Employers in Germany must contribute to Sozialversicherung (social security), which includes pension insurance (Rentenversicherung), health insurance (Krankenversicherung), unemployment insurance (Arbeitslosenversicherung), long-term care insurance (Pflegeversicherung), and accident insurance (Unfallversicherung). These contributions are mandatory and are paid in addition to the employee’s gross salary, with the employer typically covering about 19–21% of gross salary depending on income and region. Statutory paid leave includes a minimum of 20 days of holiday per year (based on a 5-day workweek) and continued wage payment during illness (Entgeltfortzahlung im Krankheitsfall) for up to six weeks.

Payroll taxes in Germany consist of income tax (Lohnsteuer), solidarity surcharge (Solidaritätszuschlag), and, where applicable, church tax (Kirchensteuer), all of which the employer withholds and remits directly to the tax authorities. Additionally, employers must calculate and pay their share of social security contributions as outlined in SGB IV, while employees pay their own portion through payroll deduction. The employer is responsible for accurate withholding and timely remittance to both tax authorities (Finanzamt) and social insurance agencies.

Beyond gross salary and statutory social contributions, employers in Germany should budget for potential severance pay (Abfindung) in cases of redundancy, administrative costs for payroll processing, and costs associated with onboarding and training. Sector-specific collective bargaining agreements (Tarifverträge) may require additional bonuses, such as Weihnachtsgeld (Christmas bonus) or Urlaubsgeld (holiday pay), which are customary in many industries. Employers are also solely responsible for accident insurance premiums and may incur costs for occupational health and safety compliance.

The Mindestlohngesetz (Minimum Wage Act) sets a binding national minimum wage, which as of 2024 is €12 per hour, with planned increases subject to government review. Working hours are restricted under the Arbeitszeitgesetz (Working Hours Act), with a standard maximum of 8 hours per day, and strict rules apply to termination (Kündigungsschutzgesetz), often requiring notice periods and, for larger employers, justification and social selection. Collective bargaining agreements may also set industry-specific terms for pay, benefits, and working conditions, and non-compliance can lead to significant penalties.

German employment contracts are most commonly indefinite (unbefristet), but fixed-term (befristet) contracts are also widely used and must comply with the Teilzeit- und Befristungsgesetz (Part-Time and Fixed-Term Employment Act). Probationary periods (Probezeit) typically last up to six months, during which notice periods are shorter. Customary benefits such as subsidized meal vouchers, company pension schemes (betriebliche Altersvorsorge), and flexible working arrangements may be expected by skilled employees and can increase overall employment costs.