Your Guide to Hiring Employees and
Contractors in Germany
Capital city
Berlin
Currency
Euro
Language(s)
German
Ease of doing business
Very easy
Payroll frequency
Monthly
Employer taxes
20.645%
Payroll
Monthly Payroll
All employee payments will be made in equal monthly installments on or before the last working day of each calendar month, payable in arrears.
Minimum Wage Requirements:
The minimum hourly wage stipulated by law for 2022 is €9.82. A higher minimum is often set by collective bargaining agreements, which are enforceable by law.
Individual Income Tax:
- The individual income tax ranges from 14% to 45%.
- Income tax is calculated according to progressive rates.
- The rate is based on the employee tax class (marital status, employees with one or more income source, etc.) and the amount of monthly wages.
- These rates are updated annually by the Federal Government.
Employer Cost:
The employer cost is generally estimated at 22.33% of the employee salary.
Retirement – 9.30%
Health insurance – 7.30%
Unemployment security – 1.20%
Long term insurance fee – 1.53%
Accident security – 2.0%
Maternity – 1.0%
Working Hours
Work Week
Monday to Friday.
Overtime Pay & Maximum Hours
Overtime payment is not mandatory. Overtime can be compensated in time off or financially, based on the employer’s discretion.
For planned overtime, the employee is required to inform the employer 4 days in advance.
Employment Termination
Germany employers in general can provide any fair reasons for termination of an employee. Any dismissal from the end of the employer for an employee that has been employed longer than six months has to be “socially justified” by the following:
- Person-related reasons, such as long-term illness;
- Termination with consent of the employee through a termination agreement;
- Conduct-related reasons, for example repeated breaches of employment terms after prior warning or serious misconduct; or
- Operational reasons, for example the shutdown of the company or economic downturns.
Notice period:
The statutory notice period for an employer depends on the duration of employment, with a minimum of four weeks for those employed less than 9 months and up to 7 months for those employed more than 20 years.
Probation periods:
The maximum length of a probationary period is 6 months. The minimum statutory notice period during the beginning of a new employment relationship is 2 weeks.