Payroll and taxes in Germany

At a glance

Key figures with the official source for each, checked November 2026.

Registrations an employer needs before the first German payroll

A company that employs people in Germany directly needs several registrations in place before the first pay run.

• Betriebsnummer. The Federal Employment Agency's Betriebsnummern-Service issues an establishment number. Every social insurance report must carry the number of the establishment where the person actually works. The agency states that incorrect reporting can be fined up to EUR 25,000.
• Accident insurer. Under § 192 SGB VII the business must notify the competent accident insurance carrier within one week of starting operations.
• Wage tax. The employer needs a tax number for wage tax and access to the ELStAM database run by the Federal Central Tax Office.
• Health funds. Each employee chooses a statutory health fund. That fund is the collection agency for all four shared contribution lines, so an employer with ten staff may report to several funds.

The Nachweisgesetz also sets documentation deadlines. Pay, working hours and the parties' details must be given on the first working day, further core terms by the seventh calendar day, and the rest within one month. Under an EOR arrangement the EOR entity holds these registrations and issues the documents, because it is the legal employer.

Wage tax withholding and the 2026 income tax bands

The employer withholds wage tax (Lohnsteuer) from every pay run and is liable for it under § 42d EStG. At hiring, the employee gives the tax identification number and date of birth. The employer retrieves the tax class, child allowances and church membership from ELStAM, stores them in the payroll account, and must check for updates every month (§ 39e EStG).

The solidarity surcharge is only charged where annual income tax exceeds EUR 20,350, or EUR 40,700 for jointly assessed couples (§ 3 Solidaritätszuschlaggesetz). Most employees therefore pay none. Church tax is withheld only for registered members of a tax-collecting religious community, at a rate set by state law.

Payroll software applies the official wage tax formula, so the employer does not calculate bands by hand. The employee settles any difference through the annual income tax return.

Social insurance rates and ceilings in 2026

Four insurance lines are shared between employer and employee. Contributions are charged on gross pay up to the monthly ceiling (Beitragsbemessungsgrenze). Pay above the ceiling carries no further contribution.

With the average supplementary rate, the employer's share comes to about 21.15% of pay below the health ceiling. Each health fund sets its own supplementary rate, so the real figure differs by employee. Saxony splits the care contribution differently. Employees earning above EUR 77,400 a year may leave the statutory health system for private cover.

On 7 October 2026 the federal cabinet approved higher ceilings for 2027: EUR 8,850 a month for pension and EUR 6,375 for health and care. The regulation still needed Bundesrat approval when this page was checked.

Employer-only costs: accident insurance and the U1, U2 and insolvency levies

Some costs sit with the employer alone and never appear as deductions on the payslip.

• Accident insurance. Paid to the sector's Berufsgenossenschaft. The rate depends on the risk class of the business and on total payroll, so it is assessed annually and not as a fixed monthly percentage.
• U1 levy. Only employers that normally have no more than 30 employees take part. In return the health fund reimburses up to 80% of continued sick pay. Funds may offer lower reimbursement tiers, but not below 40%, each with its own levy rate. One large fund charges 2.1% as its standard 2026 rate.
• U2 levy. All employers pay it. It funds 100% reimbursement of the maternity pay top-up and of pay during pregnancy work bans. The same fund charges 0.44% in 2026.
• Insolvency levy. 0.15% of pay in 2026, collected with the monthly contributions.

The legal basis for U1 and U2 is the Aufwendungsausgleichsgesetz. Headcount for the 30-employee test is measured over the previous year, with part-time staff counted at 0.25, 0.5 or 0.75 depending on weekly hours. Trainees and severely disabled employees are not counted.

Monthly deadlines, payslips and reporting

German payroll has two fixed monthly deadlines, and they fall at different times.

• Social contributions. Due in the estimated amount on the third-last banking day of the month in which the work is done (§ 23 SGB IV). Any balance is settled with the next month's payment. Because the due date falls before month end, the employer estimates variable pay and corrects later.
• Wage tax. The electronic wage tax return is due by the 10th day after the filing period ends, with payment at the same time.
• Late contributions. A surcharge of 1% of the overdue amount applies for each month or part of a month (§ 24 SGB IV).

Under § 108 Gewerbeordnung the employee must receive a payslip in text form with each payment. It must show the pay period and the make-up of pay, including allowances, deductions and advances. A new payslip is not required when nothing has changed since the last one.

The employer also files event-based electronic reports to the health fund, including the start and end of employment, the start and end of parental leave, interruptions of pay and one-off payments (§ 28a SGB IV).

Year-end reporting and audits

At the end of the calendar year, or when employment ends, the employer closes the payroll account and sends an electronic wage tax certificate (Lohnsteuerbescheinigung) to the tax administration. The fixed date in § 41b EStG is the last day of February of the following year. The employee receives a printout or electronic copy and uses it for the personal tax return.

For social insurance, the employer files an annual report for every person employed on 31 December. A separate annual report for accident insurance is due by 16 February of the following year. It gives the accident insurer the payroll totals used to assess the contribution.

The pension insurance carriers audit every employer at least once every four years (§ 28p SGB IV). The audit checks contribution payments and reports, and it also looks at people who were paid without contributions, such as freelancers. Contribution claims become time-barred four years after the end of the year in which they fell due, and after 30 years where contributions were withheld intentionally (§ 25 SGB IV).

If a deduction from the employee was missed, the employer can only recover it from the next three pay runs unless the employer was not at fault (§ 28g SGB IV).

Minimum wage, bonuses and 13th-month pay

The statutory minimum wage is EUR 13.90 gross per hour in 2026 and rises to EUR 14.60 on 1 January 2027. The Minimum Wage Commission proposes each adjustment and the federal government adopts it by regulation. The monthly earnings limit for a Minijob moves with the minimum wage. It is EUR 603 in 2026 and EUR 633 in 2027.

German law does not require a 13th-month salary, a Christmas bonus or holiday pay on top of normal wages during leave. These payments come from collective agreements, works agreements or the individual contract. Where a contract or a consistent past practice promises them, they become enforceable, so wording matters when an offer letter is drafted.

One-off payments are subject to wage tax and to social contributions, and they are reported separately to the health fund. Because contributions stop at the ceilings, a bonus paid to an employee already above the ceiling adds little employer social cost.

Where staff are engaged through licensed employee leasing under the Arbeitnehmerüberlassungsgesetz, the lessor must also grant pay equal to comparable staff of the client. A collective agreement can deviate from equal pay only for the first nine months of an assignment.

Frequently asked questions

More on hiring in Germany

Employer of record and hiring guide for Germany · Termination and notice · Benefits and leave · Contractors vs employees · Cost calculator · EOR vs PEO vs entity

Sources

• Techniker Krankenkasse, social insurance contribution rates 2026
• Federal Government, social insurance ceilings 2026
• Deutsche Rentenversicherung, planned 2027 ceilings
• Finanzverwaltung NRW, income tax tariff
• Einkommensteuergesetz § 41a, wage tax return
• Sozialgesetzbuch IV § 23, due date of contributions
• Aufwendungsausgleichsgesetz, U1 and U2 levies
• Federal Government, minimum wage 2026 and 2027

This page is general information, not legal, tax or immigration advice. Rates, thresholds and procedures change, and how they apply depends on the facts. Confirm current figures with a qualified adviser or with Dryft before acting. Checked November 2026.