When do you graduate from an EOR to your own Germany entity?
A GmbH requires EUR 12,500 minimum share capital before a single payroll runs. At from $599 per employee per month, EOR is faster and cheaper for the first 6 to 9 employees. Past that crossover, your own GmbH starts winning on cost. Here is the maths, and the Germany-specific triggers that the maths alone does not capture.
· Germany guide
Illustration · Berlin, Germany
For Germany, an EOR is faster and cheaper at low headcount. Setting up a GmbH takes approximately 8 to 12 weeks and typically costs EUR 5,000 to 20,000 in formation costs. Running it costs roughly EUR 3,500 to 5,500 per month once it is live.
Those are typical ranges, not statutory figures. GmbH setup costs vary with notarial fees, share structure, professional services, and how much you outsource. The crossover lands around 6 to 9 employees at average German tech salaries.
Employer pension at 9.3% applies on both sides of the comparison. The entity side also carries EUR 12,500 minimum share capital, notarial formation costs, and ongoing compliance overhead that do not appear in those rates.
The crossover maths
EOR cost scales with headcount. One fee per employee per month. Entity cost has a fixed overhead plus a small variable per-employee line. The two lines cross at around 6 to 9 employees for average German tech salaries.
Teamed charges from $599 per employee per month. At a common EUR rate that works out to roughly EUR 555. Your own GmbH carries a typical fixed monthly overhead of EUR 3,500 to 5,500 for payroll, bookkeeping, filings, and HR admin.
The calculation below uses EUR 555 as the illustrative EUR equivalent of the Teamed fee. This is illustrative, not a fixed EUR price. The actual EUR amount depends on the exchange rate at the time of invoice. Teamed charges from $599 USD with zero FX mark-up.
All entity cost figures in this table are typical ranges based on outsourced payroll, bookkeeping, statutory filings, and HR admin for a small GmbH. They are illustrative, not statutory numbers. Actual costs vary with the complexity of your setup, whether you outsource or hire in-house, and the benefits programme you run.
The crossover moves earlier at higher salaries. Employer social insurance contributions apply on earnings up to the contribution ceiling. At EUR 80,000 salaries the social contribution line is significant on both sides of the comparison. At lower salaries the crossover shifts toward 9 to 11 employees.
Pension at 9.3% on pensionable earnings applies on both sides of the comparison. It does not change the crossover significantly because it falls on both the EOR and the entity side equally. Run the Crossover Calculator with your own headcount and salary band.
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Calculate the EOR cost
Multiply the Teamed fee (from $599 USD) by your planned Germany headcount. This is the fixed variable cost. It grows linearly as you hire.
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Estimate the entity fixed overhead
Typically EUR 3,500 to 5,500 per month for a small GmbH. This covers payroll bureau, bookkeeping, statutory filings, social insurance admin, and first-point HR. This cost does not grow much until headcount exceeds 18.
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Find the crossover headcount
The crossover is where EOR monthly cost equals GmbH monthly overhead. For most Germany tech salary bands, this is around 6 to 9 employees. Use the Crossover Calculator for your own numbers.
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Factor in non-financial triggers
The maths gives you a headcount threshold. Works council formation rights at 5 employees, KSchG dismissal protection after 6 months, and tax treaty substance needs are separate questions that may move the decision in either direction.
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Plan the graduation date
Allow 8 to 12 weeks for GmbH formation before the first payroll on your own entity. Factor in 3 to 6 weeks extra for the business bank account. Start the GEMO process while EOR continues running.
Germany entity setup: what it actually costs
Forming a German GmbH typically costs between EUR 5,000 and EUR 20,000 all-in. The minimum share capital requirement is EUR 12,500 (half of the statutory EUR 25,000 minimum, payable on formation). Notarial certification of the articles is mandatory and unavoidable.
Allow approximately 8 to 12 weeks from the incorporation decision to your first payroll run. The business bank account and trade register entry are typically the bottlenecks.
These are typical ranges. They are not statutory figures. There is no law that sets what a GmbH costs to form beyond the minimum share capital and filing fees. The range reflects real market rates for notarial and professional services, and it varies with how much your structure needs in terms of share configuration and substance.
| Cost item | Typical range | One-off or recurring |
|---|---|---|
| Minimum share capital (Stammkapital) | EUR 12,500 (half of EUR 25,000 statutory minimum) | Capital deposit, not a fee |
| Notarial certification of GmbH articles | EUR 500 to 2,500 | One-off |
| Trade register entry (Handelsregister) | EUR 150 to 300 | One-off |
| Legal drafting of articles and shareholder agreement | EUR 1,000 to 5,000 | One-off |
| Business bank account (Geschäftskonto) | EUR 0 to 500 setup plus EUR 10 to 50 per month | One-off plus recurring |
| Gewerbe registration with local authority | EUR 20 to 60 | One-off |
| Employment contracts (German-law bilingual) | EUR 800 to 3,000 | One-off |
| Payroll and social insurance registration (DAK, BfA, BA) | EUR 500 to 1,500 (admin time and advisor fees) | One-off |
| D&O insurance (Geschäftsführerhaftpflicht) | EUR 800 to 3,500 per year | Recurring |
| Realistic total setup cost (excluding capital deposit) | EUR 5,000 to 20,000 | Mostly one-off |
Why the trade register is the bottleneck
German GmbH formation requires notarial authentication of the founding document, then submission to the local Handelsregister. Processing takes 2 to 6 weeks depending on the registry office. The GmbH does not legally exist until the Handelsregister entry is confirmed. Bank accounts for the entity typically cannot be opened before that entry, adding a further 2 to 4 weeks for foreign-parented companies. The total timeline from board decision to running first payroll is approximately 8 to 12 weeks.
Germany entity ongoing cost: typically EUR 3,500 to 5,500 per month
Running a small GmbH typically costs EUR 3,500 to 5,500 per month for outsourced payroll, bookkeeping, statutory filings, social insurance administration, HR advisory, and basic People Ops. Below 6 employees, this fixed overhead dominates.
Above 18 employees the per-employee overhead drops sharply as the fixed cost amortises across more people. The entity starts to look consistently cheaper in that zone.
These figures are typical market ranges for a small GmbH with 1 to 18 employees. They are illustrative. They are not statutory costs. Actual costs depend on whether you outsource or hire in-house, the scale of your payroll and benefits programme, and the state your entity operates in.
| Monthly cost item | Typical range | What it covers |
|---|---|---|
| Outsourced bookkeeping and monthly accounts (Buchführung) | EUR 800 to 1,800 | Cash reconciliation, accruals, monthly BWA |
| Payroll bureau (Lohnabrechnung, 1 to 18 employees) | EUR 300 to 800 | Monthly payslips, social insurance notifications |
| Annual accounts and Jahresabschluss (amortised) | EUR 250 to 600 | Around EUR 3,000 to 7,000 per year divided by 12 |
| Trade register and compliance filings (amortised) | EUR 20 to 60 | Annual Jahresabschluss submission, changes filings |
| Social insurance administration (Kranken-, Renten-, Pflegeversicherung) | EUR 100 to 300 | Monthly Beitragsnachweis submissions to each Krankenkasse |
| HR and employment law advisory (German-law) | EUR 300 to 1,000 | Contract reviews, dismissal guidance, policy updates |
| Germany People Ops and first-point HR | EUR 800 to 1,500 | Onboarding, queries, statutory leave admin |
| Software subscriptions (HRIS, payroll, accounting) | EUR 100 to 400 | Per-user SaaS |
| Insurance amortised (D&O plus Betriebshaftpflicht) | EUR 80 to 250 | Annual premiums divided by 12 |
| Total ongoing monthly | EUR 3,500 to 5,500 | 1 to 18 employee GmbH |
Above 18 employees, dedicated German HR capacity and an in-house finance function typically become necessary. The cost band widens at that point. Works council formation becomes possible at 5 employees, adding a layer of co-determination administration that is not reflected in this range.
The cost nobody quotes: GmbH managing director liability
German GmbH managing directors (Geschäftsführer) carry personal liability under the GmbH-Gesetz (GmbHG). These duties are personal. They cannot be delegated to advisors or outsourced.
EOR clients do not carry these duties. Teamed holds them as the legal employer.
Most cost comparisons skip the managing-director liability dimension because it is hard to put a number on. It is worth naming explicitly before you decide.
Personal managing director duties under GmbHG
Under the GmbH-Gesetz (GmbHG), every Geschäftsführer must manage the GmbH with the diligence of a prudent business person (GmbHG section 43). A Geschäftsführer who acts against the interests of the company or its shareholders is personally liable for resulting losses. This applies even if the instruction came from a shareholder. These are personal duties. They cannot be outsourced.
The insolvency filing obligation
A GmbH Geschäftsführer must file for insolvency within 21 days of identifying insolvency or over-indebtedness (Insolvenzordnung section 15a). Failure to do so is a criminal offence (Insolvenzverschleppung). This obligation sits personally with the managing director, not with the shareholders.
The compliance treadmill
- Lohnsteuer-Anmeldung: payroll tax filing due by the 10th of the following month. Late submissions attract fines.
- Annual financial statements (Jahresabschluss): must be filed with the Bundesanzeiger within 12 months of the financial year-end. Late filing attracts fines starting at EUR 2,500.
- Handelsregister change notifications: any change in managing directors, registered office, or share capital must be filed with the Handelsregister. Each filing requires notarial certification.
- Monthly social insurance notifications (Beitragsnachweise): submitted to each health insurer separately, by the fifth banking day of the following month.
- Works council consultation (BetrVG 102): any dismissal requires works council consultation if a works council exists. Failure to consult makes the dismissal automatically ineffective.
Each filing is individually manageable. Stacked across a year, they consume real management attention and notarial fees that an EOR carries on its own entity.
When you should stay on EOR
Below 6 employees, with project-based hires, or while you are still testing the German market, the EOR is the right answer. The crossover is a maths threshold. It is not a strategic verdict.
Reversibility matters. GmbH formation is sticky and costly to unwind. EOR is not. If the Germany bet does not pan out, ending an EOR relationship is straightforward. Winding down a GmbH takes months and notarial work.
- Under 6 Germany employees on average salaries: EOR is cheaper and faster every month. The GmbH overhead has nothing to amortise against.
- Market validation phase: you are hiring 1 or 2 people to test commercial fit, with an option to scale back. GmbH formation commits EUR 12,500 in capital and significant management attention before you know whether the German market will deliver.
- Project-based hires: 6 to 12 month engagements where the formation cost and capital deposit will not amortise before the project ends.
- Works council risk not yet assessed: at 5 employees a works council can be elected. The implications for dismissal procedures and co-determination rights are significant. If you have not yet assessed your Germany headcount plan carefully, EOR gives you flexibility to pause before crossing that threshold.
- No German permanence needed yet: some cross-border structures require your own German entity for tax treaty purposes. If that structural need has not arisen, EOR avoids committing to it.
When you should switch to your own entity
Above 9 employees consistently, with a multi-year Germany plan, or with German works council and tax-substance needs, your own GmbH beats EOR on cost and unlocks capabilities the EOR structure cannot provide.
The single biggest structural pull for Germany is the tax treaty substance requirement and the KSchG dismissal protection framework. Managing those at scale through an EOR adds friction that an owned entity removes.
- Sustained headcount above 9 Germany employees at average salaries: the GmbH overhead amortises across enough people that per-head cost falls below the EOR fee.
- Works council formation planned: a works council can be elected at 5 employees. If your Germany team will grow beyond 5 and you want direct management of the co-determination relationship, your own entity gives you that control. An EOR holds the formal employer role, which limits your direct engagement with the works council.
- Tax treaty substance: some cross-border structures need actual German substance (employees, address, banking) in your own GmbH. EOR employment typically does not count as your permanent establishment or substance for treaty purposes.
- GmbH profit extraction: if Germany operations will generate significant profit, a GmbH gives you the option to manage profit distribution and corporate tax planning directly. EOR structures do not provide that.
- Enterprise customer or regulatory requirement: some German enterprise customers and regulated-sector clients require contracting with a locally incorporated entity. Worth confirming early if relevant to your sales motion.
How Teamed's Graduation Model handles the transition
Teamed graduates customers from EOR to their own GmbH on the same platform. Same Germany specialist. Same employment contracts, novated to the new entity. No break in employee tenure or benefits.
Most providers treat graduation as a re-onboarding event. Employees re-sign, sometimes lose continuous service. Teamed treats it as a stage of the employment lifecycle.
The technical mechanic is contract novation: the employment contract transfers from Teamed's entity to your new GmbH on a specified date. All terms carry across. Salary, social insurance classification, leave entitlement, and continuous service date all remain unchanged. The employee sees a different employer name on their payslip. Nothing else changes.
What we do operationally:
- Stand up your German GmbH through GEMO, approximately 8 to 12 weeks, while EOR continues running in parallel.
- Handle notarial formation, Handelsregister entry, and Gewerbe registration.
- Open the GmbH's social insurance and payroll registrations with the Krankenkassen and Bundesagentur.
- Novate every active employment contract on a single effective date.
- Migrate ongoing benefits and social insurance memberships without any lapse.
- Provide the same People Ops specialist as the post-graduation primary contact.
The GmbH bank account is typically the longest-lead item. For foreign-parented GmbHs, German business bank account applications commonly take 3 to 6 weeks after the Handelsregister entry. Plan for this before you set the first entity payroll date.
How does Teamed handle Germany employment for you?
Teamed becomes your legal employer of record in Germany for from $599 per employee per month, with zero FX mark-up in any currency.
Payroll, statutory benefits, and the full Germany employment law stack run on one platform.
Real HR and legal experts handle your Germany hires from the first offer letter through every Lohnsteuer-Anmeldung submission and annual Jahresabschluss. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice. You see the pension line at 9.3%, the statutory leave entitlement at 20 days, and the total employer social insurance rate of approximately 19.7% (sources vary slightly; verify the precise rate with a German payroll advisor). Nothing is hidden inside the management fee.
EOR payroll, contractor onboarding, and entity setup all live on one platform. Run the Crossover Calculator to see the month the model flips. Start from the Germany hiring overview. Key sources: Federal Ministry of Labour and Social Affairs (BMAS) and Bundesministerium der Justiz statutory texts.
Frequently asked questions
At what headcount does an EOR stop being cheaper than a German GmbH?
The crossover typically lands at 6 to 9 Germany employees at average tech salaries. Below that, the EOR fee (from $599 per employee per month) is cheaper than the typical GmbH overhead of EUR 3,500 to 5,500 per month. Above it, the GmbH overhead starts to amortise and per-employee cost falls below the EOR fee. Use the Crossover Calculator to run your own salary band.
How much does it cost to set up a German GmbH?
Typically EUR 5,000 to EUR 20,000 all-in, not counting the EUR 12,500 minimum share capital deposit. The capital is not a fee but it is cash tied up in the entity. The rest is notarial certification of the articles, Handelsregister entry fees, legal drafting, employment contracts, business bank account, and D&O insurance. The range varies with how much you outsource and how involved your share structure is.
How long does it take to set up a German GmbH and run the first payroll?
Approximately 8 to 12 weeks from the formation decision to first payroll. The Handelsregister entry takes 2 to 6 weeks after notarial submission. The business bank account for a foreign-parented GmbH typically takes a further 3 to 6 weeks. Start the GEMO process while EOR continues running.
What happens to the works council if I switch from EOR to my own GmbH?
A works council can be elected by employees at 5 or more employees in any German establishment. The right to elect a works council applies regardless of whether the employer is an EOR or a direct entity. When you graduate from EOR to your own GmbH, the works council relationship transfers to your entity. If no works council exists yet, your GmbH becomes the employer against which employees could elect one.
What is Teamed's Graduation Model for Germany?
Teamed graduates customers from EOR to their own GmbH on the same platform. Employment contracts are novated to the new GmbH on a single date. Salary, social insurance classification, leave entitlement, and continuous service date all carry over unchanged. Teamed handles GmbH formation through GEMO, opens the new payroll and social insurance registrations, and migrates benefits without any lapse.
What pension contribution rates apply on both sides of the Germany comparison?
Statutory pension insurance (Rentenversicherung) is 9.3% employer and 9.3% employee on pensionable earnings up to the contribution ceiling (EUR 101,400 per year in 2026). These rates apply whether you employ via EOR or your own GmbH. They are Germany statutory employer costs on both sides of the comparison.
The GmbH formation timeline catches people out. Notarial certification, Handelsregister entry, and the bank account can each take two to four weeks. By the time the maths tips to entity, you want those processes already underway. Starting at the crossover point means your first entity payroll is three months away.
EOR is the right answer up to the crossover. Around 6 to 9 employees at Germany tech salaries. The GmbH requires EUR 12,500 in share capital before a single payroll runs.
Past that, your own GmbH typically costs EUR 5,000 to 20,000 to set up. The Handelsregister entry and bank account add weeks that no one quotes you upfront.
