How Much Does It Really Cost to Hire Someone in Germany in 2025?

    Created at: 22 October 2025 - Last updated: 22 October 2025

    Hiring-cost-in-Germany
    Germany is often regarded as both employer and employee-friendly, with clear labour laws and strong worker protections. Recently, the country has altered its labour policies to become an attractive business hub offering more benefits to employers (i.e. reducing the bureaucratic processes for hiring employees, prioritisation on providing visas to skilled foreign employees, and flexibility on the site of work). However, there are mandatory contributions and benefits that the employer should consider.

    What are the main costs of hiring in Germany?

    The total employer cost is 22 - 23% above the employee’s gross salary.
    This includes mandatory contributions and benefits such as:

    • Social security contributions: 15–20%
    • Pension contributions: Minimum 9.3%. Differs if the employee opts for a private scheme
    • Holiday allowance: 13th salary (usually as a gift)
    • Sick pay obligations: up to 2 years

    Tip: The exact percentage depends on the type of contract, employee age, and sector collective agreement (CBA).

     

    What Are Employer Social Contributions in Germany? 

    Employer social contributions cover several insurance and welfare costs.

    Contribution Breakdown

    Employer Social Contribution  

    % applied salary

    Notes

    Health insurance (KV)

    7.30% + 0.85%

    Applied to salary up to 5,512.50 EUR per month (an additional percentage can apply depending on the employee’s chosen insurance)

    Pension Insurance (RV) 

    9.30%

    Applied for a salary up to 8,050 EUR monthly in all Federal States

    Unemployment Insurance (AV)

    1.30%

    Applied to a salary up to 8,050 EUR monthly in all Federal States

    Long-Term Nursing Care Insurance (PV)

    1.80%

    Applied to the salary up to 5,512.50 EUR per month (for employees with one child)
    Disability insurance (U1), Maternity insurance (U2), and Insolvency insurance (U3). 

    0.64%

    The percentage is subject to change depending on the employing entitlement (effective once the employee reaches 23 years of age and is increased to 1.775% for employees with no children).


    Accident Insurance

    1.50%

     


    Total Employment Cost

    21.84%

     

    Table 1. An estimated overview of the employer's contributions. The percentages might change depending on the employee's case (i.e. family, willingness to opt for private schemes, annual revenue). Contact us for more detailed information.

    What Additional Employer Costs Should You Expect?

    Cost type Employer Obligation Details
    Holiday allowance Usually as 13th salary No standard payment (commission bonus or gift), but usually in December
    Pension contributions 9.30% of gross salary There is a cap contribution of up to 8,050 Euros. Also possible that the employee has a private pension scheme
    Sick pay Up to 100% for 6 weeks and then 70 - 90% based on the funds of the employee Among the highest in Europe
    Paid time off Minimum 20 days Often 25–30 days are offered

    Table 2. Overview of mandatory additional employer costs in Germany, such as holiday allowance, pension contributions, and sick pay obligations.

    Regarding health care insurance, there is no fix percentage or amount of money that needs to be covered by the employee. This amount is highly dependent on the annual revenue of the employee and whether the employee opts for a private insurance. In both cases, the employer is obliged to pay up to a certain amount for the employee’s insurance.

    To this point, it is worth noting that employees in Germany who have a managerial position are usually provided with a company car. The cost of leasing is approximately 900€ per month. If there is no lease car, mileage reimbursement is usually provided to the employee.

    To learn more about the mileage reimbursement, check out our blog (https://www.eurodev.com/blog/mileage-reimbursement-in-europe)

    Example of Employment Cost Calculation in Germany

    Consider a sales manager in a small to medium enterprise in Germany. The manager is paid a gross salary of € 5,000 a month. The average employer contributions that the employer must pay on top of the gross wage are roughly 23% which makes the total employment cost for the Sales Manager € 6,092.

    Employment Costs

    Example 1

    Example 2

    Gross Annual Salary

    € 60.000 

    € 90.000 

    Gross Monthly Salary

    € 5.000 

    € 7.500 

     Employer Social Contribution (in %)  

    Approx 22%

    Approx 23%

     Employer Social Contribution (in €)  

    € 1.092

    €1.702

    (Sub)Total Monthly Employer’s Cost  

    € 6.092 

    € 9.201

    (Sub)Total Annual Employer’s Cost (13th salary incl.)

    € 78.104

    € 118.914 

    Table 3. Example calculation of total employment cost for Dutch employees earning €5,000 and €7,500 gross monthly salary, including 35% employer contributions.

    How Does Germany compare to other European Countries?

    Country Employer Cost % Holiday Pay Sick Pay Duration
    Germany 30–35% 13th salary common 6 weeks - 78 weeks
    The Netherlands  30–40% 8% allowance Up to 2 years
    France 45–50% 13th salary common 3–6 months
    Belgium 35–45% 13th salary 1 month

    Table 4. Comparison of employer cost percentages, holiday pay, and sick pay duration in Germany, the Netherlands, France, and Belgium (2025 overview).

    What Employment Benefits Are Mandatory for German Employees?

    Benefit Description Typical Range / Comparison
    Holiday Allowance 13th salary Common amongst EU countries
    Sick Leave Protection Employees receive up to 2 years of paid sick leave, at least 70% of salary (often 100% in year one) Among the most generous systems in Europe
    Paid Time Off (PTO) Minimum 20 statutory days, usually 25–30 depending on CBA Higher than the U.S. average (10–15 days)

    Table 5. Summary of mandatory employment benefits in Germany, including holiday allowance, sick leave protection, and paid time off (PTO).

    What Makes Germany an Attractive Hiring Market?

    1. Germany is one of the biggest economies both in Europe and worldwide; it belongs to the G8 group.

    2. The labour employment policies have been recently reformed, thus offering more benefits to both the employers and the employees.

    3. Flexibility regarding the working hours, their registration as well as the working place (especially after the covid-19 pandemic).

    4. Overtime payment that exceeds the collectively agreed renumeration will be tax-exempt.

    5. Incentives, such as tax-free bonuses, can be offered by employers to the employees so as for the part-time personnel to increase their working hours.

    These benefits can lead to win-win situations; the employers benefit from less taxation while the employees are able to increase their annual revenue and arrange their working hours.

     

     

    Why Choose an Employer of Record (EOR) Partner in Germany?

    Working with an Employer of Record (EOR) partner such as EuroDev lets your company hire German employees without establishing a local entity, while staying fully compliant with tax and labour laws.
    We handle payroll, benefits, and employment contracts so you can focus on growing your European operations.

    Final Thoughts

    Hiring in Germany offers strong labour protections and moderate payroll costs compared to other EU countries. However, complex obligations - such as long sick pay and pension rules - require expert HR support.

    EuroDev helps North American businesses expand to Europe with fully compliant HR and payroll outsourcing solutions.

    Contact our HR experts to calculate your real cost of employment in the Netherlands.

    Written by Mervin Jansman, HR Outsourcing Business Development Manager at EuroDev.

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