Payroll in Germany is dominated by social insurance: four employee-facing branches, pension, health, unemployment and long-term care, each split between employer and employee, plus accident insurance and an insolvency levy the employer pays alone. The employer withholds wage tax (Lohnsteuer) and the employee's share of contributions each month and remits both, so the payslip a German employee receives is one of the most heavily itemized in Europe. For a company hiring in Germany without an entity, these are the numbers an employer of record will be administering on your behalf, and the figures below, from PwC's 2026 summary, are what the employment costs beyond gross salary.
The four shared branches and their 2026 rates
Pension insurance runs at a combined 18.6% of gross salary, 9.3% each from employer and employee, on earnings up to EUR 101,400 a year. Unemployment insurance adds a combined 2.6%, split 1.3% each, on the same ceiling. Health insurance is a combined 14.6%, split 7.3% each, on earnings up to EUR 69,750 a year, plus a fund-specific additional contribution averaging 2.9% that is also split equally. Long-term care insurance runs at 3.6%, shared 1.8% each, with a surcharge for childless employees aged 23 and over that the employee bears alone. The ceilings do the quiet work in cost planning: above them, contributions stop growing, so the marginal cost of a raise differs sharply either side of the line.
What the employer pays alone
Two items never appear on the employee's side of the payslip. Statutory accident insurance, covering workplace accidents and occupational illness, is financed entirely by the employer at rates that vary by industry sector and accident risk, so a software company and a logistics operation pay meaningfully different premiums for the same salary. The insolvency contribution, which funds wage protection when employers fail, is an employer-only levy of 0.15% on earnings up to the EUR 101,400 ceiling. Neither is optional and neither is negotiable per employee; both belong in any cost-of-hire model, and an employer of record quote that shows only the four shared branches is leaving employer-only lines out of the picture.
Withholding mechanics and the statutory floor
The employer operates the whole machine monthly: wage tax is withheld under the employee's tax class and remitted to the tax office, social contributions are calculated per branch and paid to the health fund acting as collection point, and the employee sees net pay after both. Germany also runs a statutory minimum wage; the Federal Ministry of Labour and Social Affairs describes it as a wage floor that may not be undercut, protecting workers in low-paying jobs from wage dumping, and the rate is adjusted over time on the recommendation of a standing commission. For salaried professional hires the floor is rarely relevant, but for hourly, part-time or working-student arrangements it binds, and compliance is checked against actual hours worked rather than contracted hours.
What this means for a foreign employer
As a rule of thumb from the rates above, an employer's own contribution stack adds roughly a fifth on top of gross salary for earnings under the ceilings, before accident insurance and any benefits. Running this from abroad requires German registrations and monthly filings in German, which is why companies without an entity use an employer of record and companies with one usually engage a local payroll bureau or Steuerberater. When reviewing an EOR quote for Germany, ask for each branch itemized at its current rate against the current ceilings; every number is published, so the itemization is a transparency test the provider either passes or fails. Rates and ceilings are adjusted regularly, and contracts control; nothing here is tax advice.
Questions people ask about payroll in germany
How much does an employer pay on top of gross salary in Germany?
Under the 2026 rates, the employer's shares are 9.3% pension, 1.3% unemployment, 7.3% health plus half of the average 2.9% additional contribution, and 1.8% long-term care, within the applicable ceilings, plus employer-only accident insurance and the 0.15% insolvency levy.
What are the contribution ceilings?
In 2026, pension and unemployment contributions apply to earnings up to EUR 101,400 a year, while health and long-term care contributions apply up to EUR 69,750. Above each ceiling, that branch's contributions stop growing.
Does the employee pay anything the employer does not match?
Yes: the long-term care surcharge for childless employees aged 23 and over is borne solely by the employee, lifting their care rate above the employer's 1.8% share.
Can a foreign company run German payroll without a local entity?
The registrations and monthly filings require a German employer of record or a local presence in practice. Companies without an entity typically hire through an EOR, which employs the worker locally and invoices salary, contributions and its fee.