# Payroll in Germany: employer costs, taxes and compliance

> Machine-readable page from Payroll Overview (https://payrolloverview.com/), the independent index of global payroll providers.
> Canonical page: https://payrolloverview.com/countries/germany/
> Methodology: every figure carries a source and a date in our database; ratings are averages of third-party platforms (https://payrolloverview.com/methodology/).
> Disclosure: Payroll Overview is free to use. We may earn a referral fee from some providers; this never affects inclusion or order (https://payrolloverview.com/disclosure/).
> Data updated: July 2026
> Every figure below carries its statutory source and year.

Running payroll in Germany means doing a few things every month without fail. You calculate gross salary, withhold income tax and the employee's share of social insurance, add your own employer contributions on top, and send the net amount to the employee. The filings and payments to the relevant authorities all follow that same monthly rhythm. There is no annual catch-up option, so getting each cycle right from the start matters.
This guide walks through what it actually costs to employ someone in Germany, how the pay cycle works, what the minimum wage floor looks like, and what leave and termination rules mean for your payroll runs. The tables on this page carry the exact rates and figures. The prose here gives you the context to make sense of them.

## Employer costs & taxes

| Item | Value | Source |
|---|---|---|
| Employer social security (on top of gross salary) | 20.9% | OECD (2025) |
| Employee social security (withheld from pay) | 21.5% | OECD (2025) |
| Total tax wedge (taxes as share of labor cost) | 49.3% | OECD (2025) |
| Corporate tax rate | 30.1% | OECD (2025) |

## Pay & payroll operations

| Item | Value | Source |
|---|---|---|
| Payroll cycle | monthly | Perplexity (AI gap-fill) (2026) |
| 13th-month salary | none | Perplexity (AI gap-fill) (2026) |
| Minimum wage (per month) | €2,343 | Eurostat (2026) |
| Average wage (per year) | 69,433 | OECD (2024) |

## Leave & time off

| Item | Value | Source |
|---|---|---|
| Paid annual leave | 20 days | Perplexity (AI gap-fill) (2026) |
| Public holidays | 9 days | Perplexity (AI gap-fill) (2026) |
| Maternity leave | 14 weeks | OECD Family Database (2024) |
| Paternity leave | 0 weeks | Perplexity (AI gap-fill) (2026) |
| Parental leave | 44 weeks | OECD Family Database (2024) |

## Termination

| Item | Value | Source |
|---|---|---|
| Notice period | 10 weeks | World Bank Employing Workers / B-READY (2019) |
| Severance pay (at 1 year tenure) | 11.6 weeks | World Bank Employing Workers / B-READY (2019) |
| Employment protection (OECD EPL, scale 0-6) | 2.3 | OECD (2019) |

## Labor market context

| Item | Value | Source |
|---|---|---|
| Retirement age | 66 | OECD Pensions at a Glance (2024) |
| Unemployment rate | 3.5% | OECD (2025) |
| GDP per capita | $56,104 | World Bank Open Data (2024) |
| Union density | 14.1% | OECD/AIAS ICTWSS (2024) |
| Collective bargaining coverage | 49% | OECD/AIAS ICTWSS (2024) |

## Employer contribution breakdown

| Contribution | Rate |
|---|---|
| Health & long-term care | 9.8% |
| Pension & disability | 9.3% |
| Unemployment insurance | 1.2% |
| Work injury insurance | 0.96% |

Total: about 21.26% of gross salary, paid by the employer on top of pay.

## Worked example: total employer cost

| Line | Annual |
|---|---|
| Gross annual salary | 69,000 |
| Employer contributions (about 21%) | + 14,397 |
| Total employer cost | 83,397 |

Rounded from the average wage, before benefits, allowances or provider fees.

The gap between what an employee sees in their bank account and what you actually spend is wider in Germany than many employers expect. On top of gross salary, you carry employer social insurance contributions that come to roughly a fifth of gross. That means budgeting noticeably more than the agreed salary when you are costing a hire. See the table below for the precise rate.
The total tax wedge, meaning the combined burden of income tax and all social contributions expressed as a share of total labor cost, sits at nearly half of what you spend on an employee. In plain terms, for every euro you pay out in total employment cost, close to half goes to the government in some form between your contributions and the employee's. That is worth keeping in mind when setting compensation, because a salary that looks competitive on paper may feel smaller to the employee once their own contributions come out.

Germany runs on a monthly payroll cycle. Employees are paid once a month, so your processing window, your calculations, your filings, and your bank transfers all anchor to that cadence. There is no statutory thirteenth-month salary requirement here, so you do not need to budget for a mandatory bonus payment at year end, though some employers offer one voluntarily. The statutory minimum wage sets a floor you cannot go below. As of the data we hold, that floor sits at EUR 2,343 per month. Any offer below that is not legally valid, so it is the first number to check when onboarding a new hire at the lower end of the pay scale.

Employees in Germany are entitled to at least 20 days of paid annual leave per year, plus 9 public holidays. Both feed into your payroll accruals and need to be tracked carefully, because unused leave can become a financial liability. On the termination side, the statutory notice period runs to around ten weeks, and severance entitlements compare to roughly eleven and a half weeks of pay. In practice that means a departing employee's final payroll run can be importantly larger than a normal month. Build those line items into your offboarding process early, not the day someone hands in their notice.

If you do not already have a legal entity in Germany, you cannot run local payroll directly, and setting one up takes time and ongoing administrative effort. Even with an entity, payroll filings in Germany are done in German, the social insurance rate components update periodically, and the rules around termination costs carry real financial risk if you get them wrong. A global payroll provider or employer of record can absorb that complexity, handle the filings, stay current on rate changes, and let you focus on the actual work of managing your team. It is worth considering if Germany is your first hire in the country or if your in-house team does not have local expertise on hand.