How to hire in Germany through an EOR

Germany's employment laws are strict, and they favor employees. You can't hire someone on a handshake, and fixed-term contracts have hard limits that catch a lot of companies off guard. Get the contract type wrong or skip the paperwork, and you're looking at back wages, fines, and potential lawsuits.

Contract types and when to use them

About 75% of German employees work under permanent contracts, and there's a reason: they're the default. German law assumes employment is indefinite unless you have a specific, documented reason for a time limit. That shapes how you should think about hiring from the start.

Fixed-term contracts aren't a workaround for avoiding difficult terminations. German law requires a real reason: replacing someone on leave, a specific project, a defined trial period. If you renew a fixed-term contract without documented justification, a court can convert it to permanent. Keep cycling through fixed-term contracts with the same person, and the labor authority will likely treat it as permanent anyway.

What the law requires in writing

Germany's Verification Act (Nachweisgesetz) requires written documentation within one month of hire. You must include:

• Names and addresses of both parties
• Start date (and end date for fixed-term)
• Job location and description
• Pay, bonuses, and allowances
• Working hours
• Vacation entitlement (minimum 20 days per year)
• Notice periods
• Any applicable collective agreements
• Pension scheme details

The contract must be in writing. Email counts, but a verbal agreement doesn't. Skip this, and you're liable for back wages and penalties. Probation periods are standard at 6 months for both permanent and fixed-term contracts. During probation, either party can terminate with 2 weeks' notice. After probation on a permanent contract, notice periods run 1-3 months depending on how long the person has worked for you.

Employee vs. contractor: where companies get burned

This is the biggest risk area. German law doesn't work from a simple checklist. Courts look at the substance of the relationship: who controls the work, how much independence the person has, and how integrated they are in your business. If you call someone a contractor but they work full-time, use your equipment, follow your processes, and take direction from you, they're an employee.

Misclassify someone and you owe back payroll taxes, social security contributions, and potentially 8+ weeks of paid leave retroactively. The person can also sue for damages. The labor authority can fine you, and if it looks deliberate, criminal charges are possible.

Non-compete clauses are enforceable in Germany, but only if they're reasonable in scope, duration (usually 6 months to 2 years), and geography. You must pay compensation during the non-compete period, typically 50% of the last salary. IP assignments are enforceable if they're in writing and specific about what you're claiming. Vague language won't hold up.

Germany sets the legal minimum at 20 paid vacation days for a five-day workweek, but most employees expect 25 to 30. That gap catches a lot of international employers off guard.

Time off

Full-time employees on a five-day week are entitled to 20 paid days off per year, or 24 days if they work six days a week. Leave accrues over the calendar year, and employees earn the full entitlement after six months on the job.

Part-time employees get a proportional amount. Someone working three days a week, for example, gets 12 days. Pay during leave is based on average earnings from the previous 13 weeks.

Unused days can carry over, but they must be used by March 31 of the following year or they lapse. Employees can't be paid out for unused leave unless they're leaving the company.

Public holidays vary by state and only count as paid days off when they fall on a workday. Check the employee's location for the full list. Depending on the state, this can add 10 to 13 extra days a year.

All leave types

Here's what German law requires. Job protection means the employee's role is secure during leave, with pay details noted per type.

Paternity and bereavement leave aren't always statutory, but paying in full and protecting the role is standard practice. Parental leave is funded through Elterngeld, which pays roughly two-thirds of net income up to a set cap.

Mandatory benefits

Social security in Germany covers health insurance, pension, unemployment, and long-term care. Total contributions run around 40% of gross salary, split roughly half and half between you and the employee.

These figures are for 2025. There are no unusual mandates like meal vouchers or transport passes. A 13th-month payment exists in some sectors through collective agreements, but it's not a universal legal requirement.

What people actually expect

In tech and professional services, 25 to 30 vacation days is the norm, not a perk. If you offer just 20, you'll find it harder to compete for good candidates.

Flexible hours and remote work are widely expected. Many employees also expect a home office allowance, typically around 50 euros a month for equipment or setup costs.

Private health insurance that tops up the public system is valued by expats and older employees, giving access to faster appointments or English-speaking doctors. It's not required, but it's a common addition. Sabbaticals after five years also show up regularly at larger companies.

If you're hiring senior staff, expect them to ask about long-service bonuses or additional leave. Offering 28 days plus public holidays is a more realistic starting point if you want your roles to stand out.

Letting someone go in Germany takes careful handling. It's one of the most employee-protective countries in Europe, and skipping steps can lead to court disputes, back pay, and reinstatement orders.

Termination grounds

After six months of employment, you need a valid reason to dismiss someone. That reason falls into one of two categories: business-related (like restructuring or closure) or personal (like repeated poor performance after warnings, long-term illness with no realistic recovery, theft, or fraud). In the first six months, no reason is required.

Dismissing someone without solid grounds, or without following the right process, counts as unfair dismissal. Employees have three weeks from receiving written notice to file a claim. If they win, you'll either reinstate them or pay wages up to the court date. A 2025 Federal Labor Court ruling confirmed you can't contract out of that wage liability if the termination is found invalid.

Certain groups have additional protections. You can't dismiss someone based on race, religion, gender, sexual orientation, or disability. Pregnant employees and those on maternity or parental leave require government approval to dismiss, which is rarely granted. Severely disabled employees need sign-off from the Integration Office. Works council members and caregivers also have strong legal protections. For mass layoffs, you'll need to notify the Federal Employment Agency and consult the works council first.

Extraordinary termination without notice is reserved for serious misconduct only, like violence or theft. You have two weeks from learning about the incident to act. For lesser issues, warnings should come first.

Notice periods

Notice must be in writing and hand-signed. Email doesn't count. It takes effect at the end of the month or on the 15th, depending on timing. Statutory minimums apply unless the contract offers the employee more.

Severance

Severance isn't legally required in Germany. Courts typically award it in unfair dismissal cases as a settlement, particularly for business-related terminations. There's no fixed formula, but common practice is half a month's pay per year of service. Ten years of service, for example, would typically mean around five months' salary.

Calculate based on the employee's last gross monthly salary, including any fixed bonuses. There's no legal cap, and older workers or those close to retirement age tend to receive more. Severance doesn't apply to extraordinary terminations or resignations. Negotiating a termination agreement is often the cleaner route if you want to avoid court.

Work permits and visas

You can hire foreign nationals in Germany through an EOR. Because the EOR is the legal employer with a German entity, they handle work permit sponsorship directly. That removes an important administrative burden from your side.

The main visa categories are: the EU Blue Card for skilled workers with a degree and a job offer above €45,300 (lower for shortage occupations); the standard work visa for qualified professionals with recognised qualifications; the ICT permit for intra-company transfers; and the job seeker visa, which allows skilled workers to search for roles for up to six months.

Germany doesn't have a digital nomad visa. Most permit applications take 2-3 months. You'll typically need a job offer, proof of qualifications, health insurance, and in some cases €11,208 in blocked funds. An EOR with an established compliance setup can help move things along faster.

A few other things worth knowing

GDPR applies strictly to HR data. You need explicit consent before collecting or processing employee information, and fines for breaches can be importantly high.

Trade unions and works councils are common, particularly in larger companies. More than half of workers in Germany are covered by collective bargaining agreements that often set higher standards on pay and working hours. If a works council exists at your company, you'll need to consult them before making terminations or important changes to working conditions.

Two changes are coming in 2026. From 2026, you'll be able to hire retirees on fixed-term contracts without needing justification, for up to eight years across twelve contracts. EU AI regulations also take effect in August 2026, covering high-risk HR tools like candidate screening software. If you're using those tools, document how they work and make sure the process is transparent.

Keep contracts in writing, document any performance issues as they arise, and consider using an EOR for local compliance support. That combination importantly reduces your exposure.