Payroll in Germany: 2026 Employer Guide to Tax and Deadlines
Last updated: 29 September 2026. Figures reflect the minimum wage, contribution rates and immigration rules in force at that date.
Running payroll in Germany is not hard because the rules are unclear. It is hard because there are many of them, they come from different authorities, and each has its own deadline. Wage tax goes to the tax office, social security contributions go to the employee's health insurer, accident insurance goes to a separate institution, and every employee has personal tax data that the employer must pull electronically before the first payslip.
The result is that payroll in Germany rewards preparation and punishes improvisation. Contributions are due before the month has even ended, wage tax filings follow on the tenth, and the employer is liable for wage tax that was not withheld correctly.
This guide is for HR leaders, finance teams, and founders employing people in Germany, whether through their own German company or from abroad. It covers the registrations you need, how wage tax and the tax classes work, the 2026 social security rates and ceilings, the payroll calendar, what a German payslip must show, and the options for running payroll with or without a local entity.
What does an employer need before running payroll in Germany?
Before the first payroll in Germany, an employer needs a company number from the Federal Employment Agency, a wage tax registration with the tax office, registration with the statutory accident insurance institution for its sector, and the personal tax and social insurance details of each employee. Without these, you cannot file the reports that payroll depends on.
The registrations are:
- Company number (Betriebsnummer). Issued by the Federal Employment Agency's company number service. Every social security report is filed under it.
- Wage tax registration. The employer registers with the tax office (Finanzamt) responsible for the business location where payroll is run, known as the Betriebsstättenfinanzamt, usually through the ELSTER online portal.
- Accident insurance. Registration with the Berufsgenossenschaft for your sector, which sets the accident insurance contribution based on risk class and total payroll.
- Employee data. For each employee: their tax identification number, date of birth, social insurance number, the statutory health insurer they have chosen, and details on children and parenthood that affect care insurance.
With the tax ID and date of birth, the employer retrieves the employee's electronic wage tax data (ELStAM) from the tax authorities: tax class, child allowances, and church tax status. You do not decide these yourself; you apply what the tax office supplies.
The new employee must then be registered with their health insurer, which acts as the collection point for all social security branches, with the first payroll run and at the latest within six weeks of the start date.
How does wage tax work in Germany?
Wage tax (Lohnsteuer) is the income tax that the employer withholds from salary each month and pays to the tax office. It is calculated from the employee's gross pay using the official tax formula and the employee's ELStAM data, above all the tax class.
Income tax rates for 2026
German income tax is progressive. For 2026 the tariff in section 32a of the Income Tax Act is:
| Taxable income (single person) 2026 | Rate |
|---|---|
| Up to 12,348 EUR | 0% (basic allowance) |
| 12,349 EUR to 69,878 EUR | Progressive, rising from 14% to 42% |
| 69,879 EUR to 277,825 EUR | 42% |
| From 277,826 EUR | 45% |
For jointly assessed married couples the income bands are doubled. Wage tax withheld through payroll is an advance payment on this income tax; the final liability is settled when the employee files a tax return, where one is required.
The German tax classes explained
Every employee is placed in one of six tax classes (Steuerklassen), which determine how much wage tax is withheld each month. The tax class does not change the final tax owed for the year; it changes how the tax is spread through payroll.
| Tax class | Who it applies to |
|---|---|
| I | Single, divorced, or permanently separated employees |
| II | Single parents who qualify for the single-parent relief |
| III | Married employees or registered partners whose spouse is in class V or has no employment income |
| IV | Married employees or registered partners where both earn, by default, with an optional factor method |
| V | The spouse of an employee in class III |
| VI | A second or further job held at the same time as a main job |
Classes III and V are an optional combination for couples with very different incomes. Class VI carries the highest withholding because no allowances are applied to a second job. If a new employee does not provide their tax ID and date of birth, the employer must generally withhold under class VI until the data is available, which is a common cause of a painful first payslip.
Solidarity surcharge and church tax
The solidarity surcharge (Solidaritätszuschlag) is 5.5% of income tax, but it only applies once annual income tax exceeds 20,350 EUR for a single person (40,700 EUR for joint assessment) in 2026, with a phase-in zone above that. Most employees no longer pay it.
Church tax (Kirchensteuer) applies to employees registered as members of a church that levies it. It is 8% of wage tax in Bavaria and Baden-Württemberg and 9% in the other federal states. The church tax status comes through the ELStAM data.
Employer liability for wage tax
Under section 42d of the Income Tax Act, the employer is liable for wage tax it should have withheld and paid. If payroll applies the wrong tax class, misses a taxable benefit, or treats a payment as tax-free when it is not, the tax office can recover the shortfall from the employer. Company cars, meal allowances, and bonuses are frequent sources of error.
What are the social security contributions in Germany in 2026?
Social security contributions in Germany are shared roughly equally between employer and employee and cover pension, unemployment, health, and long-term care insurance. The employer share comes to about 21% of gross salary up to the contribution ceilings, and the employee share to about the same, before the levies that only the employer pays.
2026 rates and ceilings
| Branch | Total rate 2026 | Employer share | Employee share | Monthly ceiling 2026 |
|---|---|---|---|---|
| Pension insurance | 18.6% | 9.3% | 9.3% | 8,450 EUR |
| Unemployment insurance | 2.6% | 1.3% | 1.3% | 8,450 EUR |
| Health insurance (general rate) | 14.6% | 7.3% | 7.3% | 5,812.50 EUR |
| Health insurance additional contribution (average) | 2.9% | 1.45% | 1.45% | 5,812.50 EUR |
| Long-term care insurance | 3.6% | 1.8% | 1.8% | 5,812.50 EUR |
Three details matter in practice. First, the additional health contribution depends on the employee's chosen insurer; 2.9% is the official 2026 average, and actual rates vary. Second, childless employees aged 23 and over pay a care-insurance surcharge of 0.6% on top, borne by the employee alone, while parents of several children under 25 pay a reduced rate. Third, the state of Saxony splits care insurance differently, with a lower employer share.
Earnings above the ceilings attract no further contributions in that branch. An employee earning above the compulsory health insurance threshold of 77,400 EUR a year (6,450 EUR a month) in 2026 can choose private health insurance, in which case the employer pays a subsidy towards it instead of the statutory contribution.
Contributions only the employer pays
On top of the shared contributions, the employer pays:
- Accident insurance to the Berufsgenossenschaft, based on the sector's risk class and total payroll, usually settled annually in arrears.
- The insolvency levy (Insolvenzgeldumlage) of 0.15% of pay subject to pension insurance in 2026.
- The U1 levy, which funds reimbursement of sick pay for smaller employers, and the U2 levy, which funds reimbursement of maternity pay. Rates are set by each health insurer.
Worked example
For an employee in tax class I with a gross salary of 5,000 EUR a month, childless and aged over 23, whose insurer charges the average additional contribution:
| Item | Employee | Employer |
|---|---|---|
| Pension insurance (9.3%) | 465.00 EUR | 465.00 EUR |
| Unemployment insurance (1.3%) | 65.00 EUR | 65.00 EUR |
| Health insurance (7.3% + 1.45%) | 437.50 EUR | 437.50 EUR |
| Long-term care (employee 2.4% incl. surcharge, employer 1.8%) | 120.00 EUR | 90.00 EUR |
| Total social security | 1,087.50 EUR | 1,057.50 EUR |
The employer then adds the insolvency levy (7.50 EUR at 0.15%), the U1 and U2 levies, and accident insurance. The employee's wage tax, and any church tax or solidarity surcharge, is deducted on top of their share and depends on the ELStAM data; the Federal Ministry of Finance publishes an official wage tax calculator for checking the figure.
What are the payroll deadlines in Germany?
German payroll runs on a monthly cycle with three fixed deadlines: social security contributions are due on the third-last banking day of the current month, the contribution statement must reach the health insurer two working days before that, and the wage tax return is due on the tenth day of the following month.
Monthly deadlines
- Contribution statement (Beitragsnachweis): filed electronically with each health insurer so that it arrives at the latest two working days before the contributions are due.
- Social security contributions: due in the estimated amount for the current month by the third-last banking day of that month. In practice, payroll for the month must be substantially complete before the month ends. Any difference is corrected in the following month.
- Wage tax return (Lohnsteuer-Anmeldung): filed through ELSTER and paid by the tenth day after the end of the filing period.
The wage tax filing period depends on the previous year's wage tax: monthly if it exceeded 5,000 EUR, quarterly if it was more than 1,080 EUR but not more than 5,000 EUR, and annually if it was 1,080 EUR or less. A new employer typically starts on monthly filing until a full year establishes its level.
Annual and event-driven reports
- Registration and deregistration reports to the health insurer when employment starts or ends, and when key details change.
- The annual social security report (Jahresmeldung) for each employee, by 15 February of the following year at the latest.
- The annual wage tax certificate (Lohnsteuerbescheinigung), transmitted electronically to the tax office by the last day of February of the following year, with a copy or printout for the employee.
- The accident insurance wage report to the Berufsgenossenschaft after the end of each year.
Because the contribution due dates follow banking days and some federal holidays differ by state, health insurers publish a calendar of exact dates each year. Build your payroll cut-off around it.
What must a German payslip contain?
Under section 108 of the Trade Regulation Act (Gewerbeordnung), the employer must give the employee a pay statement in text form each time pay is made, showing at least the pay period and how the pay is made up. That includes the type and amount of each supplement, bonus, allowance, and advance, and every deduction.
A typical German payslip (Entgeltabrechnung) shows the gross pay, the tax class and other ELStAM data used, wage tax, solidarity surcharge and church tax where applicable, each employee social security contribution, any net deductions, and the net amount paid. Text form means the payslip can be provided electronically, for example through an employee portal, as long as the employee can keep and reproduce it. A new statement is not required if nothing has changed from the previous month.
Which other pay rules affect German payroll?
Several employment rules flow directly into payroll and are common sources of error.
- Minimum wage. The statutory minimum wage is 13.90 EUR gross per hour from 1 January 2026, rising to 14.60 EUR on 1 January 2027. Collective agreements set higher rates in many sectors.
- Sick pay. Under the Continued Remuneration Act, the employer continues to pay full salary for up to six weeks of illness. After that, the health insurer pays sickness benefit. Smaller employers can reclaim part of the sick pay through the U1 scheme.
- Minijobs. Marginal employment up to 603 EUR a month in 2026 is handled through the Minijob-Zentrale, with employer flat-rate contributions of 13% health and 15% pension insurance plus a 2% flat-rate tax where chosen, and the levies. Minijob employers must record working hours under section 17 of the Minimum Wage Act.
- Midijobs. Employees earning between 603.01 EUR and 2,000 EUR a month fall in the transition zone (Übergangsbereich), where employee contributions are reduced and phase in gradually. The employer's calculation follows a special formula.
- Thirteenth-month pay and bonuses. These are not required by statute, but if they are in the contract or a collective agreement, they must be paid and are taxed as one-off payments using a separate method.
- Record keeping. The payroll account (Lohnkonto) for each employee must be kept until the end of the sixth calendar year after the last pay entry. Records that also serve as accounting vouchers can carry longer retention periods.
Can you run payroll in Germany without a German entity?
Yes. There are three ways to run payroll in Germany: through your own German company, as a foreign employer registered directly in Germany, or through an Employer of Record (EOR).
Your own German entity. A GmbH or branch registers as an employer and runs payroll in-house or with a payroll provider and tax adviser. This is the standard route for companies with a team in Germany.
A foreign employer without an entity. A company based abroad can obtain a Betriebsnummer and register its German employees for social security directly. Social security contributions apply in the usual way. Wage tax withholding applies to a domestic employer under section 38 of the Income Tax Act, which includes a foreign company with a permanent establishment or permanent representative in Germany; where neither exists, the employee may have to settle their own income tax, which is often unwelcome. This route needs specific tax advice, particularly on permanent establishment risk.
An Employer of Record. The EOR is the legal employer and runs German payroll through its own entity, including wage tax, social security reporting, and payslips. In Germany an EOR arrangement is generally treated as labour leasing, which brings a licence requirement and an 18-month limit on placing the same person with the same client. See our guide on EOR vs local entity in Germany for the full comparison. Learn more about Employer of Record services from Jackson & Frank.
What are the most common payroll mistakes in Germany?
Most payroll errors in Germany come from timing and data, not from the tax formula.
- Running payroll after month-end. Contributions are due on the third-last banking day of the current month, so a payroll cut-off after month-end misses the deadline.
- Starting without ELStAM data. Paying the first salary before the tax data is available can force tax class VI withholding and a difficult conversation with a new employee.
- Wrong care-insurance rate. Forgetting the childless surcharge, the reduced rate for parents of several children, or the Saxony split.
- Taxable benefits missed. Company cars, vouchers above the tax-free limits, and meal allowances treated incorrectly create employer liability under section 42d.
- Late registration. Registering a new employee with the health insurer later than six weeks after the start.
- Treating a contractor as outside payroll. A freelancer who works under your direction may be an employee for social security, with backdated contributions borne largely by the employer.
Many companies get this wrong in the same way: they set up payroll in Germany like payroll at home, run it at month-end, and discover that the contribution deadline passed a few days earlier. The fix is a payroll calendar built around German due dates, not around your group's reporting cycle. Explore global payroll with Jackson & Frank.
How often is payroll run in Germany?
Payroll in Germany is run monthly. Salaries are usually paid at the end of the month, social security contributions are due on the third-last banking day of that month, and the wage tax return is due by the tenth day of the following month for most employers.
What are the employer social security costs in Germany in 2026?
The employer share of statutory social security is about 21% of gross salary up to the ceilings: 9.3% pension, 1.3% unemployment, 7.3% health plus half the insurer's additional contribution (2.9% on average), and 1.8% long-term care. The employer also pays accident insurance, the 0.15% insolvency levy, and the U1 and U2 levies.
What are the German tax classes?
There are six tax classes. Class I is for single employees, II for single parents, III and V are a combination for married couples with different incomes, IV is the default for married couples who both earn, and VI applies to a second job. The class affects monthly withholding, not the final annual tax.
What is the income tax-free allowance in Germany in 2026?
The basic allowance (Grundfreibetrag) is 12,348 EUR of taxable income for a single person in 2026 and 24,696 EUR for jointly assessed couples. Income above it is taxed progressively from 14% up to 42%, with 45% applying from 277,826 EUR.
When is the wage tax return due in Germany?
The wage tax return (Lohnsteuer-Anmeldung) is due on the tenth day after the end of the filing period. The period is monthly if the previous year's wage tax exceeded 5,000 EUR, quarterly between 1,080 EUR and 5,000 EUR, and annual at 1,080 EUR or less.
Can a foreign company run payroll in Germany without an entity?
Yes. A foreign company can register as an employer, obtain a company number, and pay German social security for its staff. Whether it must also withhold wage tax depends on whether it has a permanent establishment or permanent representative in Germany. Many companies use an Employer of Record instead to avoid running German payroll themselves.
How long must payroll records be kept in Germany?
The payroll account for each employee must be kept until the end of the sixth calendar year after the last pay entry, under section 41 of the Income Tax Act. Payroll documents that also serve as accounting vouchers are subject to the longer commercial and tax retention periods.
Conclusion
Payroll in Germany comes down to three things: the right registrations before the first salary, accurate employee data from the tax and insurance systems, and a payroll calendar that respects German deadlines rather than month-end habits. Budget about 21% of salary for employer social security up to the ceilings, plus the levies and accident insurance, and treat wage tax errors as your liability, because under German law they are.
The larger question is who runs it. A German entity with a payroll provider suits a team that is staying. An Employer of Record suits a first hire or a market test, within the limits German labour-leasing rules set.
If you are working out how to run payroll in Germany, Jackson & Frank's team can walk you through the specifics for your employees, from registrations and the payroll calendar to running German payroll for your entity or employing through us. Get in touch with the team to talk it through.
Sources
- Gesetze im Internet, Einkommensteuergesetz section 32a - https://www.gesetze-im-internet.de/estg/__32a.html - 2026 income tax tariff and basic allowance
- Gesetze im Internet, Einkommensteuergesetz section 38 - https://www.gesetze-im-internet.de/estg/__38.html - wage tax withholding and the domestic employer definition
- Gesetze im Internet, Einkommensteuergesetz section 38b - https://www.gesetze-im-internet.de/estg/__38b.html - tax classes I to VI
- Gesetze im Internet, Einkommensteuergesetz section 39e - https://www.gesetze-im-internet.de/estg/__39e.html - electronic wage tax data (ELStAM)
- Gesetze im Internet, Einkommensteuergesetz section 41 - https://www.gesetze-im-internet.de/estg/__41.html - payroll account and retention period
- Gesetze im Internet, Einkommensteuergesetz section 41a - https://www.gesetze-im-internet.de/estg/__41a.html - wage tax return deadline and filing periods
- Gesetze im Internet, Einkommensteuergesetz section 41b - https://www.gesetze-im-internet.de/estg/__41b.html - annual wage tax certificate deadline
- Gesetze im Internet, Einkommensteuergesetz section 42d - https://www.gesetze-im-internet.de/estg/__42d.html - employer liability for wage tax
- Gesetze im Internet, Solidaritätszuschlaggesetz section 3 - https://www.gesetze-im-internet.de/solzg_1995/__3.html - 2026 solidarity surcharge exemption thresholds
- Gesetze im Internet, SGB IV section 23 - https://www.gesetze-im-internet.de/sgb_4/__23.html - due date of social security contributions
- Gesetze im Internet, SGB IV section 20 - https://www.gesetze-im-internet.de/sgb_4/__20.html - transition zone (Midijob)
- Gesetze im Internet, DEÜV section 6 - https://www.gesetze-im-internet.de/de_v/__6.html - registration of new employees within six weeks
- Gesetze im Internet, DEÜV section 10 - https://www.gesetze-im-internet.de/de_v/__10.html - annual social security report by 15 February
- Gesetze im Internet, Gewerbeordnung section 108 - https://www.gesetze-im-internet.de/gewo/__108.html - payslip requirements
- Gesetze im Internet, Entgeltfortzahlungsgesetz section 3 - https://www.gesetze-im-internet.de/entgfg/__3.html - six weeks of employer-paid sick pay
- Gesetze im Internet, Mindestlohngesetz section 17 - https://www.gesetze-im-internet.de/milog/__17.html - working-time records for minijobs
- Bundesregierung, Mindestlohn 2026 - https://www.bundesregierung.de/breg-de/aktuelles/mindestlohn-steigt-2391010 - minimum wage of 13.90 EUR from 1 January 2026 and 14.60 EUR from 2027
- Bundesregierung, Beitragsbemessungsgrenzen 2026 - https://www.bundesregierung.de/breg-de/aktuelles/beitragsgemessungsgrenzen-2386514 - 2026 contribution ceilings and compulsory insurance threshold
- Bundesministerium für Gesundheit, Beiträge der gesetzlichen Krankenversicherung - https://www.bundesgesundheitsministerium.de/beitraege - health insurance rate and 2026 average additional contribution
- Bundesagentur für Arbeit, Betriebsnummern-Service - https://www.arbeitsagentur.de/unternehmen/betriebsnummern-service - company number for employers
- Minijob-Zentrale - https://www.minijob-zentrale.de/DE/home/home_node.html - minijob limit and employer flat-rate contributions
- ELSTER - https://www.elster.de/eportal/start - electronic wage tax registration and filing
Disclaimer: This article is for general guidance only and does not constitute legal, tax, or immigration advice. Employment regulations change regularly. Consult a qualified local expert before making hiring or compliance decisions.