Contractor Payroll in Germany

Positioning a candidate internationally means navigating unfamiliar tax and payroll systems. Not only does this generally mean more work for you, but even small missteps can have serious financial or even legal consequences.

If you want to successfully place a contractor, you should first familiarize yourself with the contractor payroll process in Germany, as well as how you can make the situation simpler.

Contractor Payroll in Germany

Payroll options in Germany

There are several different options for payroll in Germany:

  • The client can provide payroll for the contractor, but not all clients offer this for temporary workers.  
  • The contractor can do it on their own, but this creates serious risk for the end client and possibly your agency, as well. Like most people, many contractors do not specialise in Germany’s tax system, nor do they always have the time or means to pore over complex tax returns.
  • Your contractor can use a local payroll company.

The third option is the simplest and quickest. An even simpler and quicker option is to use an Umbrella Company, as they offer the same services as a local payroll provider in addition to other services that simplify international assignments (such as Work Permit sponsorship).

Check out our FAQ for specific quotes on payroll providers and Umbrella Companies. 

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Questions and Answers about

Questions and Answers about Payroll in Germany

Q: How does payroll work in Germany?
A: Your employer (the company sponsoring your visa) pays the candidate on a monthly basis. They deduct social security - which is 20.855% for employers and 20.475% for employees. This is made up of 19.6% pensions insurance (employer 9.8%) capped at EUR 67200, 15.5% health insurance (employer 7.3%) (employee 8.2%) capped at EUR 45900, unemployment insurance 3% (employer 1.5%)capped at EUR 67200, nursing care insurance 1.95% (employer 0.975%), accident insurance 1.28% (employer 1.28%). They also deduct income tax - which is progressive and varies from 0-45% pendant on salary level. These deductions are made at source and paid to the Germany tax authorities. Candidates are able to offset their taxable income with relevant business expenses. The World Bank estimates it takes employers in Germany 148 man days to ensure compliance with payroll and labour taxes each year.

Q: What is the monthly cost to outsource payroll in Germany?
A: For simple pay-roll calculations €30 per payslip, for a fully managed pay-roll solution it’s €75 per person

Q: What is the estimated net retention for a contractor in Germany earning USD 1000 per day?
A: 65%

Q: What is the minimum salary required per month in Germany when a candidate is sponsored on an Work Permit?
A: €300 a day