Our guide to Payroll in Germany

Doing Business in Germany

Investing in Germany

The German government has been a driver, innovator, and beneficiary of an ever more globalised economy. Germany is amongst the three largest exporters in the world, with exports accounting for over one third of GDP.

Foreign and local investors are treated equally and are both eligible for investment incentives. Any entrepreneur who wishes to start a business in Germany may do so, there are generally no restrictions limiting the establishment of new companies.

Basic Facts about Germany

Full Name: Federal Republic of Germany

Population: 83.05 million (Eurostat, 2019))

Capital: Berlin

Major Language(s): German

Major Religion(s): Christianity

Monetary Unit: Euro

Main Exports: Motor vehicles, electrical machinery, metals and pharmaceuticals.

Internet Domain: .de

International Dialing Code: +49

How to Say:

Hello: Hallo

Good Morning: Guten Morgen

Good Evening: Guten Abend

Do you speak English? Sprechen Sie Englisch?

Goodbye: Auf Wiedersehen

Thank you: Danke

See You Later: Wir sehen uns später

Registrations and Establishing an Entity

In the establishment phase of a company and prior to assumption of commercial activities, a company only has to be registered in the public commercial register (Handelsregister) and the local trade office (Gewerbe-/Ordnungsamt).

For companies that are looking to process payroll in Germany, the company registrations to the tax and social security authorities include:

• Employer Company Number with Employment Agency (Betriebsnummernstelle)
• If no German company exists, a copy of the Foreign Company Registration is necessary
• Applying for Statutory Accident Insurance (Berufsgenossenschaft)
• Employer Tax Number for withholding tax purposes

The timeline for processing depends on the registering authority. According to experience, this can take up to six weeks.

The key legislative authority in Germany varies depending on where the employer is located and the purpose of the business:

• Tax authorities
• Health insurance company
• Statutory accident insurance

Banking

It is not mandatory to pay employees from an in-country bank account. Salary and third-party payments can be made on behalf of the client. Bank transfers are used to pay both employees and the local authorities in Germany. Any transfers that are made between banks in Germany are usually completed within a day. International bank transfers can take at least three working days.

Working Week

The average working hours in Germany is 8 hours per day. This can be extended to up to 10 hours per day for a short period. A rest period of 11 hours is normally prescribed between 2 shifts.

Employment Law

As of 2026, the minimum wage is €13.90 per hour. These regulations apply even if the employee is not subject to a collective bargaining agreement.

Holiday Accrual / Calculations

The default statutory holiday year is the calendar year; however, the employee’s contract and relevant collective agreement may provide for a different leave year.

Employees are entitled to a minimum of 24 holiday days per year (based on a 6-day working week when the act was initially implemented). In general, employees are given between 25 to 30 days per year in Germany.

Maternity Leave

Maternity leave entitlement is six weeks before the delivery date and eight weeks after the birth of the child (this is extended to 12 weeks after birth in case of premature or multiple births). Part of the payment is paid by the employer and part is paid by the Health Insurance Company.

Employees that are insured by the statutory insurance company will receive a daily net amount without paying taxes and the difference will be contributed by the employer.

Paternal Leave

Parental leave is available for both the mother and father to take together or individually. Employees are entitled to parental leave until their child turns three. The employee’s job will remain open to them and the employer cannot terminate their contract during this time. The employee must be living in the same household as their child and be working no more than 30 hours a week whilst taking parental leave.

Parental allowance is a state benefit for parents who would like to look after their child themselves after the birth, and therefore are not in full-time work or not working at all. Parents who were not working before the birth also receive the parental allowance.

Sickness

Under the Continued Remuneration Act, employees with 4 weeks or more service are entitled to six weeks statutory sick pay (unless the absence was materially caused by the employee’s actions).

An employee is entitled to a fresh six-week statutory sick pay period if a new underlying cause of sickness absence emerges. Once the six-week sick pay period expires, employees must claim statutory or private insurance sickness benefits.

National Service

There is no compulsory national service in Germany.

Tax & Social Security

The tax year runs from 1 January to 31 December in Germany.

Income Tax

Payroll withholding is required for tax and social security contributions. Local PAYE administration carried out by Finanzamt offices.

Withholding tax statement and payments are due to be paid to the authorities by the 10th of the following month. The typical penalty awarded for late submission is a maximum 10% of the assessed tax. Interest due for late payment is 6% per annum.

Please see below for detailed tax rates for 2025:

Employees are entitled to personal allowances which vary according to the number of children they have and their marital status.

Social Security

The German social insurance system requires employers to create a contribution statement, and then make payment of the reported total contributions. Cleared payment of the reported total contributions must reach the correct insurance bank account by the third-last bank working day of month.

Social security contributions for 2026 are as follows:

Reporting:

Employers are required to file reports of:

• Pay and tax deducted reports known as the Lohnsteuer-Anmeldungszeitraum

• Social insurance contribution statement known as Beitragsnachweis

The following payroll processing activities must take place at year end, 31 December:

• Certificate of wages for each employee (Lohnsteuerbescheinigung) latest by February payroll of the following year
• Social Security Statement for each employee (Sozialversicherungsmeldung /DEÜV) – with the January payroll of the following year but latest by 15th February of the following year
• Statutory Accident Insurance (Berufsgenossenschaftsmeldung) – employer – February following year

Statement for Persons with disabilities – employer statement – 31st March following year

Payroll

The employer must provide employees with payslips and it is legally acceptable in Germany to provide employees with online payslips.

Reports

By law, payroll information/reports should be kept for six years. Bookkeeping information should be kept for 10 years.

Payslip Example

New Employees

Employers require the following information from new employees:

• proof of citizenship or, if necessary, proof of work or residence permits
• holiday certificate
• proof of parenthood if necessary
• health insurance membership certificate within 2 weeks of starting work
• health certificate where the employee is under age 18

The employee's tax wage deduction data will be provided by ELStAM.

The new hire must provide their employer with their social security number of the German public pension insurance and/or any other pension provider (see social insurance numbers above).

Leavers

Legislative specifications regarding the employee’s final payment in Germany suggests that employees must receive final payments within the normal payroll run. Any additional payments i.e. bonus or special payments need to be paid in line with the work contract.

The leaving employee in Germany is automatically de-registered through the payroll system. The employee himself/herself has to send notification to the health insurance company four weeks before ending and de-register with the registry office.

Employee Benefits

Typical benefits provided in Germany include the following:

• General expenses e.g. per day payments could be provided for travel expenses up to a certain amount and will remain tax free.
• If the employee uses his/her own car, the car mileage could be provided tax free for business related trips. Trips from home to office are calculated with €0.30 per kilometer (distance one way; 1 until 20 kilometers) and €0.38 per kilometer (distance one way; from 21 kilometers) and can be deducted in the individual’s German income tax return.
• If an employee has a company car, private usage should be taxed with 1% of gross list price per month. For distances between home and office, an additional amount of 0.03% of the gross list price multiplied by distance in kilometers should be taxed.
• Other benefits are - Canteen Meals, Private Pension Scheme, and Telephone Costs etc.

Visas & Work Permits

Individuals who are citizens of a country within the European Union (EU) or European Free Trade Association (EFTA) do not require a work permit.

Those coming from the following non-EU countries do not require a work visa to enter Germany for employment purposes, nor do they need to have a job offer prior to entering Germany:

• Australia
• Israel
• Japan
• Canada
• South Korea
• New Zealand
• United States

However, these individuals listed above must register with the local residence registration office (Einwohnermeldeamt) if they intend to stay for more than 90 days. Registration must be completed within a week of finding permanent accommodation (ie not a hotel). The individual must provide:

• Passport or valid ID
• Proof of address such as a copy of the lease or rental agreement, and
• Completed registration form (which is usually available at the registry office)

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.