GermanyGermany is where US startups go for deep, senior engineering talent and access to the largest economy in Europe. What surprises founders is how much structure comes with the hire: a five-pillar social insurance system that adds roughly 22-23% on top of gross salary, and termination protection strong enough that "we'll just let them go if it doesn't work out" is not a plan.
Here's the whole picture.
Quick facts
| Germany | |
|---|---|
| Currency | Euro (EUR) |
| Standard work week | 40 hours, 5 days |
| Payroll frequency | Monthly |
| Employer statutory cost | ~22-23% on top of gross salary |
| Minimum wage | €13.90/hour (from January 2026) |
| Probation | Up to 6 months (6 is the default) |
| Notice period | 4 weeks to start, rising to 7 months with tenure |
| 13th month pay | Not mandatory (common in collective agreements) |
| Employees paid in | EUR, required by law |
First decision: contractor or employee?
German contractors (Freiberufler) are common in engineering, and for a genuinely independent specialist with multiple clients, the structure works.
Germany polices the line through the concept of Scheinselbststaendigkeit, false self-employment. Someone working fixed hours, integrated into your team, exclusively for you, is an employee regardless of what the agreement says, and the pension authority can audit and assess years of back contributions. The rough test: if you'd be uncomfortable with them taking a second client, they're probably an employee.
When someone becomes core to the team, you convert them through an employer of record (EOR) or your own German entity.
Paying contractors in Germany
The mechanics:
- Collect a W-8BEN before the first payment. It certifies the contractor is a non-US person, so you generally don't issue a 1099. Have your accountant confirm.
- Sign a real contract with scope, rate, IP assignment, and termination terms. Keep the working relationship genuinely independent; the contract label doesn't decide classification, the day-to-day reality does.
- Pay in USD or EUR, their choice. Contractors can invoice in either. Per-invoice bank wires cost $25-45 plus an FX spread buried in the rate.
Shor pays German contractors over local rails at a flat disclosed 2% FX margin, for a $19/month per-contractor fee. Contracts, W-8BEN collection, and invoicing are built in.
Hiring full-time employees
Germany's statutory social insurance has five pillars, most split roughly equally between employer and employee:
| Contribution | Rate (employer side) | Notes |
|---|---|---|
| Pension insurance | 9.3% | Employee contributes 9.3% too |
| Health insurance | ~8.75% | Base 7.3% plus half the fund's supplementary rate; varies by fund |
| Unemployment insurance | 1.3% | Employee matches |
| Long-term care insurance | 1.8% | Childless employees aged 23+ pay a surcharge on their side |
| Accident insurance | ~1.3% | Employer only, risk-rated by occupation |
Headline employer load: roughly 22-23% on top of gross salary, with contribution ceilings capping the base (around €101,400/year for pension and unemployment, €69,750/year for health and care in 2026). Statutory rates change; confirm with your accountant.
For 2026 specifically: the minimum wage rose to €13.90/hour in January (with €14.60 already scheduled for January 2027), the average health insurance supplementary rate went up to 2.9%, and the contribution ceilings increased. Separately, the EU Pay Transparency Directive was due for transposition into German law by June 2026, so expect salary-range disclosure obligations to start shaping job postings. A good EOR reprices all of this as it lands.
Two structural things to know before your first German hire. Many sectors are covered by collective bargaining agreements (Tarifvertraege) that set minimum salaries, hours, and notice periods, so classification has to check coverage. And if the worksite has a works council (Betriebsrat), it holds consultation rights over certain employment actions, including terminations.
Employees must be paid in EUR, monthly, with wage tax filed through the ELSTER system.
Leave and benefits
- Annual leave: 20 days statutory minimum (market standard is higher, often 25-30)
- Sick leave: employer pays 100% of salary for the first 6 weeks; after that, the employee's health insurance pays a statutory benefit
- Maternity leave: 14 weeks at full pay, employer-advanced with a reimbursement mechanism
- Paternity leave: no separate statutory paternity entitlement; parents use the shared parental leave system with state-paid allowance
- Public holidays: ~10 days, varying by state
Beyond statute, competitive German offers commonly add occupational pension plans, meal vouchers, transport subsidies, private health supplements, and mobile or internet allowances.
Ending employment
Germany has some of the strongest dismissal protection in the world once an employee passes 6 months of tenure. Expect:
- Notice periods that grow with tenure: 4 weeks to start, roughly 1 month after 2 years, 2 months after 5 years, and up to 7 months for long-tenured employees. Contracts and collective agreements can extend these.
- No automatic statutory severance, but dismissals need a legitimate ground (operational, conduct, or personal) with documentation, and settlements of around half a month's salary per year of service are the common outcome of termination agreements.
- Works council consultation is mandatory where one exists.
- A final settlement covering accrued salary, outstanding vacation payout, and any negotiated severance.
Done carelessly, a German termination ends up in labor court. This is exactly the situation where an EOR earns its fee: route the decision through a consultation before you communicate anything.
Documents we'll collect from your employee at onboarding
Tax ID (Steuer-ID), social insurance number (Sozialversicherungsnummer), health insurance fund selection and certificate, and a German bank IBAN for salary. Marital status and church membership also affect tax withholding, so payroll will ask.
What it costs through Shor
- Contractors: $19/month each
- Full-time employees (EOR): $449/month each, five-pillar registrations, ELSTER filings, and sick pay administration handled
- Your own German entity: we run payroll on top of it for $60/month per employee, in the same dashboard
No setup fees, no annual lock-in, and the FX margin is a flat disclosed 2%. The pricing calculator shows the full Germany math.
Next steps, depending on where you are: the EOR pricing comparison puts published provider prices side by side, and EOR vs. your own entity has the breakeven math for when a local entity starts to win. To see Germany against the rest of our coverage, the reference tables compare employer costs, notice periods, and public holidays across every country here. Already with another provider? Switching EOR providers covers the traps worth planning around.
FAQ
Can I pay German employees in USD? No. Salary must be paid in EUR through German payroll. Contractors, however, can invoice in USD or EUR.
Do I have to pay severance in Germany? There's no automatic statutory severance, but dismissal protection is strong after 6 months of tenure, so most terminations end in a negotiated settlement, commonly around half a month's salary per year of service. Budget for it.
What does an employer of record in Germany cost? With Shor, $449/month per employee, plus the statutory employer contributions (roughly 22-23% of gross salary) that any employer pays. Deel and Remote charge $599-699/month for the same coverage.
How fast can someone start? Contractors: same day, once the contract is signed and the W-8BEN is in. Employees via EOR: typically 15-25 business days, longer than most countries because of health fund selection, social insurance registration, and tax setup. Plan start dates accordingly.