a Schengen short-stay visa (Type C).
• ETIAS: Starting in 2026, visa-exempt travelers will need to obtain an ETIAS (European Travel Information and Authorization System) authorization before entering the Schengen Area.

For any stay longer than 90 days, or if the employee will be working, a proper work visa and residence permit are necessary.