Germany

Registrations and Establishing an Entity

To operate payroll in Germany, a business must:

• Register with the local trade office (Gewerbeamt)
• Notify the tax office (Finanzamt)
• Register with the local labor office
• Obtain a company tax number and an employer registration number

It is essential to register with the appropriate health insurance provider, as they act as central points for social security coordination.

Banking

A local German bank account is required for paying salaries and remitting social contributions and taxes.

Working Week

The standard working week in Germany is Monday to Friday. Working hours typically range from 35 to 40 hours per week. Overtime is usually compensated with time off or additional pay.

Employment Law

Holiday Entitlement

Employees are legally entitled to a minimum of 20 days of paid leave per year based on a 5-day work week. However, 24 days based on a 6-day week is also a legal standard. Many employers offer 25 to 30 days. The leave year is typically aligned with the calendar year unless otherwise stated in employment contracts.

Maternity Leave

Pregnant employees are entitled to 14 weeks of paid maternity leave: 6 weeks before and 8 weeks after childbirth (extended to 12 weeks in certain cases). Payment is shared between statutory health insurance and the employer.

Parental Leave

Up to 3 years of parental leave per child can be taken by either parent. During this period, job protection is granted, and part-time work is allowed.

Sick Leave

Employees are entitled to 6 weeks of full salary in case of illness, paid by the employer. If the illness persists, statutory health insurance pays a sickness benefit.

Public Holidays

Public holidays vary by federal state. Employees are entitled to paid leave on nationally recognized holidays.

Probation Period

Commonly 3 to 6 months. During this period, termination notice is 2 weeks.

National Service

There is no compulsory military service in Germany. Civil service obligations were suspended in 2011.

Minimum Wage

As of 2025, the statutory minimum wage in Germany is €12.82 per hour. This applies nationwide, regardless of collective agreements or industry-specific pay scales.

Tax & Social Security

The German tax year runs from 1 January to 31 December.

Income Tax

Germany applies progressive income tax rates. Employers are responsible for withholding tax (Lohnsteuer) from salaries.

2025 Income Tax Rates:

Solidarity surcharge (5.5% of income tax) and church tax (8% or 9%) may apply.

Social Security Contributions

Social security is shared equally between employer and employee and includes:

• Pension Insurance (RV): 18.6%
• Unemployment Insurance (AV): 2.6%
• Health Insurance (KV): ~14.6% (plus 1.3% average additional contribution)
• Long-Term Care Insurance (PV): 3.05% (higher for childless employees)

Additional employer costs may include:

• 2.5% sick pay surcharge
• 0.44% maternity pay surcharge
• 0.15% insolvency fund
• 1.3% accident insurance (Berufsgenossenschaft)
• 5% artists' social security contributions (where applicable)

Employers remit contributions monthly through health insurance providers.

Monthly Reporting

Employers must report monthly to:

• Health insurance funds (for all social contributions)
• Tax office (income tax and surcharges)
• Submit Beitragsnachweis (contribution declaration)
• Complete Lohnsteuer-Anmeldungszeitraum filings

Yearly Reporting

Annual income tax statements (Lohnsteuerbescheinigung) must be submitted for each employee.

• Annual Sozialversicherungsmeldung / DEÜV submission
• Berufsgenossenschaftsmeldung for accident insurance
• Submit disability employee report by March 31

Payroll

Employees are typically paid monthly. Payroll must include gross salary, deductions, and net pay. Payslips must be provided and may be issued digitally.

Payroll software that supports German standards (e.g., ELSTER) is commonly used for automated filings.

Reports

Payroll reports must be retained for at least 6 years; other financial documentation such as bookkeeping records must be kept for 10 years.

Payslip Example

New Employees

Before employment begins, the employer must:

• Obtain the employee’s tax ID and social security number
• Register the employee with the health insurance provider
• Submit registration to the social security clearing house (DEÜV)
• Collect documentation:
  • Proof of citizenship or valid residence permit
  • Holiday certificate from previous employer
  • Proof of parenthood (if claiming child benefits)
  • Membership certificate from health insurance (within 2 weeks)
  • Health certificate (for employees under 18)

Leavers

Upon termination, employers must:

• Provide final payslip
• Submit deregistration (Abmeldung) to social security and health funds
• Issue employment certificate (Arbeitszeugnis) upon request

Employees are also responsible for:

• Informing their health insurance fund 4 weeks before coverage ends
• De-registering with their local residence office (Einwohnermeldeamt)

Notice periods vary by tenure and contract terms, ranging from 2 weeks to 7 months.

Employee Benefits

Common employer-provided benefits include:

• Holiday and Christmas bonuses
• Travel subsidies or company cars
• Supplementary health or pension schemes

Expenses

Reimbursable business expenses must be documented. Tax authorities require clear audit trails. Non-compliant reimbursements may be taxed as salary.

For private vehicle use, mileage reimbursements follow set limits:

• €0.30/km for the first 20km
• €0.38/km beyond 20km

If a company car is provided, the employee must report:

• 1% of the vehicle’s gross list price as a benefit
• An additional 0.03% per km from home to office

EU/EEA citizens do not need a visa or work permit. Non-EU citizens must obtain a residence permit for employment purposes.

Work Visa Process

Required documentation includes:

• Valid passport
• Employment contract
• Professional qualifications
• Job approval from the Federal Employment Agency

Application is usually submitted at the German embassy or consulate before entry.

Upon arrival, non-EU nationals must:

• Register with the local residence office within 1 week
• Provide passport, lease/rental contract, and residence registration form (Anmeldung)

Blue Card EU scheme is available for highly skilled workers earning above a minimum salary threshold.

Location Specific Considerations

• Church Tax: Applies to registered members of recognized religious groups.
• Public Holidays: Differ by federal state (e.g., Bavaria vs. Berlin).
• Health Insurance Choice: Employees may choose between statutory and private plans based on income.
• German Language Use: Employment documents and payslips are generally issued in German.
• Regional Registration Requirements: Residence and health insurance changes must be reported locally.

Further Information

For more information, or assistance with Germany Tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.