Hiring in Germany:
what it costs, and what the rules are.

Christoph SchulerFounder, Business Center Reutlingen · 15+ years with Mercedes, including two years living in Bangalore · Written 29 August 2026

What an employee actually costs

German employers and employees split social security contributions, broadly in half. These are the 2026 rates.

A worked example. On a gross salary of 60,000 €, the statutory employer share above comes to roughly 12,800 €. With accident insurance and the levies, budget somewhere around 73,000 to 74,500 € in total employer cost for that hire, before anything discretionary.

There is no statutory thirteenth month in Germany. Christmas and holiday payments are common but they come from the employment contract or a collective agreement, not from the law.

Why senior hires cost proportionally less

This is the part that surprises foreign employers, and it is worth building into your salary planning rather than discovering afterwards.

Contributions are not levied on the whole salary. They stop at annual ceilings, which for 2026 are 69,750 € for health and nursing care and 101,400 € for pension and unemployment. Everything above those lines is contribution-free.

So the effective employer rate falls as the salary rises. At 60,000 € the statutory share is about 21.3 % of gross. Run the same calculation on 120,000 € and it comes out at roughly 15 %, because most of that salary sits above the ceilings. One senior hire is not twice as expensive as two people on half the salary, in social security terms it is meaningfully cheaper.

The contract, and what must be in writing

An employment contract in Germany does not have to be concluded in writing to be valid, but the essential terms of the employment relationship have to be recorded in writing and handed to the employee under the Nachweisgesetz, and since the 2022 amendment some of those items are due on the first day of work. In practice everybody uses a written contract, and you should too.

Two things foreign employers routinely get wrong. First, a fixed-term contract without an objective reason must be agreed in writing before the work starts, sign it late and you have an open-ended contract. Second, clauses imported from an English or American template, at-will language, unlimited non-competes, unilateral variation rights, are frequently ineffective under German law and can invalidate more than the clause itself. Have the contract drafted or reviewed by a German employment lawyer once, and reuse it.

Working time, breaks and minimum wage

The Working Time Act sets the daily limit at eight hours. It may be extended to ten hours provided the average over six calendar months or twenty-four weeks does not exceed eight.

Read "working time" precisely, because this is where shift plans and budgets go wrong. § 2(1) ArbZG defines working time as the time from the beginning to the end of work excluding rest breaks. The ten hours are ten hours of actual work. On top of them § 4 ArbZG requires a break of 30 minutes for more than six and up to nine hours of work, and 45 minutes for more than nine, which may be split into blocks of at least fifteen minutes. A ten-hour working day therefore means roughly ten hours forty-five minutes on site, and nobody may work more than six hours at a stretch without a break.

There must also be an uninterrupted rest period of eleven hours between working days (§ 5 ArbZG), and Sunday and public holiday work is restricted.

On the weekly figure: the Act counts in Werktage, Monday to Saturday, so eight hours across six days gives the familiar ceiling of 48 hours a week on average. Up to 60 hours in a single week is possible, but only if the six-month average comes back to eight hours a day. What is not correct is the figure of twelve hours a day that appears on several English-language hiring guides, the German daily maximum is ten hours of working time.

The statutory minimum wage is 13.90 € gross per hour from 1 January 2026 and 14.60 € from 1 January 2027, following the Minimum Wage Commission's decision of 27 June 2025. Sector-specific minimum wages under collective agreements can be higher and take precedence where they apply.

Holiday, sickness and parental leave

Holiday

The Federal Holiday Act sets a minimum of 24 working days based on a six-day week, which is 20 days for a five-day week. Treat that as a floor. German contracts commonly grant 25 to 30 days and you will not attract anyone at the statutory minimum. Public holidays are additional and differ by federal state: Baden-Württemberg, where we are, has twelve.

Sickness

The employer continues to pay full salary for up to six weeks under section 3 of the Continued Remuneration Act, once the employment has lasted four weeks. After that the health insurer pays sickness benefit, for a maximum of 78 weeks within three years for the same illness. Smaller employers are reimbursed a share of the continued pay through the U1 levy, which is why that levy exists.

Maternity and parental leave

Maternity protection runs six weeks before and eight weeks after the birth, extended to twelve weeks after in cases such as premature or multiple births. Parental leave can be taken for up to three years per child, with a statutory right to return. During parental leave the state pays parental allowance at 65 to 67 % of previous net income, capped at 1,800 € a month, that is a state benefit, not an employer cost, but the position has to be held open.

Probation, notice and dismissal

A probationary period may be agreed for a maximum of six months, during which the notice period is two weeks.

Outside probation the basic statutory notice under § 622 BGB is four weeks to the fifteenth or the end of a calendar month. For notice given by the employer it lengthens with the employee's service, one month after two years, two months after five, three after eight, and onwards up to seven months after twenty years. Contracts and collective agreements often provide longer periods. Notice must be in writing and signed; an email does not terminate a German employment relationship.

There is no general right to severance in German law. The commonly quoted half a month's salary per year of service comes from § 1a KSchG, which applies where an employer dismisses for operational reasons and offers severance in the notice letter in return for the employee not bringing a claim. It is also the customary starting point in settlement negotiations, which is why it is often reported as though it were the statutory rule.

What you must do before the first payday

1. Get a Betriebsnummer from the Federal Employment Agency. Nothing in payroll works without it.
2. Register with the competent Berufsgenossenschaft, the statutory accident insurer for your sector. Membership is compulsory and the contribution is the employer's alone.
3. Set up compliant payroll. Monthly reporting to the health insurers, wage tax returns to the tax office, and electronic notifications. A German payroll provider or tax advisor is the normal route, not a spreadsheet.
4. Check whether an immediate notification is required, in certain sectors the employee must be registered before the first hour of work, not afterwards.
5. Take out the compulsory and the sensible insurances and check whether a collective agreement applies to your sector, because it may set pay, hours and notice above the statutory floor.

If all of this is the reason you were considering hiring through a third party instead, the trade-offs are in Employer of Record in Germany, or your own GmbH?, and if the plan is to place your own people with a German client rather than employ them for yourself, the licence question is in Werkvertrag, Dienstvertrag or labour leasing.

Figures that circulate and are wrong

We checked the widely used English-language hiring guides for Germany against the official sources while writing this. Four errors turned up often enough to be worth naming, because a budget or a contract built on them will be wrong.

• "Minimum wage 14.00 €." It is 13.90 € from 1 January 2026 and 14.60 € from 1 January 2027.
• "Working time may not exceed 12 hours a day." The German maximum is ten hours of working time, and only where the six-month average returns to eight. The 48-hour weekly figure quoted alongside it is defensible, it follows from eight hours across six Werktage, but the twelve-hour day is not.
• "Sickness benefit for 72 weeks." It is up to 78 weeks within three years for the same illness.
• "Nursing care insurance 1.7 %." The 2026 rate is 3.6 % in total, 1.8 % each, with a 0.6 % surcharge borne by childless employees alone.

All figures on this page are for 2026 and were checked on 29 August 2026 against the sources listed below. Rates change every January, check the year before you rely on them.

Questions

Sources

Minimum wage from 1 January 2026: Bundesministerium für Arbeit und Soziales
§ 3 ArbZG, daily working time: gesetze-im-internet.de
§ 2 ArbZG, definition of working time (excluding breaks): gesetze-im-internet.de
§ 4 ArbZG, rest breaks: gesetze-im-internet.de
§ 5 ArbZG, rest period: gesetze-im-internet.de
§ 3 BUrlG, minimum holiday: gesetze-im-internet.de
§ 3 EFZG, continued pay during sickness: gesetze-im-internet.de
§ 48 SGB V, duration of sickness benefit: gesetze-im-internet.de
§ 3 MuSchG, maternity protection periods: gesetze-im-internet.de
§ 15 BEEG, parental leave: gesetze-im-internet.de
§ 622 BGB, notice periods: gesetze-im-internet.de
§ 23 KSchG, scope of the Dismissal Protection Act: gesetze-im-internet.de
§ 1a KSchG, severance on operational dismissal: gesetze-im-internet.de
Nachweisgesetz, written record of essential terms: gesetze-im-internet.de
Contribution rates and assessment ceilings 2026: AOK Firmenkunden

Business Center Reutlingen provides administrative and organisational support and introduces you to licensed professionals. We do not give legal or tax advice, in Germany only admitted lawyers (Rechtsanwälte) and tax advisors (Steuerberater) may do so.

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