Payroll in Germany

Germany has no statutory pay frequency in the dossier, but monthly payroll is the norm. Salary is due after the work is performed. Where pay is agreed by time periods, it falls due after the relevant period ends. Put the pay period and the due date in the employment terms, and confirm the agreed payday and your payroll cut-off before the first pay run.

Payday and payslips

Record the legal employer, role, location, pay, hours, applicable agreements and termination terms in writing. Key evidence is due by the first working day, further items within 7 days, and the remaining prescribed items within 1 month. Electronic text form is allowed only under the statutory conditions. Paper is required on request and in excluded sectors.

The dossier does not set out the required layout of a German payslip. Check the current requirements before you finalise your template, and show pay components and deductions on separate lines as good practice.

Extra and 13th-month payments

There is no statutory 13th salary in Germany. Any extra payment comes from the contract or an applicable collective agreement. If one applies, state it and its due date in the terms, and show it separately so it is not counted twice against annual salary. Special payments are included in the national average earnings figure of EUR 64,441 gross a year for full-time employees in 2025. That is a national mean, not a salary offer.

Contributions and tax

Both you and the employee contribute to social insurance, so the employee share comes out of pay and you remit both shares. Each contribution has a 2026 ceiling.

The published average additional health rate for 2026 is 2.9%, but the actual fund can differ. Saxony splits care contributions differently, and childlessness can add 0.6 percentage points to the employee care share. Accident insurance is a separate employer cost. Obtain the assessment from the provider rather than assuming a flat percentage.

For income tax, the 2026 basic allowance is EUR 12,348, and the 45% band starts at EUR 277,826 of taxable income. The dossier gives no remittance deadlines or form names for tax or contributions. Confirm the current calendar and filing channels with the tax authority and the social insurance carriers before your first pay run.

Working time rules that affect pay

The general daily limit is 8 hours per working day. It can extend to 10 if the average returns to 8 over 6 calendar months or 24 weeks. The legal calculation counts Saturday as a working day, and the contract or collective agreement sets normal weekly hours.

Work over 6 hours normally requires at least 30 minutes of breaks, rising to 45 minutes over 9 hours. Break segments must be at least 15 minutes. Daily rest is normally 11 consecutive hours. Annual leave is a minimum of 24 working days on a 6-day week, equivalent to 20 days on a 5-day week. Germany has 9 nationwide public holidays in 2026, plus state and some local holidays, so use the calendar for the place of work.

Sick pay is also a payroll item. The employer normally continues regular pay for up to 6 weeks of qualifying incapacity, after 4 weeks of continuous employment. Overtime supplements are excluded from that regular-pay calculation.

Germany does not have a single flat income tax rate for employees. Wage tax (Lohnsteuer) is withheld from each payment as an advance on the employee's income tax, using the progressive tariff. The dossier gives only part of the tariff, so confirm the current wage-tax programme and tables before you configure payroll.

Income tax bands

For 2026 the income tax schedule has five bands, running from 0% to 45%. The basic personal allowance is €12,348, so income up to that amount is taxed at 0%. Tax above it follows progressive formulas rather than fixed steps. The 45% band starts at €277,826 of taxable income. The dossier does not give the intermediate band limits or rates, so take those from the official tariff and do not copy them from a calculator.

How withholding works

You withhold tax each pay period and remit it for the employee. The amount depends on the employee's filing status, deductions and other applicable charges, so two people on the same salary can have different withholding. Salary is normally paid monthly. Put the pay period and due date in the employment terms.

Withholding is an advance. The employee's final liability is settled through their own tax assessment. A national tax wedge statistic is not an employer contribution rate and should not be used as a withholding percentage.

Employee social contributions

On top of wage tax, employees pay social insurance contributions from gross pay. The overall employee rate is 21.46% of gross, against 20.86% for the employer. Each branch has its own rate and 2026 ceiling.

• Pension: 18.6% in total, usually 9.3% each for employer and employee, up to €101,400 a year (€8,450 a month).
• Unemployment: 2.6% in total, usually 1.3% each, with the same ceiling as pension.
• Health: general rate of 14.6%, split equally, plus the employee's health fund additional rate, also split equally. The published average additional rate for 2026 is 2.9%, but the actual fund can differ. The ceiling is €69,750 a year (€5,812.50 a month).
• Long-term care: standard total of 3.6%, usually 1.8% each, with the same ceiling as health. In Saxony the usual shares are 1.3% employer and 2.3% employee. Childlessness can add 0.6 percentage points to the employee share, and qualifying children can reduce that share.

Employers also fund statutory accident insurance. This is a separate cost, not a universal percentage of salary, so obtain the assessment from the provider.

Optional deductions

Employees can generally request pension salary conversion up to 4% of the general pension insurance assessment ceiling. For qualifying pension vehicles, the statutory employer supplement is 15% of converted pay, insofar as the employer saves social contributions. Check the applicable scheme and any collective rules.

Business taxes are separate

The corporate tax rate is 15% and VAT is 19%. These are business and transaction taxes. Neither is taken out of an employee's salary.

Employer social contributions in Germany

German employers pay social insurance contributions on top of gross salary, and the employee's share is withheld from pay. The OECD figures give an overall employer rate of 20.86% of gross and an employee rate of 21.46%. The statutory branch rates below show how the main contributions are built from pension, health, long-term care and unemployment insurance.

Statutory rates by branch

The additional health rate depends on the employee's actual health fund, so the 2.9% average is a planning figure only. In Saxony the usual long-term care shares differ: 1.3% employer and 2.3% employee. Childlessness can add 0.6 percentage points to the employee's care share, and qualifying children can reduce it. These adjustments fall on the employee, not the employer.

Ceilings and thresholds

Contributions are only due up to the annual assessment ceilings for 2026. Earnings above a ceiling are not charged for that branch.

• Pension and unemployment: EUR 101,400 per year (EUR 8,450 per month).
• Health and long-term care: EUR 69,750 per year (EUR 5,812.50 per month).

Because the ceilings differ, a higher earner can be over the health and care ceiling while still paying pension and unemployment contributions. Run each branch against its own ceiling.

What is and is not included

The rates above cover the four main social insurance branches. Statutory accident insurance is a separate employer-funded cost. Obtain the assessment from the provider, and do not treat it as one universal percentage of salary. Income tax is not an employer contribution. Employers also carry other costs, such as continued pay during sickness for up to 6 weeks, which sit outside these contribution rates.

Occupational pension salary conversion has its own employer supplement of 15% of converted pay, insofar as the employer saves social contributions. Check the applicable scheme and any collective rules.

Worked cost example

The dossier does not include a worked salary example, so none is given here. To build one, apply each branch rate to earnings up to its own ceiling, add the accident insurance assessment from the provider, and confirm the employee's health fund additional rate and state of work with payroll.

Annual leave

The statutory minimum in Germany is 24 working days on a six-day working week. On a five-day week this is equivalent to 20 days. The legal count uses working days that include Saturday, so check the employee's working pattern before you convert the entitlement. Contracts and collective agreements may give more than the statutory minimum.

The full annual entitlement arises after 6 months of employment. In specified part-year cases, the employee receives one-twelfth for each complete month of employment. Salary during leave is paid by the employer as normal pay, so leave accruals belong in your payroll and year-end processes. Check the contract and any applicable agreement before you treat unused leave as lost or paid out.

Public holidays

Germany has 9 nationwide public holidays in 2026. States and some localities add further holidays, so apply the calendar for the employee's place of work. Christmas Eve and New Year's Eve are bank business closures in the Bundesbank calendar. They are not nationwide public holidays, so do not treat them as paid days off unless the contract or an agreement says so.

Sick pay

The employer normally continues regular pay for up to 6 weeks of qualifying incapacity, once the employee has 4 weeks of continuous employment. Repeated illness and other statutory conditions affect entitlement, so assess each case rather than restarting the 6 weeks automatically. Overtime supplements are excluded from the statutory regular-pay calculation.

The dossier does not cover what happens after the 6 weeks. Confirm with the relevant health insurer how longer absences are handled and what notifications are needed.

Maternity leave

The usual protected periods are 6 weeks before birth and 8 weeks afterwards. The employee may expressly agree to work before birth, but work is prohibited during the post-birth protection period. The post-birth period rises to 12 weeks for premature or multiple births and for qualifying disability cases. An early birth can add unused prenatal time.

Maternity benefit depends on the employee's insurance status. For qualifying employees, the employer supplement generally covers the difference between €13 per calendar day and average calendar-day net pay from the last 3 settled calendar months before protection begins. Confirm insurance status, any reimbursement and the employment circumstances with payroll before you calculate the supplement.

Paternity and parental leave

Do not assume a separate universal employer-paid paternity entitlement. Fathers' time off is generally taken through parental leave and Elterngeld. Check the employee's parental-leave rights and any extra contractual or collective-agreement leave.

Each eligible parent can take up to 3 years of parental leave per child, including up to 24 months between the third and eighth birthdays. The employer does not normally pay for this leave. Notice is generally 7 weeks for leave before age 3 and 13 weeks for leave from age 3 to 8.

Elterngeld is a separate public benefit and is not 3 years of employer-paid salary. Basic Elterngeld is generally income-related within €300 to €1,800 a month, subject to eligibility and calculation rules. Its duration differs from the duration of parental leave.

Care leave

An acute care situation can justify up to 10 working days to organise or provide care for a close relative. Employer pay requires a separate legal or contractual basis. Longer qualifying care leave can last up to 6 months, and the statutory claim generally applies to employers with more than 15 employees.

German payroll compliance rests on a short list of obligations: written contract terms, correct payroll contributions, a clear view of whether a works council or collective agreement applies, rest and break rules, and a formal termination process. The dossier does not cover several registration and filing topics, so those are flagged below for you to confirm locally.

Registration and filing deadlines

The data available here does not set out employer registration steps, payroll filing dates or payment deadlines. Check these with your payroll provider or local adviser before the first hire. What the dossier does confirm is how contributions are built. Statutory pension contributions are 18.6% of covered earnings, usually split 9.3% each between employer and employee. Unemployment insurance is generally 2.6%, split 1.3% each. Health insurance is 14.6%, split equally, plus the employee's health fund additional rate, also split equally. Statutory accident insurance is funded by the employer, and the assessment must be obtained from the provider because it is not one universal percentage of salary.

Contributions are capped. For 2026, the ceiling for pension and unemployment is €101,400 per year (€8,450 per month). For health and long-term care it is €69,750 per year (€5,812.50 per month). The monthly payroll cycle is the norm, and salary is due after the work is performed or after the agreed period ends. Put the pay period and due date in the employment terms.

Employment contracts and written terms

Record the legal employer, role, location, pay, hours, applicable agreements and termination terms. Evidence of key terms is due by the first working day, further items within 7 days, and the remaining prescribed items within 1 month. Electronic text form is allowed only under the statutory conditions. Paper is required on request and in excluded sectors.

Fixed-term clauses need legal written form. Without an objective reason, the usual limit is 2 years in total with at most 3 extensions. A probation period of up to 6 months can carry 2 weeks' notice, and it must be proportionate on a fixed-term contract. Post-employment non-compete clauses need a written agreement, compensation of at least half the employee's most recent contractual benefits, and a duration of no more than 2 years.

Check classification before using a contractor. The actual working relationship decides employee status, not the contract label. Also note that the national minimum wage is €13.90 gross per hour from 1 January 2026, and a higher agency, sector or collective-agreement rate takes priority.

Records, working time and works councils

The general daily limit is 8 hours per working day. It can extend to 10 if the average returns to 8 over 6 calendar months or 24 weeks. Work over 6 hours normally requires at least 30 minutes of breaks, rising to 45 minutes over 9 hours, in segments of at least 15 minutes. Daily rest is normally 11 consecutive hours. The dossier does not set a statutory time-recording period, so confirm record retention periods locally.

A works council may be elected in an establishment with at least 5 permanent voting-eligible employees, including 3 eligible candidates. It is not created automatically on the fifth hire. An existing council has participation rights, including on working-time arrangements and monitoring systems. OECD data puts collective bargaining coverage at 49% for 2024, so check whether an agreement applies to each hire.

Notice and termination

After probation, the basic statutory notice is 4 weeks to the 15th or month-end. Employer notice rises with service, normally to month-end:

Collective agreements and statutory exceptions can change these periods. General dismissal protection normally applies after more than 6 months in an establishment with more than 10 weighted employees. A dismissal then needs a lawful personal, conduct or operational reason. Other protections can apply even outside that threshold.

Dismissals and mutual termination agreements require legal written form, and electronic form is excluded. Consult an existing works council before dismissal. The usual deadline for an employee to challenge a written dismissal is 3 weeks from receipt. Protected employees may need additional approvals. There is no universal severance formula, so assess settlements and social plans case by case.