Germany is one of the most attractive markets for business expansion in Europe. With its strong economy, central location, and highly skilled workforce, it’s no surprise that companies around the world look to establish a presence there. However, expanding into Germany comes with challenges—especially for companies that lack a local legal entity. That’s where an Employer of Record (EOR) can make all the difference.
In this case study, we’ll explore how a US-based tech company used 1EOR’s Employer of Record services to successfully enter the German market—without setting up a subsidiary—while ensuring full compliance with local labor laws.
The Company’s Background and Expansion Goals
The client, a rapidly growing SaaS company headquartered in San Francisco, had seen significant traction in Europe, especially among mid-sized B2B customers. Germany stood out as a strategic location for their customer success operations due to both the volume of leads and demand for German-language support.
The company’s leadership identified a high-potential candidate in Berlin to lead customer onboarding and retention efforts in the DACH region. However, they faced an immediate hurdle: they did not have a legal entity in Germany and had no experience navigating its employment laws, tax regulations, or HR requirements.
Their goal was clear—hire quickly, stay compliant, and avoid the cost and complexity of setting up a subsidiary.
The Challenge: Hiring in Germany Without a Legal Entity
Germany has one of the most structured and regulated labor markets in the world. Employing staff there requires:
- A registered business entity
- Proper tax and social security registration
- Locally compliant employment contracts
- Regular payroll tax filings
- Employer contributions to health, pension, unemployment, and care insurance
- A deep understanding of termination protocols and employee protections
For a company with no German operations, this posed significant risks. Hiring the employee as a contractor was not a viable option—it would likely constitute misclassification, exposing the company to penalties, back pay, and legal action under German labor law.
The company needed a fast, legal, and fully compliant way to employ the candidate. That’s when they contacted 1EOR.
The Solution: Employer of Record Services by 1EOR
1EOR proposed a seamless solution: employ the candidate through our local German entity using the Employer of Record model. This would allow the SaaS company to onboard the employee quickly, without forming a GmbH (German limited liability company) or navigating German bureaucracy.
Our process involved:
- Local Contract Setup: We created a German-language employment contract compliant with national labor regulations. It included statutory benefits such as 20+ paid vacation days, pension contributions, and healthcare.
- Payroll & Tax Management: 1EOR handled all payroll calculations, income tax deductions, and social security contributions, ensuring flawless monthly compliance.
- Employee Benefits: The employee received access to mandatory health insurance, accident coverage, and optional perks like wellness stipends.
- Onboarding & Support: Our German HR team provided onboarding support, answered benefits questions, and assisted with leave tracking and work equipment reimbursements.
Within 10 business days of engagement, the candidate was legally employed, fully onboarded, and ready to start.
The Results: Fast Hiring, Full Compliance, No Entity Needed
By using 1EOR’s Employer of Record services, the company achieved its objectives:
- Hired their first employee in Germany without delay
- Avoided the cost and time of entity registration
- Eliminated compliance risks around misclassification and payroll
- Provided a strong, localized employment experience for the hire
- Laid the groundwork to expand further in the German market
The employee, now a full-time Customer Success Manager, is thriving—confident in their legal employment status, salary transparency, and benefits structure. The company has since hired two more employees in Germany through 1EOR, building a small but impactful European team.
Why EOR Was the Right Choice
For fast-growing companies, the traditional route of expansion—forming a subsidiary, opening a local bank account, and learning a new legal system—isn’t always the best first step. In this case, the Employer of Record model gave the company exactly what they needed: speed, simplicity, and legal security.
EOR was also the right cultural fit. The employee received all the protections and perks they would expect from a German employer, while the US-based team could manage workflows, performance, and collaboration without being distracted by foreign administrative tasks.
Frequently Asked Questions (FAQs)
- Can I legally employ someone in Germany without setting up a company?
Yes—through an Employer of Record like 1EOR, which employs the worker on your behalf using a local entity. - How long does onboarding take through an EOR?
Onboarding usually takes 7–14 business days, depending on documentation and country-specific timelines. - Will the employee get full German benefits?
Yes. 1EOR provides all statutory benefits required by German labor law, including healthcare and pension. - Can I hire more employees later through the same EOR?
Absolutely. You can scale your team in Germany or add team members in other countries using the same service. - What if I want to open a subsidiary in Germany in the future?
You can transition employees from 1EOR to your new local entity when you’re ready, with full legal support. - Is EOR a temporary solution?
It can be both temporary and long-term. Many companies use EOR as a bridge to expansion—or as a permanent model for global teams. - What makes EOR better than hiring contractors?
Hiring full-time through an EOR avoids misclassification risks and ensures employees receive proper protections. - Is 1EOR compliant with German labor laws?
Yes. Our contracts, payroll processes, and benefits offerings are 100% compliant with German employment regulations. - Will the employee report to me or the EOR?
The employee reports directly to you. We handle the legal and HR backend; you manage performance and goals. - How do we handle performance or termination?
1EOR guides you through German labor laws on performance reviews and legal termination processes, protecting both you and the employee.
Conclusion
This case study illustrates how an Employer of Record can be the fastest, safest, and most strategic way to expand into new markets like Germany. For companies seeking flexibility without sacrificing compliance or employee satisfaction, EOR offers a future-ready path to global hiring.
At 1EOR, we help companies like yours break into new countries, onboard talent with confidence, and build world-class distributed teams—without the legal and administrative headaches of entity setup.
