The cost of hiring an employee in Germany

The cost of an employee in Germany has three parts. The first is the gross salary you agree with the person. The second is the employer social contributions, which come to roughly 21 percent of that gross and fund pension, health, long-term care and unemployment insurance, plus small levies.

The third part depends on how you employ. If you run your own German entity, it is the overhead of that company, from a Steuerberater to filings and admin time. If you use an employer of record, it is a flat monthly fee instead. The salary and the 21 percent are the same either way.

Take a single, childless employee on a gross salary of 70,000 euro a year, on tax class one with no church tax. The employer adds social contributions of roughly 21 percent, which brings the total employer cost to about 85,200 euro a year.

From the employee’s side, income tax and their share of social contributions come off the gross, leaving a net take-home of somewhere around 42,000 to 42,500 euro a year, or about 3,500 euro a month. The exact figures move with the health insurer’s supplementary rate and the employee’s tax class, but this is the shape of it.

The 21 percent is not uniform across every salary, because social contributions stop at fixed ceilings. For 2026, pension and unemployment contributions are only charged up to a salary of 8,450 euro a month, and health and long-term care up to 5,812.50 euro a month.

The practical effect is that the higher the salary, the lower the effective percentage of employer on-cost, because a growing part of the pay sits above the ceilings. On a very high salary the employer overhead as a share of gross is noticeably below 21 percent, while on a modest salary it sits close to the full figure.

Payroll is the biggest cost but not the only one. A realistic budget for a German hire also allows for the things that sit around the salary.

• Paid leave, at least 20 days and often 25 to 30
• Sick pay at full salary for the first six weeks
• Equipment, software and any home-office allowance
• Recruitment and onboarding time
• If you run your own entity, the Steuerberater and filing costs

Most of these apply whichever way you employ. The entity overhead in the last line is the one an employer of record removes, replacing it with a single fee.

For the third part of the cost, the choice is between a flat EOR fee and the running overhead of your own GmbH. The comparison is clearest side by side.

Sources: 2026 social contribution rates and ceilings from Deutsche Rentenversicherung and GKV publications. Worked example reviewed July 2026.