Employer of record in Germany: the real cost in 2026

EOR, own company or contractor?

There are three ways to work with someone in Germany. Each one fits a different case.

Employer of record

The EOR employs the person for you and runs the payroll. You need no German company. This suits one or a few employees, or a first test of the market.

Your own German company

You set up a company, such as a GmbH, and employ people directly. A GmbH needs at least €25,000 of share capital. You also need payroll, accounting and HR support in Germany.Limited Liability Companies Act (GmbHG), section 5Checked 1 Oct 2026

Contractor

A freelancer sends you invoices. This works only when the person is really independent. If the person works on your instructions and as part of your organisation, the law treats the work as employment. Then social contributions are due.Social Code IV (SGB IV), section 7Checked 1 Oct 2026

When you are not sure, you or the person can ask the German pension insurance (Deutsche Rentenversicherung Bund) to decide if the work is employment or self-employment.

Sources: Social Code IV (SGB IV), section 7aChecked 1 Oct 2026

The agency work licence (AÜG)

In Germany, an EOR arrangement can count as temporary agency work (Arbeitnehmerüberlassung). The EOR is the legal employer, but the person works for you and follows your instructions.

If the arrangement counts as agency work, three rules apply:

• The EOR, or its partner in Germany, needs a licence under the AÜG.
• The same worker can work for the same client for at most 18 months in a row. Earlier assignments count when the gap between them is 3 months or less.
• The worker must get the same pay and working conditions as the client's comparable employees. A collective agreement can allow different pay for the first 9 months only.

Ask each provider these questions before you sign:

• Do you, or your partner in Germany, hold an AÜG licence? Can you show it?
• How do you handle the 18-month limit?
• Which collective agreement applies, and how does it affect the pay?

These rules are complex. Ask a lawyer how they apply to your case.

Sources: Temporary Agency Work Act (AÜG), section 1, Temporary Agency Work Act (AÜG), section 8Checked 1 Oct 2026

Employment rules in Germany

Written terms

The employer must give the main terms of the job in writing. Some terms are due on the first working day, and the others within 7 days or 1 month.Employment Terms Documentation Act (NachwG), section 2Checked 1 Oct 2026

Working hours

At most 8 hours a working day. Up to 10 hours are allowed if the average stays at 8 hours over 6 months or 24 weeks.Working Hours Act (ArbZG), section 3Checked 1 Oct 2026

Minimum wage

€13.90 an hour from 1 January 2026, and €14.60 an hour from 1 January 2027.Federal Ministry of Labour and Social Affairs (BMAS)Checked 1 Oct 2026

Minimum holiday

24 working days a year, counted on a 6-day week. This is 20 days on a 5-day week.Federal Leave Act (BUrlG), section 3Checked 1 Oct 2026

Sick pay

The employer continues to pay the salary for up to 6 weeks of illness. A new employee gets this right after 4 weeks of work.Continued Remuneration Act (EntgFG), section 3Checked 1 Oct 2026

Maternity protection

No work in the 6 weeks before the birth, unless the mother asks to work, and no work in the 8 weeks after it. After premature or multiple births, the period after the birth is 12 weeks. The employer tops up the maternity pay of €13 a day to the mother's average net pay.Maternity Protection Act (MuSchG), section 3, Maternity Protection Act (MuSchG), section 20Checked 1 Oct 2026

Parental leave

Each parent can take leave until the child's third birthday. Up to 24 months of it can be taken later, until the child is 8.Parental Allowance and Leave Act (BEEG), section 15Checked 1 Oct 2026

Probation

Up to 6 months. During probation, either side can end the job with 2 weeks' notice.Civil Code (BGB), section 622Checked 1 Oct 2026

Notice period

4 weeks, to the 15th or to the end of a month. When the employer gives notice, the period grows with service: 1 month after 2 years, up to 7 months after 20 years.Civil Code (BGB), section 622Checked 1 Oct 2026

Dismissal protection

After 6 months, in a business with more than 10 employees, a dismissal needs a reason that the law accepts. The reason must come from the employee's person, the employee's conduct, or urgent business needs.Dismissal Protection Act (KSchG), section 1, Dismissal Protection Act (KSchG), section 23Checked 1 Oct 2026

Payroll and taxes

The employer, or the EOR, takes the employee's income tax (Lohnsteuer) out of each salary payment and pays it to the tax office.

The employee also pays social contributions. For pension, unemployment, health and care, the employee pays the same rates as the employer: 21.15% of the salary up to the ceilings in 2026, with the average extra health rate. Employees without children pay 0.6% more for care. In Saxony, the employee pays 0.5% more for care.

Sources: Income Tax Act (EStG), section 38, GKV-Spitzenverband, lohn-info.deChecked 1 Oct 2026

Benefits

The law requires the social insurance, paid holiday and sick pay that this guide describes.

Each employee can also ask to convert part of the salary into a company pension. The limit is 4% of the pension ceiling, which is €4,056 a year in 2026. When the conversion saves the employer social contributions, the employer adds 15% of the converted amount.

Other benefits, such as a bonus, a company car or extra holiday, depend on the contract or on a collective agreement.

Sources: Company Pensions Act (BetrAVG), section 1a, GKV-SpitzenverbandChecked 1 Oct 2026

How hiring through an EOR works

1. Compare providers and ask for quotesAsk for the monthly fee in Germany, the deposit, the exchange rate and the notice period of the EOR contract. Ask about the AÜG licence too.
2. Agree the employment termsAgree the salary, the start date, the probation period and the holiday with the candidate.
3. The EOR signs the contractThe EOR becomes the legal employer. It must give the employee the written terms on time.
4. The EOR runs the payrollEach month, the EOR pays the salary, takes out the income tax and pays the social contributions.
5. You manage the daily workYou set the tasks and the goals. The EOR handles the employment administration.

Sources: Employment Terms Documentation Act (NachwG), section 2, Income Tax Act (EStG), section 38Checked 1 Oct 2026