Hiring in Germany: EOR, Payroll & Employment Law Guide

German law requires written employment contracts covering key terms: job title, start date, salary, working hours, holiday entitlement, and notice periods. Contracts can be permanent (unbefristet) or fixed-term (befristet), but fixed-term contracts have strict rules — they can only be renewed a limited number of times and must have objective justification.

Probation periods are limited to 6 months, during which the notice period is 2 weeks. After probation, statutory notice periods start at 4 weeks and increase with tenure (up to 7 months after 20 years).

The EOR drafts contracts that comply with German law, including industry-specific collective bargaining agreements (Tarifvertrag) where applicable. These agreements can override statutory minimums on salary, working hours, and benefits.

German employer social insurance contributions total approximately 20–21% of gross salary (up to contribution ceilings), covering: pension insurance (~9.3%), health insurance (~7.3%), unemployment insurance (~1.3%), nursing care insurance (~1.7%), and accident insurance (varies by industry).

These contributions are split roughly 50/50 between employer and employee, meaning the employee also pays ~20% from their gross salary. Combined with income tax (progressive, 14–45%), German employment is heavily regulated but provides comprehensive social protection.

Additional employer costs include: mandatory continued pay during illness (6 weeks at full salary), holiday entitlement (minimum 20 days for a 5-day week, often 25–30 in practice), and Christmas bonus / 13th month salary (common but not statutory).

Germany is one of the most employee-protective jurisdictions in Europe. After 6 months of employment, the Protection Against Unfair Dismissal Act applies (for employers with 10+ employees). Terminations must be socially justified — due to the employee's conduct, personal reasons (illness, incapacity), or operational business reasons.

Operational dismissals require social selection criteria: tenure, age, maintenance obligations, and disability status. Getting this wrong leads to unfair dismissal claims in labour courts, which frequently result in reinstatement or substantial severance.

Practically, most German terminations are resolved through negotiated severance agreements (Aufhebungsvertrag). The standard benchmark is 0.5–1 month's salary per year of service, though this varies.

The EOR manages terminations in compliance with German law, including proper notice, documentation, and severance negotiations where needed.