As global mobility increases and companies expand beyond their home markets, hiring and posting employees abroad has become more common. For companies seeking to employ staff in Germany without establishing a local legal entity, the concept of an Ausländischer Arbeitgeber (foreign employer) is a crucial option.
But what does it really mean to be an Ausländischer Arbeitgeber—and why does it matter for your business?
What Is an Ausländischer Arbeitgeber?
An Ausländischer Arbeitgeber refers to a foreign company that hires or posts employees to work in Germany, without having a registered company or permanent establishment in the country.
This setup is particularly relevant for:
- Companies expanding into Germany without a GmbH or local entity.
- Businesses hiring remote workers based in Germany.
- Organizations running temporary or project-based operations in Germany.
The foreign company remains the legal employer but is still required to comply with German labor, social security, and tax regulations for the employees based in Germany.
Why Does It Matter?
While this setup offers flexibility, it also brings responsibilities. Here’s why it’s important to understand the implications:
1. Compliance Is Not Optional
Even without a German legal entity, the foreign employer must:
- Register as an employer with German authorities (e.g., for tax and social security).
- Withhold and pay income tax (via the Lohnsteuer system).
- Register and contribute to German social insurance schemes (health, pension, unemployment, etc.).
- Follow local labor laws, including working hours, leave entitlements, and health/safety rules.
Failing to comply can lead to fines, liability risks, and reputational damage.
2. No Permanent Establishment Needed
Being an Ausländischer Arbeitgeber allows companies to legally employ staff in Germany without forming a GmbH or branch office. This can be beneficial for:
- Testing the market before making a long-term commitment.
- Hiring remote workers who wish to remain in Germany.
- Operating shorter projects or temporary assignments.
It’s a strategic option for lean expansion.
3. Impact on Posted Workers
If you’re posting employees temporarily to Germany, you’ll also need to consider:
- A1 certificates from the home country (for social security coverage).
- German minimum wage and labor law requirements.
- Registration with specific sectoral institutions
These obligations apply regardless of your company’s location, and especially under EU labor mobility rules.
4. Need for Payroll & Administrative Support
Running compliant payroll in Germany without a local presence requires expert handling. You will need:
- A German-compatible payroll system.
- Local knowledge of taxes, contributions, and reporting obligations.
- Coordination with authorities like the tax office (Finanzamt) and health insurance providers.
Internago provides full-service support to foreign employers, helping you manage payroll, social security, tax compliance, and employee documentation—without the need for a local entity.
When Is It the Right Choice?
Being an Ausländischer Arbeitgeber is an ideal solution if:
- You want to hire employees in Germany without forming a legal entity.
- You are expanding into Germany and want to move quickly.
- You need to deploy project teams for limited periods.
- You are supporting remote-first hiring models and flexibility.
How Internago Can Help
At Internago, we specialize in assisting businesses with their international expansion, helping you manage tax and payroll compliance efficiently. Whether you are entering Germany or another European market, let us handle the complexities so you can focus on growth and success.
Be sure to also check out our other blogs about Germany, such as “Business regulation updates 2025“, “Parental leave”, or “Understanding the German payslip”.
Interested in learning more? Please visit us on linkedin, our website or our Payroll Portal. For further inquiries, contact us at info@internago.com
Disclaimer
This blog post provides a general overview and introductory examples related to payroll. In practice, there are many additional factors to consider, and this article should not be regarded as comprehensive guidance. For a more in-depth discussion tailored to your specific needs, please feel free to contact us.