When do you graduate from an EOR to your own Germany entity?

The calculation below uses €560, Teamed's published EUR starting rate, not an estimate. Teamed charges from $599 USD with zero FX mark-up; €560 is the equivalent fixed price for EUR-paying customers, not a conversion of the dollar figure.

*The "About even" label is illustrative, not a fixed crossover headcount. Where the two columns level out moves with the EOR fee and your GmbH overhead, so run your own figures in the Crossover Calculator.

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.

Salary largely cancels because it sits on both sides of the comparison. Employer social insurance contributions apply on earnings up to the contribution ceiling, so above that ceiling the extra employer cost is capped on both the EOR and the GmbH side. That is why there is no single crossover headcount: run your own headcount through the Crossover Calculator.

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.

1. 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.

2. 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.

3. Find your crossover point

   The crossover is where EOR monthly cost equals GmbH monthly overhead. There is no fixed headcount for this: it moves with the EOR fee, your GmbH overhead, and how fast you are growing. Use the Crossover Calculator for your own numbers.

4. Factor in non-financial triggers

   The maths gives you a planning point. 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.

5. Plan the graduation date

   Allow time to form the company and then to reach a first payroll, including opening the business bank account. The market estimates are in the setup cost section. Start the GEMO process while EOR continues running.

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.

Why the bank account and trade register are the bottlenecks

German GmbH formation starts with notarial authentication of the founding document. Next comes the business bank account, because the share capital has to be paid in before the company can apply for registration: at least a quarter of each share and at least EUR 12,500 in total (GmbHG section 7(2)). The account is opened for the company in formation, and for foreign-parented companies it typically takes 3 to 6 weeks. Only then is the application filed with the local Handelsregister, where processing takes 2 to 6 weeks depending on the registry office. The GmbH does not exist as such until the Handelsregister entry is made. The market estimates below give the timeline from documents ready to a first payroll.

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.

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.

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.

• While your Germany team is small, 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.

• Sustained headcount past your crossover point: 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.

German social insurance law covers anyone employed in Germany, wherever their employer sits. That is section 3 of the German Social Code Book IV, still the rule in 2026. The single market lets you trade across borders. It does not move an employee's social security to your home country.

Payroll works the same way. An employer based outside Germany still needs a German employer number, the Betriebsnummer, from the Bundesagentur für Arbeit. Without it, you cannot report the employee to German social insurance. Wage tax is filed in Germany too. Your existing entity carries none of this across.

For one person, the sums are one-sided. A second entity means a new company, the capital deposit, fresh sign-ups for payroll, tax and social insurance, then filings and accounts every month, on the costs and timings set out above. A provider already holds those, so the person can start in weeks, not months. You have done this once, so you know the cost is mostly time.

The first person is not what decides this. Your headcount plan is. One hire with nothing behind it rarely pays for a second entity. A team you expect to grow changes the answer, because the fixed cost is shared out. So do not trust a headcount someone quotes you. Run your own figures in the Crossover Calculator.

The right answer depends on your plans and the person's role. Talk to an expert at Teamed to work through yours.

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, while EOR continues running in parallel.
• Handle notarial formation, then the Handelsregister application once your business bank account is open and the share capital is paid in (GmbHG section 7(2)), then 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, and it comes before registration: the share capital has to be paid into it before the Handelsregister application can be filed (GmbHG section 7(2)). For foreign-parented GmbHs, German business bank account applications commonly take 3 to 6 weeks. Plan for this before you set the first entity payroll date.

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.