Germany is a country in central Europe bordered by France, Denmark, Poland, the Czech Republic, Austria, Switzerland, Luxembourg, Belgium, and the Netherlands. It’s the 2nd-most populous country in Europe (after Russia) and has the largest economy on the continent (along with a large skilled labor market).

Germany is a developed country with social security, a universal healthcare system, environmental protections, and a tuition-free university education. The country is very friendly to English-speakers, and, like many European countries, there is a large population of digital nomads in Germany.

Types of Contracts

Fixed Term Contract with a minimum duration of 6 months and a maximum duration of 18 months, under the AUG labour leasing model.

Working Hours

Germany's legal working days are from Monday to Saturday, however for the majority of employees, a typical workweek is from 8 or 9 AM to 5 PM, Monday through Friday.

Working days may not exceed 12 hours per day or 48 hours per week. If the employee exceeds 12 hours in a given day, they must have a minimum of 12 hours rest following this. Overtime pay is arranged between the employee and employer; it is not required.

Minimum Wage

From 1 January 2026, the national minimum wage in Germany is EUR 14.00 per hour gross (+9.2%, confirmed by the Mindestlohnkommission October 2024). Based on a 40-hour work week, this equates to approximately EUR 2,427 per month and EUR 29,120 per year (based on 12 salaries).

Probation Period

Probation period is not mandatory in Germany. The maximum is 6 months.

Additional Payments

Although German compensation laws do not require a 13th-month bonus, many employers choose to give employees an extra month's wage at the end of the year.

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Taxes & Local Employment Costs

Employee Taxes

Germany has a progressive income tax, ranging from 0% to 45% depending on the income bracket.

In addition, employees should make the following social security contributions:

• Health insurance: 7.3% base rate (allgemeiner Beitragssatz) + ~1.7% average supplementary contribution (Zusatzbeitrag, varies by health insurer) = effective average ~9.0%, up to an income ceiling of EUR 66,150 annually. The Zusatzbeitrag is split equally between employer and employee.
• Pension insurance: 9.3%, up to an income ceiling of EUR 96,600 annually.
• Unemployment insurance: 1.3%, up to an income ceiling of EUR 96,600 annually.
• Long-term care insurance (Pflegeversicherung): 1.7% base rate (2.4% for childless individuals aged 23+). Parents receive a reduction of 0.15% per child up to 5 children.

Self-employed individuals generally do not have to pay mandatory social security contributions.

Employer Taxes & Contributions

The following social security contributions are levied on employment income. Employer contributions are generally tax-free.

• Health insurance: 7.3% base rate + ~0.85% (half the average supplementary contribution) = effective average ~8.15%, up to an income ceiling of EUR 66,150 annually.
• Pension insurance: 9.3%, up to an income ceiling of EUR 96,600 annually.
• Unemployment insurance: 1.3%, up to an income ceiling of EUR 96,600 annually.
• Long-term care insurance: 1.7%, up to an income ceiling of EUR 66,150 annually.
• Work accident scheme: depends on the industrial sector and the accident risk; the employer bears these contributions.
• Sickness Insurance: from 2.7% to 5.1% depending on the employment model
• Maternity Leave: 0.65%
• Insolvency contribution: 0.09%, up to an income ceiling of EUR 96,600 annually.

Annual Leave

A minimum of 20 days of annual paid leave are required by law for employees who work a 5-day week (allocated for the employee's entry and departure years). Read more about paid leave in Germany.

Sick Leave

In Germany, employees can take sick leave for up to 72 weeks of Krankengeld within a rolling three-year period for the same illness. For the first six weeks the employer pays 100% of salary (Entgeltfortzahlung); from week 7 onwards the statutory health insurer (Krankenkasse) pays Krankengeld at 70% of gross salary (capped at 90% of net salary).

Maternity Leave

Maternity allowance is paid for 6 weeks before the birth and 8 weeks after, as well as the day of childbirth. The allowance is paid for 12 weeks after the birth for premature and multiple births, as well as in cases where a doctor declares the child to be disabled within 8 weeks of childbirth, the woman applies for a longer term of protection.

The maternity allowance amount is always determined by the salary of the last 3 cleared calendar months before the beginning of the maternity period. It is calculated at EUR 13 per day, with the employer paying the difference between the maternity allowance amount and the employee’s previous salary.

Employees are entitled to maternity benefits if they are entitled to sick pay due to their inability to work, or if they are not being paid any wage or salary because of the maternity protection periods.

Additional maternity benefits

Employees who are not a member of state health insurance (e.g., privately insured or women with family insurance under the state health insurance system) are entitled to receive a one-off maternity benefit payment up to a maximum of EUR 210.

Self-employed women who have taken out a private sickness cash benefit insurance are entitled to the contractually agreed daily benefits during the maternity protection periods.

Pregnant women and new mothers also receive:

• Care from a doctor and assistance from a midwife during the pregnancy and after the delivery (birth);
• Assistance from a midwife during the delivery and, if necessary, from a doctor as well;
• Provision of medicines, bandages, treatments and equipment;
• Cover for the costs for an inpatient delivery in a hospital;
• Home care;
• Domestic help.

Paternity Leave

Germany does not have statutory paid paternity leave. Fathers are entitled to take Elternzeit (parental leave) of up to 3 years (shared with the mother), during which the employer does not pay salary. Instead, both parents can apply for Elterngeld (government parental allowance) — see Parental Leave section below.

Parental Leave

After the birth of a child, mothers and fathers are entitled to take parental leave to care for their child and spend time with their family, for up to 3 years per child.

During Elternzeit, parents can apply for Elterngeld (government parental allowance), funded by the state — not the employer:

• Basiselterngeld: 65–67% of prior net income, capped at EUR 1,800/month, for up to 12 months (14 months if both parents take leave, with at least 2 months taken by the second parent).
• ElterngeldPlus: Half the Basiselterngeld rate paid over double the period — suited for parents returning part-time.Elterngeld does not affect the employer's payroll obligations.

During this time, the employer may only terminate the employment relationship in exceptional circumstances (e.g. insolvency, shutdown of the business). The employer is not expected to pay salary during this time off, but parents can apply for the parental allowance (”Elterngeld”) during this time.

After parental leave, parents have the right to return and work at the same level as they did before.

Public Holidays

There are 9 public holidays that are observed in all 16 federal states in Germany, including New Year's Day, German Unity Day and Christmas Day.

Although the federal government has the power to declare national holidays, control over public holidays rests primarily with the individual states. For this reason, some federal states observe holidays that are not recognized elsewhere.

The state with the most public holidays is Bavaria, where an employee is entitled to 13 rest days per year. The other federal states have between 10 and 12 days per year.

In addition to officially-recognized public holidays, there are several unofficial holidays, such as St Nicholas’ Day (Nikolaus) on December 6th, Carnival Monday (Rosenmontag) and Christmas Eve.

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Benefits

Summary

The statutory employee benefits in Germany, required by the German government, include retirement, unemployment insurance, healthcare, long-term nursing care, and workers' compensation (as covered under “Taxes and Contributions”).

In addition to this, some employers (especially those in competitive industries), offer supplemental allowances such as a transportation season ticket allowance or a meal allowance.

Medical Insurance

Employees are obliged to have health insurance; there are two models, one is statutory and the other is private.

For both of these, the employer pays half and the employee pays half; these deductions are made every payroll and are part of the social security contributions.

Notice Period

Without cause: The employee is subject to a statutory notice period of 4 weeks (starting from the 15th of the month or the 30th of the month)

With cause: In the case of a severe breach of the employment agreement the employer can give a dismissal and terminate the employment with immediate effect. This notice of termination must be served within two weeks of the employer gaining knowledge of the underlying facts causing the dismissal. There also needs to be proof of the severe breach of the employment agreement.

For individual dismissals, the Civil Code specifies the period of minimum notice to be given by the employer. The minimum notice given to all employees is:

• 0-2 years = 4 weeks notice
• 2-5 years = 1 months notice
• 5-8 years = 2 months notice
• 8-10 years = 3 months notice
• 10-12 years = 4 months notice
• 12-15 years = 5 months notice
• 15-20 years = 6 months notice
• 20+ years = 7 months notice

Longer notice periods can be negotiated between employee and employer. The notice period (for employee resignation or employer termination) is 2 weeks during probation.

Statutory Payments

Any accrued and unused leave is paid at the end of employment. Any rules around severance etc. should be negotiated between the employee and employer.

While there is no statutory general severance entitlement, in practice Abfindung (severance) of approximately 0.5 months' salary per year of service is the widely accepted starting point in negotiated terminations. Separately, employees with more than 6 months' tenure at companies with more than 10 employees have strong unfair dismissal protection (Kündigungsschutzgesetz — KSchG), making termination without a valid substantive reason (conduct, capability, or operational) legally contestable. Employers should factor both into offboarding planning.

While not legally mandated, 13th-month salary bonuses are customary in Germany and paid out in December. As of February 2023, employers are required to record the actual working hours of their employees’ days. And while the employee is the one who needs to record the hours, the employer has to provide the necessary system and verify that the employees are recording their times.

Companies hiring in Germany should also be mindful of the AUG License which is a labor leasing license. Read more about how to stay compliant in Germany and what you need to know about German business visas.