How to hire an employee in Germany, step by step

Before any paperwork, decide how the person will be employed. There are three routes. You can employ them through your own German entity, usually a GmbH, which means forming and running a company. You can use an employer of record, where we employ them on our German entity and you skip the setup. Or you can engage them as a contractor, which carries the risk of Scheinselbstständigkeit if the work really looks like employment.

The rest of this guide assumes the direct route through your own entity, so you can see everything that involves. If you would rather not run it yourself, an EOR collapses steps two through six into a single service agreement.

To employ anyone in Germany you first have to exist as an employer in the eyes of the authorities. That means obtaining a Betriebsnummer, the employer number, from the Bundesagentur für Arbeit. Without it you cannot report an employee to social insurance.

You also register with the Finanzamt to run wage tax, which is where the monthly Lohnsteuer-Anmeldung will be filed, and you set up cover with the relevant Berufsgenossenschaft, the statutory accident insurer for your sector. These are one-off steps, but they have to be in place before the first payroll.

Next the employee goes into the social insurance system. You confirm their statutory health insurer, the Krankenkasse, and submit the joining notification through the standard DEÜV reporting process. That single enrolment covers health, long-term care, pension and unemployment insurance.

For this you need the employee’s social insurance number, the Sozialversicherungsnummer, and their tax details. From that point the monthly contributions, split between employer and employee, flow to the health insurer, which passes the pension and unemployment shares on.

The employment contract, the Arbeitsvertrag, has to set out the written terms the Nachweisgesetz requires, including pay, working hours, leave, notice and place of work. It can be fixed term or open ended, within the limits German law puts on fixed-term contracts.

Check whether a collective agreement, a Tarifvertrag, applies to the role or the sector, because it can set minimum pay, hours and leave above the statutory floor. If one binds your business, the contract has to respect it.

German law sets minimums the contract cannot fall below, and getting these wrong is where employers most often trip up. The main ones are straightforward once you know them.

• Minimum wage of 13.90 euro an hour in 2026, rising to 14.60 in 2027
• At least 20 days of paid leave on a five-day week, with 25 to 30 the market norm
• Notice periods under section 622 of the civil code, rising with length of service
• Sick pay at full salary for the first six weeks under the Entgeltfortzahlung rules
• Mutterschutz and Elternzeit rights for parental leave

These apply whether or not they are written into the contract, so the safest approach is to state them clearly and make sure your terms meet or beat them.

With everything registered, payroll runs each month. You calculate the Lohnabrechnung, withhold Lohnsteuer and, where they apply, the solidarity surcharge and church tax, and deduct the employee social contributions. You add the employer contributions of roughly 21 percent and pay both halves to the Finanzamt and the health insurer.

Alongside the monthly Lohnsteuer-Anmeldung and social insurance reports, there are year-end filings and records to keep. Most companies doing this directly retain a Steuerberater to keep it right. With an employer of record, all of this sits with us, and you receive a single monthly invoice instead.