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Employer of Record Germany

Our Employer of Record Germany service enables clients to hire employees in Germany without the need to operate a local legal entity there.

As an EOR provider, FMC Group hires employees on your behalf and handles payroll, taxes, employee benefits, and ensures compliance with German law, including the strict requirements of the German Employee Leasing Act (AUG).

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Our Employer of Record Germany service enables clients to hire employees in Germany without the need to operate a local legal entity there. As an EOR provider, FMC Group hires employees on your behalf and handles payroll, taxes, employee benefits, and ensures compliance with German law, including the strict requirements of the German Employee Leasing Act (AUG). Without this burden, you can fully concentrate on your core business.

If your local business grows large enough, you can easily transfer the employees to your own subsidiary. It also provides a quick exit strategy if necessary. In addition to Germany, we offer Employer of Record services in 50+ countries.

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Stephan Dorn
Managing Partner

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Employer of Record Germany - FMC Group's Approach

  • FMC Group hires employees on your behalf through its legal entity in Germany, streamlining the process of hiring employees quickly and efficiently.
  • This enables companies to enter the German market quickly without the complexities of setting up a local entity, ensuring adherence to local labor laws.
  • Engaging FMC Group as Employer of Record (EOR) in Germany simplifies hiring as we manage payroll, taxes, employee benefits, and legal compliance.
  • As your legal employer, FMC Group assumes full responsibility for compliance with local labor laws, including taxes, payroll, and employment contracts, ensuring a positive experience for your workers.
  • Choosing the right EOR provider is crucial, as they must hold a valid AUG license (Erlaubnis zur Arbeitnehmerüberlassung) – FMC Group GmbH in Germany holds the required license.

EOR Germany Management & Reporting Flow

Management and Reporting Flow Chart 1

Learn more about Employer of Record Germany

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The Legal Framework - German Employee Leasing Act (AUG)

The German “Act on Temporary Agency Work” (Arbeitnehmerüberlassungsgesetz —AUG) regulates the activity of an employer of record. The AUG is very strict and states that providers of this activity must hold a permit from the Federal Ministry of Labor (Erlaubnis zur Arbeitnehmerüberlassung) and follow certain standards and rules. Collective bargaining agreements also play a significant role in shaping labor laws and employee protections in Germany, influencing terms of employee leasing and minimum wage compliance.

As FMC Group GmbH in Germany, we hold this license and operate in compliance with the rules of the AUG.

The 18-Months Rule

The AUG imposes a significant restriction: There is a time limit of 18 months. An employee can only be deployed to the same client for a maximum duration of 18 months. And the criterion is “the same client,” so switching between different EOR providers will not solve this issue. After 18 months, the employee must take a “cool down period” of a minimum of 3 months plus 1 day. After that, the employee can be assigned again for 18 months.

Some providers operate without a valid AUG permit or try to circumvent the 18-month period by working with “consultancy agreements.” These approaches come with a high risk, as there are high penalties for the provider and the client.

Illegal employee leasing can lead to severe legal violations and consequences. If proper declarations are not made, an unwanted employment relationship can form between a factual employer and an employee. Companies face significant risks if the leased employee’s role is classified as illegal, including tax liabilities and severe penalties for the employer.

Visa in Germany - Hiring Foreign Employees in Germany

Germany is part of the European Union. Citizens of European Union states can work in Germany without needing a visa or work permit.

Citizens from other countries need to obtain a work permit. The process for obtaining a work permit depends on the job profile and nationality of the employee.

Cost of Employment in Germany

The total cost of employment is calculated based on the employee’s gross salary.

Benefits

Benefits in Germany

German employees must be registered with the German social security system. Contributions to these benefits are shared equally between the employer and the employee. The components of the social insurance system in Germany are:

  • Pension Fund
  • National Health Insurance
  • Unemployment Funds
  • Long-Term Care
  • Accident Insurance (Note: Only employers make contributions to this fund.)

Social security contributions are automatically deducted through the monthly payroll.

Employees earning above a certain salary can opt out of national health insurance and register with private health insurance instead. Employers then pay the equivalent National Health Insurance contribution to the employee.

Optional benefits in Germany depend on the industry and the job profile, e.g. performance bonus, 13th salary, etc.

More details can be found in our 2025 Benefits Guide Germany.

Social Security

The mandatory social security contributions make up a substantial part of the total cost of employment.

Contribution TypeEmployer Share (2025)Employee Share (2025)
Pension Insurance9.3%9.3%
Health Insurance7.3% + 1.45%*7.3% + 1.45%*
Longterm-Care Insurance1.8%0.8-2.4%
Unemployment Insurance1.3%1.3%
Accident Insurance1.2–3% (industry-specific)0%

*Health insurance includes a provider-specific supplementary rate.

You can find more details in our summary on Understanding the Total Cost of Employment in Germany

Disclaimer: Although we carefully researched and compiled the above information, we do not give any guarantee with respect to the actuality, correctness, and completeness.

Hiring an Employee

German employment laws encompass various aspects of employment, such as discrimination, maternity benefits, and minimum wage. Local companies must strictly adhere to these laws. As an EOR provider, the German Federal Ministry of Labor periodically audits us. The Federal Employment Agency is also one of the bodies that periodically audits EOR providers for compliance. Statutory benefits, including health insurance, public pension scheme, and unemployment insurance, are crucial aspects of employee entitlements, ensuring legal compliance and attracting talent.

Employment Contract – indefinite vs. fixed term

In Germany, a written employment contract that complies with local regulations is a legal requirement. This contract should clearly outline the working conditions, compensation, benefits, and termination conditions.

Typically, employment contracts in Germany are open-ended or for an unlimited duration. However, it is possible to have a fixed-term contract, provided that the duration is agreed upon in writing before the employment begins. A fixed-term contract automatically concludes without requiring written notice when its specified term expires.

To justify a fixed-term employment relationship, objective grounds must exist, some of which are outlined in statutory law (e.g., temporary workload increase, substitution of an employee during parental leave).

In cases where no objective grounds exist, a fixed-term employment contract can last a maximum of two years as long as there was no prior employment contract with the same employer. If the parties decide to continue the employment beyond the fixed-term contract’s expiration, the contract is considered to be for an indefinite period.

Employment contracts for EOR employees need to fulfill additional criteria. For example, they need to state that the purpose of employment is employee leasing (“Arbeitnehmerüberlassung”) and educate the employee about their rights arising out of this.

Probation Period

The maximum probation period for an unlimited employment contract is six months. An extension is only possible under certain conditions (e.g., prolonged illness).

The probation period must be proportionate for a fixed-term contract. A guideline is 1/4 to 1/3 of the contract duration (e.g., 3-4 months probation for a 12-month contract).

During probation, the employee and employer can terminate the employment relationship with 2 weeks’ notice.

Work Week, Overtime & Maximum Working Hours

Full-time employees typically work 35 to 40 hours weekly (Monday to Friday). The limit is 8 hours per day, 6 days per week (Monday-Saturday). Working on Sundays and on public holidays is permitted in exceptional cases only.

Working up to 10 hours on certain days is possible, but overtime needs to be compensated by time off (8 hours per day must not be exceeded in a six-month average).

Employers are generally required to record their employees’ working hours.

The statutory minimum wage in Germany is €12.82 as of January 2025.

Disclaimer: Although we carefully researched and compiled the above information, we do not give any guarantee with respect to the actuality, correctness, and completeness.

Time off Policies

Public Holidays

Depending on the federal state, employees in Germany benefit from 10 to 12 public holidays per year.

Annual Leave

In Germany, the statutory minimum paid leave is 20 days for a 5-day workweek and 24 days for a 6-day workweek. However, most full-time employees typically enjoy between 25 to 30 days of paid leave per year.

Sick Leave

In the event that an employee is absent from work for more than three consecutive days due to illness, they are required by law to provide their employer with a doctor’s note as documentation. For absence below 3 days, there is no general requirement to provide a medical certificate. However, employers can request one from day.

The Continued Remuneration Act (Entgeltfortzahlungsgesetz) in Germany provides employees with six weeks of statutory sick pay if they have been employed for at least 4 weeks. During these initial six weeks, employees receive their full salary from the employer.

Following the initial six weeks, employees will receive sickness benefits directly from their health insurance company. These benefits typically equal 70% of the gross salary (up to the social security ceiling) but no more than 90% of the net salary.

Other Leave Types

Maternity leave for pregnant employees in Germany comprises 6 weeks before the expected birth date and 8 weeks after the birth, all paid at full salary. In cases of premature births or the birth of multiples, employees are entitled to 12 weeks of paid leave following the birth.

Either parent is eligible for parental leave until the child reaches 3 years of age. During this parental leave period, parents may either take full leave or work part-time for up to 32 hours per week. Parents of premature infants receive additional parental leave.

It is against the law to terminate the employment of an employee during pregnancy and up to four months after the child is born in Germany, providing protection to pregnant employees and new mothers.

Disclaimer: Although we carefully researched and compiled the above information, we do not give any guarantee with respect to the actuality, correctness, and completeness.

Terminating an Employee

The German Employment Protection Act (Kündigungsschutzgesetz) oversees employment terminations and safeguards employees by ensuring that termination are well-founded. During the probation period, the contract can be terminated with a notice of 2 weeks without providing a reason.

After the probation period, the following notice periods apply:

  • Below 2 years employment – 4 weeks to the 15th or to the end of the month
  • 2 years of employment – 1 month to the end of the month
  • 5 years of employment – 2 months to the end of the month
  • 8 years of employment – 3 months to the end of the month
  • 10 years of employment – 4 months to the end of the month
  • 12 years of employment – 5 months to the end of the month
  • 15 years of employment – 6 months to the end of the month
  • 20 years of employment – 7 months to the end of the month

Ordinary terminations must be socially justified, and employers must provide a valid reason for the termination. There are three possible reasons: behavioral, personal, and operational.

Behavioral reasons include, for example, serious misconduct by an employee. Personal reasons are related to the employee’s (changed) skills and not to his behavior. An example could be a driver who has lost their driver’s license. Operational reasons can be diverse, like restructuring, streamlining processes, or a severe drop in sales. A special requirement for operational terminations is that employers must make a social selection of which employee to terminate.

Extraordinary termination, which allows immediate termination without notice, is limited to exceptionally severe cases such as fraud.

For further information, you can refer to our Guide on Terminating Employees in Germany.

Severance Payment

There is no general legal entitlement to pay severance in the event of termination. Rather, it is a voluntary benefit of the employer. An exception applies to operational termination. The employer has the possibility to offer the dismissed employee a severance payment, provided that the employee waives the right to file a termination protection claim before the labor court. A typical severance amount is a half to one monthly salary per year of employment.

Disclaimer: Although we carefully researched and compiled the above information, we do not give any guarantee with respect to the actuality, correctness, and completeness.

FAQ

Do EOR providers in Germany need an AUG license?

Yes, they do. The Employer of Record (EOR) model qualifies as employee leasing under German law. According to the German Employee Leasing Act (AUG), EOR providers must hold an AUG license to comply with the regulatory framework and avoid legal issues.

Yes, FMC Group GmbH in Germany has a valid license from the German Federal Ministry of Labor in Nürnberg. Our License number is 60101/010923/11901.

The time limit for using an Employer of Record (EOR) in Germany is 18 months. After that employees need to take a “cool down period” for 3 months plus 1 day before they can be assigned for 18 months again.

An Employer of Record (EOR) is a third-party provider that hires employees for a company, handling all aspects of employment such as payroll, benefits, taxes, and legal compliance. This arrangement allows businesses to focus on their core operations while ensuring adherence to employment regulations.For company registration in Turkey, you will need to provide passport copies, proof of address, a power of attorney, Articles of Association, and a notarized signature circular. Depending on your industry, additional specific documents may also be necessary. All documents must be notarized at public notaries in Turkey or Turkish consulates worldwide.

Utilizing an EOR in Germany significantly minimizes compliance risks and reduces administrative burdens while offering flexibility in hiring and compensating employees according to local regulations. This approach allows companies to navigate the complex work environment more efficiently.

In Germany, mandatory employee benefits encompass retirement pensions, unemployment insurance, healthcare, long-term nursing care, and workers’ compensation. These benefits are essential for ensuring employee welfare and security.

An EOR effectively manages payroll taxes in Germany by accurately calculating them and ensuring timely submission to the local tax authority, thereby avoiding potential penalties. This diligent process safeguards compliance with legal obligations.

Our office in Germany

Germany

Johannesstr. 69
D-70176 Stuttgart
stuttgart@fmcgroup.com

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