🇩🇪 Hiring in Germany

InfoGuides by Countryclock icon16 MIN READ·calendar iconUPDATED NOV 5, 2026

Learn how to hire and manage employees in Germany through Toku, including payroll processing, tax compliance, employer costs (21-22.5% on salary), onboarding timelines, leave entitlements, statutory benefits, and termination procedures.

💡 Everything you need to know to hire and manage employees in Germany through Toku. Toku handles payroll processing, tax withholding, social contributions, and statutory compliance. This guide covers what you need to plan costs and manage your team.

At a Glance

Item Detail
Currency Euro (EUR)
Payroll cycle Monthly. Toku runs one payroll per month in Germany.
Estimated employer costs on top of salary Approximately 21-22.5%
Onboarding lead time 5-7 business days
Standard working week 37.5-40 hours (statutory maximum 48)
Probation period Determined by the applicable collective agreement, commonly 6 months
Annual leave 20 days statutory minimum; 25-30 days is typical practice
13th month salary Not required (Christmas or vacation bonuses common under collective agreements)
Minimum notice on termination Depends on contract, service and collective agreement. See Ending Employment.

Onboarding a New Hire

Plan for 5-7 business days between submitting a new hire and their start date. Before day one, the employee completes a personnel questionnaire, signs the employment contract, and provides their health insurance details; Toku uses these to complete all statutory registrations and set up payroll.

Submit the new hire through the Toku platform for the employment agreement, statutory registrations and payroll setup. See Onboard Contributors as a Client Admin in Toku for the steps. Toku will confirm the expected onboarding timing for your hire.

Employer Costs

On top of each employee's gross salary, you pay the following employer contributions (2026 rates):

Cost Rate Notes
Pension insurance 9.3% On salary up to EUR 101,400/year
Health insurance 7.3% + 1.45% average supplementary On salary up to EUR 69,750/year
Unemployment insurance 1.3% On salary up to EUR 101,400/year
Long-term care insurance 1.8% (1.3% in Saxony) On salary up to EUR 69,750/year
Accident insurance ~1.14% average Varies by industry
Insolvency surcharge 0.15% On salary up to EUR 101,400/year
Total Approximately 21.3-22.5% Plus small sick pay and maternity levies

As a rule of thumb, total cost of employment is roughly 121-123% of gross salary. Note that the contribution ceilings mean the effective percentage falls for higher salaries. There is no statutory 13th month salary, though Christmas or vacation bonuses are common where a collective agreement provides them.

Employees pay a broadly matching share of social contributions (about 21-22%) plus progressive income tax, and church tax where applicable. These are withheld from gross salary, not added on top of your costs. Toku calculates and remits all of the above.

Compensation & Payroll

Toku runs one payroll per month in Germany, and employees receive a payslip each cycle showing gross pay, all deductions, and net pay. The statutory minimum wage is EUR 13.90 per hour as of 1 January 2026, rising to EUR 14.60 on 1 January 2027. There are no mandatory bonuses beyond what the employment contract or collective agreement provides.

Employment Contracts & Probation

  • Toku issues a compliant local employment agreement for every hire, covering all terms required by the Evidence Act.
  • Indefinite-term contracts are the default. Fixed-term contracts without objective justification are limited to two years (maximum three renewals), and the fixed-term clause must be agreed in writing before work begins.
  • Confirm the agreed probation terms and applicable collective agreement. The ordinary statutory two-week probation notice rule can be varied by collective agreement; current GVP/DGB notice rules are explained under Ending Employment below.

Working Hours

The standard working day is 8 hours, extendable to 10 if the average stays at 8 over six months; typical contractual weeks run 37.5-40 hours, with a statutory maximum of 48. German law sets no automatic overtime premium: overtime compensation follows the contract or collective agreement, where supplements of 25-50% are typical. Employers must record working time, which Toku's setup accounts for.

Leave Entitlements

Leave Entitlement Who pays
Annual leave 20 days statutory minimum on a 5-day week; 25-30 days typical, at full pay Employer
Sick leave Typically up to 6 weeks of continued pay, followed by statutory sickness benefit if eligible. The 78-week limit within 3 years includes the continued-pay period. Benefit is generally 70% of eligible gross pay, capped at 90% of net pay. Employer, then statutory health insurance
Maternity leave 6 weeks before and 8 weeks after birth at 100% of net salary Health insurance plus employer top-up (largely reimbursed)
Parental leave (Elternzeit) Up to 3 years per parent per child, unpaid; state parental allowance of 65-67% of net income (capped at EUR 1,800/month) for up to 14 months combined Government
Child sick leave 15 days per parent per child per year (30 for single parents) at about 90% of net Statutory health insurance
Special leave (marriage, bereavement) Typically 1-3 days per contract or collective agreement, at full pay Employer

Leave should generally be used within the calendar year, with carryover into the first quarter of the next year when work or personal reasons prevented taking it. Parental allowance is state-funded, so extended parental leave adds no direct salary cost to you.

Public Holidays (2026)

Germany observes 9 nationwide public holidays in 2026. Individual federal states add between one and four more (Bavaria has the most at 13), so your employee's total depends on where they live.

Date Holiday
January 1 New Year's Day
April 3 Good Friday
April 6 Easter Monday
May 1 Labour Day
May 14 Ascension Day
May 25 Whit Monday
October 3 Day of German Unity
December 25 Christmas Day
December 26 Second Christmas Day

Benefits

Germany's five-pillar social insurance system (statutory pension, health insurance covering medical, hospital, prescriptions and dental, unemployment insurance, long-term care insurance, and employer-funded accident insurance) is mandatory and non-waivable, and runs through payroll as shown in Employer Costs above. On top of this, Toku adds a fully employer-paid supplemental health plan, Hallesche FEELfree, with a €1,500 annual health budget. Toku handles enrollment, payroll deductions and statutory registrations. Employees choose their own statutory health fund, or provide their private policy details instead.

Benefits at a Glance

Item Detail
Statutory coverage Health, pension, unemployment, long-term care (shared ~50/50), accident insurance (employer-paid)
Supplemental health Hallesche FEELfree: €1,500/year flexible health budget
Supplemental cost €42.24/month per employee; 100% employer-paid, €0 to the employee
Enrollment Automatic on start date; no medical questions, no waiting periods
Pre-existing conditions Covered from day one
Opt-out 16-day window after enrollment
Retirement Statutory pension insurance; no supplemental occupational pension in the standard package

Statutory Benefits

Germany's social insurance system is mandatory and non-waivable, funded via payroll contributions split roughly equally between employer and employee. Your employer rates are in Employer Costs above; employees pay a matching share:

Program Employee share
Health insurance (GKV) 7.3% + half of their fund's supplementary add-on
Pension insurance 9.3%
Unemployment insurance 1.3%
Long-term care insurance 1.8% (2.3% in Saxony), plus a 0.6% surcharge for childless employees aged 23+

Employees choose their own statutory health fund (Krankenkasse: TK, Barmer, DAK, AOK, etc.) at onboarding, or provide their private (PKV) policy details instead. Statutory accident insurance (VBG) covers workplace and commuting accidents and occupational disease. It's 100% employer-paid, automatic from day one, and billed annually rather than through monthly payroll.

Supplemental Health: Hallesche FEELfree

Every full-time Germany employee gets a flexible €1,500 annual health budget through Hallesche, usable across: vision and optical (glasses, contacts, LASIK up to €180/year), dental (fillings, crowns, implants; cleaning/bleaching up to €60/year), physiotherapy and massages, hearing aids, medical aids, all prescribed medications, and alternative care such as acupuncture and osteopathy.

There are no medical questionnaires, no waiting periods, and no exclusions: pre-existing conditions are covered from day one. Claims are submitted directly via the Hallesche4u app or email.

Costs & Who Pays

Cost Amount Who pays
FEELfree premium €42.24/month (~$49) per employee 100% Toku (billed to you)
Statutory contributions See Employer Costs above and the employee shares above Shared employer/employee via payroll
Statutory accident insurance Annual contribution, varies by industry 100% employer

Enrollment

Enrollment in FEELfree is automatic on the start date, with no action needed. Employees have a 16-day opt-out window via their Toku account (Benefits tab); after it closes, unenrollment isn't possible until renewal.

Retirement

Retirement is provided through Germany's statutory pension insurance (9.3% employee / 9.3% employer via payroll). No supplemental occupational pension is included in the standard package; employees have a legal right to convert salary into an occupational pension, so ask Toku if you want to offer this.

What You Need to Know About Benefits

  • Statutory social insurance is mandatory and can't be waived; plan the employer share into every German hire.
  • Budget €42.24/month per employee for FEELfree; it is billed to you and costs the employee nothing.
  • Your new hire must provide their health fund (or private insurance) details before day one so Toku can register them.
  • Statutory accident insurance is billed annually, not monthly. Through Toku, German employees receive all statutory insurances plus a EUR 1,500 annual supplemental health budget. See Germany Benefits for the employee-facing details.

Common Extras

Common extras in the German market include occupational pension contributions (employees have a legal right to convert salary into one), supplementary dental or hospital insurance, the Deutschlandticket transport subsidy, meal subsidies, and childcare support. Toku can advise on the cost impact of any extras you want to offer.

Ending Employment: Process, Timing and Cost Risk

⚠️ An unsigned mutual termination agreement does not end employment or start a dismissal notice period. Until there is a valid agreement or another lawful basis for ending employment, salary and applicable employment costs continue. Budget for negotiation and delivery delays as well as notice and severance.

Agree the exit route with Toku first

WorkCo Germany GmbH is the legal employer. Ending a client assignment, removing system access or telling the employee that their role has ended does not itself terminate their employment. Toku's employment terms expressly provide for salary during non-assignment periods, consistent with AÜG §11(4). Contact Toku before communicating a final date or offering terms.

  • Mutual termination agreement (MTA / Aufhebungsvertrag): Toku's usual preferred route. Both parties must voluntarily agree the terms and validly execute the paper agreement. The employee can refuse, negotiate or stop responding. A verbal agreement, an emailed scan or DocuSign completion does not replace the required originals. The end date is the date validly agreed, subject to legal review.
  • Unilateral dismissal (Kündigung): A separate route requiring Toku's legal assessment and a properly issued notice. The employee's agreement or countersignature is not required. Where dismissal protection applies, the employer needs a legally sufficient personal, conduct or operational ground. A client's wish to end the assignment alone does not establish that ground. General protection normally applies after more than six months in a qualifying establishment with more than ten employees, subject to counting and legacy rules. Special protections can apply independently. KSchG §1, §23.

Paper signatures and delivery

Ordinary private MTAs and dismissal notices require written form with original signatures; electronic form is expressly excluded by BGB §623. An MTA requires both parties' signatures in a form satisfying BGB §126.

For a unilateral notice, legally effective receipt determines timing, not the date on the letter or the posting date. Delivery to the employee's verified home address is a common method, but it is not the only lawful method: documented personal handover may also work. Toku coordinates delivery that can prove the document's contents, recipient and receipt date. Postal tracking alone may be insufficient. Federal Labour Court, 2 AZR 68/24.

What the process looks like

  1. Submit the request and evidence: Provide the reason, target date, relevant employee communications, performance or redundancy records, original service date, leave balances and known protected status. Toku reviews the signed employment agreement, amendments and applicable collective agreement.
  2. Confirm the route and budget: Toku assesses legal feasibility, notice, any consultation or authority approval, and estimated costs. Immigration implications require a separate review where relevant.
  3. Negotiate the MTA: Agree an offer, a response deadline and the paper-signing/return arrangements. The proposed end date remains provisional until valid execution. Toku also assesses the lawful alternative early enough to protect any notice-delivery deadline.
  4. If the employee does not sign: Toku and the client review whether to continue negotiations or pursue a legally supportable dismissal. An expired offer does not automatically become a dismissal. Continued salary and costs must remain budgeted.
  5. Complete execution or service: Toku arranges the authorised signature and originals. For dismissal, Toku confirms effective receipt and the resulting end date. For an MTA, Toku confirms valid execution.
  6. Complete offboarding: Toku coordinates final salary, leave, agreed severance, benefits, required certificates and token-related handoffs using the confirmed legal end date.

Notice and the risk of missing a deadline

The applicable signed contract, amendments, service and collective agreement determine notice. The current GVP/DGB agreement replaced the former BAP/DGB and iGZ/DGB agreements from 1 January 2026. Its notice rules differ from the ordinary two-week statutory probation rule.

Service / applicable rule Employer notice
GVP/DGB applies: first 3 months 1 week
GVP/DGB applies: months 4 - 6 2 weeks
GVP/DGB qualifying new hire, first 2 weeks 1 day only if specifically agreed and applicable
After 6 months, less than 2 years 4 weeks (28 days) to the 15th or month end
2 / 5 / 8 years 1 / 2 / 3 months to month end
10 / 12 / 15 / 20 years 4 / 5 / 6 / 7 months to month end

These are reference rules, not a confirmed date for an individual exit. Without an applicable differing collective rule, an agreed statutory probation period of up to six months generally permits two weeks' notice. Longer applicable contractual rights must be checked. BGB §622, GVP/DGB agreement §2.4.

Illustration: If one month's notice to month end applies, receipt on 30 September allows an ordinary end date of 31 October; receipt on 1 October moves it to 30 November. Continuing MTA negotiations does not preserve the earlier deadline. There is no guaranteed universal turnaround: legal assessment, negotiations, address checks and delivery all precede or affect the final date.

What to budget

Cost Planning point
Salary and employer costs Include the whole period from the planning date through the lawful end date, including negotiations, non-assignment and paid garden leave. Apply actual contributions and benefit costs, not a blanket percentage.
Severance / settlement No general automatic severance entitlement. A negotiated amount, contractual entitlement, social plan or specific statutory route may apply. A 0.5-month salary per service year reference is not a guaranteed price or cap.
Unused leave and other earned amounts Include legally outstanding leave, overtime/time-account balances, contractual bonuses, expenses and relevant token obligations. Garden leave does not automatically extinguish leave.
Legal and execution costs Obtain a case-specific estimate for German counsel, negotiation, translation, address verification, courier or formal service, and any dispute.
Service fees and delay reserve Confirm applicable Toku fees and cost allocation under the client's signed services agreement. Model at least the target date and next notice deadline; disputes can create further exposure.

The statutory 0.5-month formula in KSchG §1a applies only to its particular redundancy-offer conditions. German employment litigation at first instance generally leaves each party responsible for its own lawyer's fees, even if successful. An ineffective dismissal can leave employment continuing and create back-pay exposure. ArbGG §12a, BGB §615.

Illustrative delay cost, not a quote: EUR 8,000 monthly gross salary plus EUR 1,600 assumed employer costs means one additional month adds EUR 9,600 before extra benefits, fees, leave changes or legal costs. Payroll will calculate the actual figures.

Further risks to resolve

  • Employees generally have three weeks from receipt of a written dismissal to bring a dismissal-protection claim. Toku must check exceptions and actual service; silence following an MTA is never acceptance. KSchG §4.
  • Pregnancy, parental leave, severe disability, works council rights and collective redundancies may require additional protection, consultation or approval. Toku must assess these before notice.
  • An MTA can affect unemployment benefits, including a potential blocking period; ending earlier than the employer's notice period with severance can separately defer benefits. Do not promise that agreement wording prevents this. Federal Employment Agency guidance, SGB III §158.
  • Required prefunding must be arranged with Toku in advance. Funding or payroll cutoffs do not override employee rights or an already binding legal end date. Termination guidance researched and updated 11 September 2026. Individual terms, costs and feasibility require Toku's case-specific review.

Annual Leave at Termination

This section describes statutory annual leave. Any additional contractual or company-provided leave above the statutory minimum may follow different carryover, expiry, or payout rules under the employee's agreement or applicable policy, subject to local law.

Statutory leave termination payout: Required for legally outstanding statutory leave. If leave can no longer be taken because employment ends, it must generally be compensated.

Statutory carryover / look-back: Leave does not reliably expire automatically if the employer failed to give the employee a real opportunity to take it and clearly warn of expiry. Long-term sickness can create extended carryover, commonly up to 15 months after the relevant leave year for statutory leave.

Admin responsibility: Issue documented annual reminders showing remaining statutory leave, encourage employees to schedule it, provide a genuine opportunity to take it, and clearly communicate the lawful expiry deadline.

Important exceptions: Long-term sickness and employer failure to satisfy the information/opportunity requirements can preserve older balances. Toku should review any historic balance before termination.

See the Annual Leave / PTO Carryover & Termination Payout Guide for the cross-country framework.

Hiring Someone from Overseas?

EU, EEA, and Swiss nationals can work in Germany without a permit. Other nationals need a residence permit with work authorization: the EU Blue Card is the main route for degree-holding professionals meeting a salary threshold, with additional pathways for recognized vocational qualifications and intra-company transfers. Processing typically takes 4 to 12 weeks, so talk to Toku before extending an offer to a candidate who needs sponsorship.


Last updated November 5, 2026 (onboarding link and sick leave guidance only). Last verified October 2026. This guide is for general information and doesn't constitute legal or tax advice. Your Toku account manager can confirm specifics for your situation.

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