Can a UK company hire an employee in Germany?

A UK company can absolutely hire an employee in Germany. What it cannot do is employ that person from the UK as if Germany did not have its own rules. A German-based employee has to be on a German contract, in the German social-security and tax system, which means employing through a German entity, either your own or an employer of record’s.

So the question is never really whether you can hire in Germany. It is how you structure the employment so it is compliant.

Brexit made the UK a third country in the eyes of the EU, and that mainly matters for moving people across borders. A UK national relocating to Germany to take a job now needs the right visa or work permit, such as an EU Blue Card for a qualifying salary, where before they could move freely.

What Brexit did not change is your ability to hire someone who already lives and has the right to work in Germany. For a German resident, the employment works the same as it would for any employer. The structure of the employment, not Brexit, is the thing to get right.

The instinct to put a German hire on UK PAYE is understandable, but it does not comply with German law. A person working in Germany owes German income tax, Lohnsteuer, and belongs in the German social-security system, with contributions to German pension, health, care and unemployment insurance. UK PAYE and National Insurance do not satisfy any of that.

Running a German employee off UK payroll also risks creating a permanent establishment for your UK company in Germany, which can pull your business into German corporate tax. The clean answer is a German employment, run through German payroll.

There are three realistic ways for a UK company to employ someone in Germany, and they trade off speed, cost and control.

• Form your own German entity, usually a GmbH, and run payroll yourself
• Use an employer of record, who employs the person on their German entity
• Engage the person as a contractor, which carries misclassification risk

The contractor route is the one to be most careful with, because if the person works like an employee it can be challenged as Scheinselbstständigkeit, with back-dated contributions and penalties.

For most UK companies making one or a few German hires, the employer of record route is the practical winner. Forming a GmbH takes weeks and carries ongoing cost, and the contractor route carries real risk. An EOR gives you a compliant German employee without either.

We employ the person on our German entity, run German payroll and social security, and keep the employment compliant, while you manage the work. It is the fastest way to get a UK company’s German hire onto solid ground, and it keeps your UK business clear of German permanent establishment exposure.