Employer of record in Germany: costs and rules for 2026

What makes hiring in Germany different

Social insurance is split roughly half and half between employer and employee, and the employee's share (about 21.15%) almost matches yours. The quirks are in how it is capped and who sets the rate.

• Two 2026 caps. Pension and unemployment stop at EUR 8,450 a month (EUR 101,400 a year), now one figure for all of Germany. Health and long-term care stop at EUR 5,812.50 a month (EUR 69,750).
• The health fund sets part of your cost. On top of 14.6%, each fund charges an additional rate. The 2026 average is 2.9%, up 0.4 points, and vdek expects actual fund rates to average above 3%. Your employee's choice of fund changes your bill.
• Extra levies. U1 (sick pay, employers up to 30 staff), U2 (maternity) and accident insurance through the trade association (BG) are employer-only and priced by fund or sector.
• Probation can last up to 6 months if agreed, with 2 weeks' notice either way during it.
• Notice is 4 weeks to the 15th or month end. Employer notice then rises to month end: 1 month after 2 years, 2 after 5, 3 after 8, 4 after 10, 5 after 12, 6 after 15 and 7 months after 20. Collective agreements can change this.
• No general statutory severance. For an operational dismissal, the employer can offer 0.5 month's pay per year of service in the notice, and the employee who does not sue in time receives it (KSchG s.1a).
• Leave: 24 working days (Werktage, counted on a six-day week) by statute, which is 20 days on a five-day week (BUrlG s.3). Christmas and vacation bonuses exist only by contract or collective agreement. Payroll runs monthly.
• Minimum wage: EUR 13.90 an hour from January 1, 2026, and EUR 14.60 from January 1, 2027. The minijob limit is EUR 603 a month.

Public holidays are set by each state, and we have not confirmed a count or the working-time limits from an official source; ask the EOR for the rules in your hire's state.

Employment costs and rules in Germany

What an EOR charges to employ someone in Germany

A EUR 35,000 German hire, priced out

At this salary nothing is capped, so the employer share is a flat 21.30% of pay. The fee and the dollar column use the ECB reference rate for October 16, 2026 (USD 1.1253 per EUR), so the salary is USD 39,385.50 rather than exactly USD 40,000.

Higher salaries flatten out. Above EUR 69,750 the health and care lines stop growing, and above EUR 101,400 nothing does. The U1, U2 and BG lines are missing here because they depend on the fund and sector; ask your EOR to show them on the quote.

Model your own figures with the international payroll cost calculator, or line Germany up against other countries in the cost index.

What letting someone go costs

Take the sample employee after 5 years. Notice is 2 months to the end of a month. If the dismissal is for operational reasons and the notice offers the statutory payment, it is 0.5 x EUR 2,916.67 x 5 = EUR 7,291.67. Whatever the exit costs, the EOR passes it to you.

Setting up a German company instead

Your own German entity pays the same 21.30% and the same levies. The saving is the EUR 6,387.63 annual fee per head at $599 a month. The cost is registering a company, joining the BG for your sector, running monthly payroll for each health fund and handling dismissals under German law yourself. Our EOR versus entity guide covers the crossover point, and the permanent establishment guide covers tax exposure from staff in Germany.

Freelancers in Germany

A freelancer who works only for you, on your schedule and inside your team looks like an employee. If that is found later, the arrears are the social insurance that was never paid: 21.30% from the employer side on this salary, plus the employee share. For true freelancers, contractor management platforms are the cheap route; a contractor of record adds a compliance check for a fee.

Which EOR fits a German hire

Ranked on our published criteria, Multiplier scores 79/100 and Oyster 64/100; the best EOR list covers the rest.

• Multiplier: $499 on monthly billing or $459 if you commit to a year, deposit refunded within 60 days. Its FAQ says there is no setup fee, but its pricing page mentions an implementation fee "as applicable".
• Oyster: $699, no onboarding or termination fees, 30 days' notice to leave the service.
• Deel and Remote list $599. Remote's default terms run 12 months and auto-renew (Remote review); Deel's promo order forms need two years (Deel review). Oyster's complaints are in the Oyster review.

For Germany, ask whether the contract follows a collective agreement, which health fund additional rate the quote assumes, and whether U1, U2 and BG are in the price.