Minimum wage and social security obligations for foreign employers

Companies based abroad that employ staff in Germany must comply with German labor law regulations. The statutory minimum wage and social security obligations are particularly important here. These regulations apply regardless of whether the company has a branch in Germany or not.

1. minimum wage for foreign employers in Germany

Since the January 1, 2025 is the statutory minimum wage in Germany 12.82 euros per hour. This minimum wage applies Mandatory for all employeeswho work in Germany, regardless of the location of the company. This means that even foreign employersthat employ workers in Germany must pay at least this hourly wage.

Exceptions and special regulations

There are only a few exceptions to the minimum wage. For example, special regulations apply to the following groups:

• ApprenticesThe statutory minimum wage does not apply to people who are completing company-based training.
• Voluntary activities: There is no minimum wage requirement here.
• Long-term unemployedPeople who start a new job after a long period of unemployment can be paid below the minimum wage for the first six months.

For Sectors with collective agreements there may be higher minimum wages. For example, the collectively agreed minimum wage in the Construction industry or Care sector often above the statutory minimum wage.

Consequences of violations

If a company fails to pay the statutory minimum wage, it faces severe penalties:

• Fines of up to 500,000 euros.
• Back payments of unpaid wages to the employees concerned.
• Subsequent claims for social security contributions.
• Exclusion from public contracts.

The Financial Control of Undeclared Work (FKS) regularly checks whether employers are complying with the minimum wage. Checks are particularly frequent in sectors such as construction, logistics, cleaning and catering.

2. social security obligation for foreign employers

In Germany, the Territorial principleThis means that all employees who work in Germany are subject to social security contributionseven if their employer is based abroad. Employers must therefore pay social security contributions for their employees.

Which insurance policies are mandatory?

Employers must pay the following social security contributions for their employees:

1. Health insurance (approx. 14.6 % of gross income, divided between employer and employee)
2. Pension insurance (18.6 % of gross income, also divided)
3. Unemployment insurance (2.6 % of gross income)
4. Long-term care insurance (3.4 %, for childless persons 4 %)

In total, these levies account for around 40 % of gross salary half of which is borne by the employee and half by the employer.

What steps must a foreign employer take?

A foreign company that employs workers in Germany must observe the following steps:

1. Apply for a company number:
   Every company that registers employees in Germany requires a Company numberwhich is applied for at the employment agency. Without this number, no social security contributions can be paid.

2. register employees with a health insurance fund:
   Employees must be registered with a German health insurance fund. The chosen health insurance fund is responsible for paying all social security contributions.

3. Submit contribution statements:
   Every month, foreign employers must submit a notification of the contributions due to the relevant health insurance fund.

4. Pay social security contributions on time:
   Employers must pay the contributions due by the third last banking day of the month at the latest to the health insurance company.

5. Appointment of an authorized representative in Germany:
   Since the January 1, 2021 foreign companies are obliged, an authorized representative in Germany who manages the fee documents in German and makes them available for any audits by the authorities.

3. example from practice

A French logistics company hires drivers to transport goods from France to Germany. As the drivers regularly work in Germany, the company must fulfill the following obligations:

• Payment of the German Minimum wage of 12.82 euros per hour.
• Registration of drivers with a German health insurance to social security.
• Payment of Social security contributions to the responsible authorities.
• Designation of a Authorized representative in Germany that can be reached for examinations.

Another example is a Polish construction company that employs workers on a German construction site. This company must also comply with the minimum wage, pay social security contributions and adhere to German regulations.