Last reviewed
The short answer
A company with no German entity has two main routes to a German employment contract: incorporate, or place the person through a provider that already holds the registrations the role needs. Employing someone in Germany brings German social contributions, the main ones collected through the employee's chosen health fund and German employment law. Whether wage tax is withheld at source depends on who the employer is: section 38(1) of the Income Tax Act puts that duty on an employer with a domestic base and separately on a foreign business that hires workers out commercially for work in Germany.
That second route is regulated. Section 1(1) of the Arbeitnehmerüberlassungsgesetz requires a permit from the Bundesagentur für Arbeit to supply employees to another business in the course of economic activity and section 1(1) sentence 2 sets the test: whether the worker is integrated into the hirer's organisation and works under its instructions. Where a provider supplies workers without that permit, section 9(1) number 1 makes both its contracts void and section 10(1) then treats an employment relationship as having arisen between the hirer and the worker.
Aspirock supports companies hiring in Germany as part of employer of record and payroll coverage across more than 70 countries, with a named account team owning the deployment end to end.
Worth knowing
Three things worth knowing
A missing permit moves the employment to the client unless the worker opts out
Where a provider supplies workers without an AÜG permit, section 9(1) number 1 voids its contracts with both the hirer and the worker, and section 10(1) then treats an employment relationship as having come into existence between the hirer and the worker. The worker can prevent that by declaring in writing to the provider or the hirer, within one month of the date set for the assignment to begin, that they wish to keep their contract with the provider, having first presented the declaration in person at an Agentur für Arbeit. That saves the employment contract only: the commercial contract between provider and hirer is void either way. The choice is the worker's, not the hirer's, and the clock runs from the intended start date rather than from the day the missing permit comes to light. Section 16(1) number 1a separately makes it the hirer's own administrative offence to let such a worker work, in the same band as the provider's offence.
Eighteen months is a default, not a fixed ceiling
Section 1(1b) sentence 1 bars a provider from supplying the same worker to the same hirer for longer than 18 consecutive months and imposes the mirror duty on the hirer not to let them work longer. A collective agreement in the hirer's own sector can set a different maximum and a works agreement made under one can reach 24 months even where the hirer is not itself bound by that agreement. Earlier assignments to the same hirer, by any provider, count in full where the gaps between them are three months or less, so the clock does not reset on a short break.
Employee leasing has its own wage floor, above the minimum wage
A regulation made under section 3a sets a minimum hourly rate for supplied workers that is separate from, and higher than, the general statutory minimum wage. The Seventh Wage Floor Regulation sets it at EUR 14.96 an hour from 1 July 2026, EUR 15.33 from 1 September 2026 and EUR 15.87 from 1 April 2027. Above that floor, section 8(1) makes the pay of a comparable employee in the hirer's establishment the default, though a collective agreement for the temporary-work sector can derogate on pay for the first nine months and longer where it steps the worker up to a rate it defines as equivalent to the user sector's collective rate by month fifteen.
Reference
Employment terms in Germany
Why does employing in Germany need a registered employer?
Employment in Germany runs through a registered employer. Payroll has to be filed, wage tax accounted for, and social contributions paid over to the health fund the employee has chosen, which collects the health, care, pension and unemployment elements together.
That overhead is why the choice in practice narrows to two routes: incorporate and become the employer directly, or place the person through a provider that already holds the registrations the role requires.
The second route is regulated. Supplying employees to another business is a licensable activity under the Arbeitnehmerüberlassungsgesetz, the employee leasing act and is treated as employee leasing rather than as an ordinary service contract. Section 1(1) requires a permit from the Bundesagentur für Arbeit before an employer may supply its employees to a third party in the course of economic activity. Section 1(1) sentence 2 decides what is caught and it does so on the facts rather than on the label: workers are supplied for the purposes of the Act when they are integrated into the hirer's work organisation and subject to its instructions. An arrangement in which the client integrates the person into its own organisation and directs their day-to-day work meets that description whatever the contract calls it.
What does the employee leasing regime require?
Four duties travel together and a company evaluating the route needs all four before it prices anything. They are set out in full on the AÜG licence page.
| Requirement | What the statute says | Where it sits |
|---|---|---|
| A permit | The provider must hold a permit from the Bundesagentur für Arbeit before supplying workers in the course of economic activity | Section 1(1) |
| A written designation | The contract must name the arrangement expressly as employee leasing before the worker starts and identify the worker by reference to it | Section 1(1) sentences 5 and 6 |
| A duration limit | 18 consecutive months with the same hirer as the statutory default, binding the hirer as well as the provider | Section 1(1b) |
| A pay rule | A wage floor set by regulation and above it the conditions of a comparable employee at the hirer, subject to collective-agreement derogation | Sections 3a and 8 |
The consequence of missing the first of those is the fact most worth carrying into a supplier conversation. Where the provider has no permit, section 9(1) number 1 makes both its contracts void, the one with the hirer and the one with the worker, and section 10(1) then treats an employment relationship as having come into existence between the hirer and the worker. The company that engaged the provider becomes the employer, by operation of law, of a person it never intended to employ.
The worker can decline that outcome. Within one month of the date set for the assignment to begin, they may declare in writing to the provider or the hirer that they wish to keep their contract with the provider, having first presented the declaration in person at an Agentur für Arbeit. That saves the employment contract only. The commercial contract between provider and hirer is void either way, and the choice belongs to the worker rather than to the company carrying the exposure.
Section 16 adds a fine of up to EUR 30,000 on the provider for supplying without a permit and the same maximum on the hirer, separately, for letting such a worker work. The exposure is not one-sided.
What does an employee cost an employer in Germany?
Statutory employer contributions run to about 21.30% of gross pay on earnings up to EUR 5,812.50 a month. That figure assumes the 2.9% average supplementary health rate for 2026; each health fund sets its own, so the real total moves with the fund the employee picks. In Saxony the employer's care share is lower and the total is 20.80%, because Saxony alone kept its Buß- und Bettag holiday when the care scheme was introduced.
Two ceilings then reshape the number and they sit at different levels, which is what makes German employer cost behave unlike a flat percentage.
| Band of monthly gross | Marginal employer rate | What is still being assessed |
|---|---|---|
| Up to EUR 5,812.50 | About 21.30% | Health, care, pension, unemployment, insolvency levy |
| EUR 5,812.50 to EUR 8,450 | 10.75% | Pension, unemployment, insolvency levy only |
| Above EUR 8,450 | Nothing at these rates | Accident insurance, on the sector body's own maximum, which may already have stopped |
Health and care contributions stop at EUR 5,812.50 a month. Pension, unemployment and the insolvency levy run to EUR 8,450. So the employer's marginal cost falls twice and a senior hire carries a materially smaller loading as a proportion of salary than the headline rate suggests. The employer costs page works the arithmetic through.
Two employer-only items sit outside all of that and neither has a national rate. Accident insurance is set by the sector Berufsgenossenschaft on its own risk tariff and assessed on that body's own maximum earnings figure, which starts at EUR 94,920 a year and varies by sector, so it can stop before the pension ceiling or continue past it. The maternity levy is set by the employee's health fund. Employers with no more than 30 staff also pay the sick-pay levy. A budget that carries only the 21.30% is missing real money and it is money that cannot be quoted from a national table.
What sets the pay of a worker supplied under the leasing rules?
This is the part of German cost that a rate card cannot answer and it has two layers rather than one.
Two instruments apply in sequence. A regulation made under section 3a sets a minimum hourly rate that applies to supplied workers specifically and sits above the general statutory minimum wage. Under the Seventh Wage Floor Regulation that rate is EUR 14.96 an hour and rises to EUR 15.33 on 1 September 2026 and EUR 15.87 on 1 April 2027, against a general minimum wage of EUR 13.90 rising to EUR 14.60 in January 2027. Above that floor, section 8(1) makes the essential working conditions of a comparable employee in the hirer's establishment, pay included, the default.
The default is displaceable and commonly is by the sector agreements in use. Section 8(2) lets a collective agreement for the temporary-work sector derogate; section 8(4) lets it derogate on pay for the first nine months of an assignment and for longer where it steps the worker up to a rate the agreement defines as equivalent to the user sector's collective rate, beginning after an induction period of no more than six weeks and reaching it by month fifteen at the latest. An employer that is not a signatory can adopt such an agreement by reference. So the answer to what a supplied worker costs is that it depends on which collective agreement applies and what that agreement pays and it is a question to settle before a placement is priced rather than after.
When does a German entity make more sense?
The employee leasing route removes the incorporation step and the capital that comes with it. What it does not do is run indefinitely: the 18-month default applies to the same worker with the same hirer, earlier assignments count where the gaps are three months or less and a collective agreement in the hirer's sector can move the limit in either direction.
A German entity reverses the trade. It requires EUR 25,000 of share capital for a GmbH, a notarial deed and a Handelsregister entry and it leaves the company holding German employer obligations directly, including dismissal protection above ten employees and works council rights from five. The comparison, including the smaller UG route and who withholds wage tax in each case, is set out on the EOR or entity page.
Cost transparency
What does it cost to employ someone in Germany?
Key statutory employer costs in Germany. Employer of Record pricing sits on top of them and is confirmed after a short discovery call, once the role, location and timeline are known.
- Employer social contributions
- About 21.30% of gross pay
- Contribution ceilings
- EUR 5,812.50 and EUR 8,450 a month
- Other employer costs
- Accident insurance and the maternity levy, both variable
- Minimum wage
- EUR 13.90 an hour
The provider
About Aspirock
Aspirock is an Employer of Record and payroll provider operating across 70+ countries from six global offices, founded on more than 22 years of operational EOR experience and supporting more than 5,000 workers. Every client works with a named account team that owns the deployment end to end, so contracts, payroll, visas, and compliance filings in each market are handled by people accountable for the outcome.
For hires in Germany that means German payroll with wage tax withheld and contributions paid to the employee's chosen health fund, the two contribution ceilings applied at the right points, statutory notice and holiday under the Civil Code and the Federal Holiday Act and the employee leasing rules in the Arbeitnehmerüberlassungsgesetz where the arrangement falls inside them.
Common questions
Frequently asked questions
Last reviewed
Yes, by placing the person through a provider that already holds the registrations the role requires. That route is regulated: section 1(1) of the Arbeitnehmerüberlassungsgesetz requires a permit from the Bundesagentur für Arbeit to supply employees to another business in the course of economic activity and section 1(1) sentence 2 defines the supply that triggers it as one where the worker is integrated into the hirer's organisation and works under its instructions. The main alternative is to incorporate, which for a GmbH means EUR 25,000 of share capital, with a quarter of each share paid in and at least EUR 12,500 covered before registration.
The statutory element is about 21.30% of gross pay on earnings up to EUR 5,812.50 a month, comprising 8.75% health, 1.80% long-term care, 9.30% pension, 1.30% unemployment and a 0.15% insolvency levy, with accident insurance and the maternity levy on top and variable. The health element assumes the 2.9% average supplementary rate, which each health fund sets for itself. Above EUR 5,812.50 the marginal rate falls to 10.75% and above EUR 8,450 a month nothing further is due at those rates. Where the arrangement is employee leasing, pay is floored by the section 3a regulation and referenced by section 8(1) to comparable staff in the hirer's establishment, though a collective agreement for the temporary-work sector can displace that reference on pay for the first nine months and up to fifteen where it steps the worker up to an equivalent rate. Which of the two governs and from when, has to be established before the cost is fixed.
Aspirock supports companies making a first hire in Germany and coordinates the engagement through a named account team, so the employment terms, the cost position and the start date are settled together rather than one after another. A first German hire needs a registered employer standing behind it, an employer registration number, a German employment contract and registration of the employee with their health fund, which is due with the first payroll run and in any event within six weeks of the start date. Which structure provides that registered employer is a separate decision and the routes are compared elsewhere on this cluster.
The basic statutory notice under section 622(1) of the Civil Code is four weeks to the 15th or the end of a calendar month. For notice given by the employer it lengthens with service, from one month at two years to seven months at twenty years, each expiring at month-end and a probation period may last at most six months with two weeks' notice during it. The statutory minimum holiday under section 3 of the Federal Holiday Act is 24 Werktage on a six-day week, which is 20 days on a five-day week. Public holidays are set by each federal state apart from the Day of German Unity, so the total depends on where the employee works.
Aspirock supports companies that need people at work in Germany without their own German entity and coordinates the engagement through a named account team that owns the deployment end to end. The cost model is priced from the statutory contribution stack that applies to the actual salary rather than from an average and the regulatory position governing the route, including the permit regime, the 18-month default and the equal-treatment rule, is set out in full across this cluster before an engagement is structured.
General guidance on Germany employment rules, reviewed 5 August 2026. Rates and rules change. This is not legal or tax advice for a specific situation.
Ready to deploy staff into Germany?
Get a deployment plan covering employment setup, timeline, and costs. One conversation, no obligation.