Hiring employees as a freelancer in Germany is an effective way to expand your business, delegate tasks, and enhance productivity. However, becoming an employer comes with legal, tax, and administrative responsibilities. From registering as an employer to managing payroll and understanding labor laws, there’s a lot to consider.
Can freelancers or self-employed in Germany hire employees?
✅ Yes! Freelancers (Freiberufler) and self-employed professionals (Selbstständige) in Germany can legally hire employees. Whether you need full-time staff, part-time assistance, or temporary help, adhering to German labor and tax regulations is important for compliance.
Is it possible to hire employees as a small business owner (Kleinunternehmer) ?
Yes, small business owners (Kleinunternehmer) can also hire employees. The same rules apply to you as to sole proprietors or tradespeople. You must apply for a company number (Betriebsnummer) and register the employee with the relevant authorities, such as the tax office and health insurance providers. Additionally, you are responsible for deducting wage tax and paying social security contributions for your employees.
Steps to hiring employees as a freelancer
Registering as an employer
Before hiring employees, freelancers must officially register as employers by completing several key steps:
Apply for a company number (Betriebsnummer): This number is issued by the Federal Employment Agency (Bundesagentur für Arbeit). It allows you to officially register your employees with the tax office and social security systems.
Notify the tax office (Finanzamt): Inform your local tax office about your new status as an employer.
Register with health insurance providers: Enroll your employees with their chosen statutory health insurance provider for social security contributions.
Join a liability insurance association (Berufsgenossenschaft): This protects against workplace accidents and is mandatory for all employers.
Drafting an employment contract 📄
A written employment contract is required by German labor law and must include the following details:
Job title and description
Working hours and location
Gross salary and benefits
Probationary period (optional)
Termination notice period
🫣 Use legally vetted templates or consult a labor lawyer to ensure your contract complies with German labor regulations.
Employer tax obligations and contributions
Once you hire employees, you are required to pay their monthly income tax to the tax office. The amount is calculated based on the employee’s income and their respective tax bracket. Factors such as the number of children and marital status also affect this calculation.
Important: The income tax is not an additional cost for you as an employer. It is part of the employee’s agreed gross salary. Instead of paying this portion to your employee, you transfer it directly to the tax office on their behalf.
As an employer, you are responsible for contributing approximately 20% of your employee’s gross salary toward social security, covering the following areas:
Health insurance: ~7.3%
Pension insurance: ~9.3%
Unemployment insurance: ~1.3%
Long-term care insurance: ~1.7%
😧 Example: If your employee earns a gross salary of €3,000 per month, you’ll pay an additional ~€600 in employer contributions, making the total monthly cost €3,600.
Understanding employment types
Freelancers can hire employees under different arrangements, including:
Full-time or part-time employees: Traditional contracts with fixed working hours and benefits.
Mini-jobs (556.01-euro jobs): Simplified employment with lower tax and administrative requirements.
Freelancers or contractors: Independent professionals hired for project-based work.
Important: Ensure independent contractors are genuinely self-employed to avoid legal issues.
🧐 Example: Hiring Lisa as a marketing assistant
You decide to hire Lisa as a part-time marketing assistant with a gross salary of €2,000 per month.
What you’ll do:
Obtain a company number and register Lisa with the tax office and her chosen health insurance provider.
Draft and sign an employment contract outlining her responsibilities, salary, and working hours.
Deduct ~20% from her gross salary for her share of social security contributions and remit them, along with your employer contributions, to the appropriate authorities.
Outcome: Lisa receives her net salary of ~€1,600, and you comply with all legal requirements.
Alternatives to hiring employees
What is a subcontractor?
Instead of hiring employees, you may choose to hire subcontractors. Subcontractors are independent companies or individuals hired by a business to complete specific tasks. This approach is common in industries like construction, where a company’s own workforce or expertise may be insufficient for a job.
Key Characteristics of Subcontractors:
Subcontractors are independent and manage their own taxes and social security.
They work directly with you, not your client.
You avoid the responsibilities of payroll and employment contracts.
Can I employ other freelancers?
Yes, freelancers or self-employed individuals can hire other freelancers for project-based work. This is often done for short-term support or specialized tasks.
In this arrangement:
The hired freelancer acts as a subcontractor and invoices you for their services.
They remain independent and are responsible for their own tax obligations.
They do not communicate with your clients but collaborate with you on the project.
What is false self-employment?
When hiring other freelancers, it is crucial to avoid false self-employment (Scheinselbstständigkeit). False self-employment occurs when a freelancer is treated as an employee based on objective criteria, such as:
Lack of autonomy in their work.
Being tied to specific working hours or locations.
Using tools or resources provided by the hiring party.
False self-employment has significant consequences:
The freelancer is not covered by social security, which disadvantages them.
The employer avoids paying wage taxes and contributions but risks penalties.
Avoiding False Self-Employment:
Clearly outline the freelancer’s independence in the contract.
Avoid imposing employee-like conditions such as fixed hours or work location.
Ensure the freelancer invoices you and manages their own taxes.
Frequently asked questions (FAQ)
Can I hire another freelancer instead of an employee?
Yes, but ensure the freelancer is truly independent to avoid misclassification. A contractor relationship should not include employment-like conditions.
What is the minimum wage in Germany?
As of 2024, the minimum wage in Germany is €12.41 per hour and in 2025 it will rise to €12.82.
Are social security contributions mandatory?
Yes, both employers and employees must contribute to social security. Employers cover approximately 50% of the total contribution.
Do subcontractors differ from employees?
Yes, subcontractors are independent and responsible for their own taxes, while employees are on your payroll and require compliance with employment laws.
What are mini-jobs, and are they easier to manage?
Mini-jobs are low-income employment contracts capped at €538 per month and from January 1, 2025 is €556 per month. They involve reduced social security contributions and are simpler to administer.
Final thoughts
Hiring employees as a freelancer or small business owner in Germany is a significant step toward growth. However, understanding your responsibilities—whether hiring employees, subcontractors, or freelancers—is crucial to ensure compliance with labor and tax laws.
👩💻 Using tools like Norman for accounting and taxes, you will simplify these processes and focus on scaling your business efficiently and legally.