Your first employee: what it really costs the employer

The first employee is a milestone, but also a turning point in your cost structure. The gross salary is not even half of the actual employer costs. On top of the salary come employer contributions for social and employee insurance, the income-dependent healthcare contribution, accruals for holidays and holiday allowance (at least 8%), any pension premium and the costs of sick leave.

As a rule of thumb, you should budget about 25 to 30% on top of gross salary for employer costs and accruals. For a salary of € 3,000 per month the total employer cost then lands around € 3,800 to € 4,000. In sectors with a heavy collective labour agreement or mandatory industry pension it can be higher.

Besides the costs there are obligations that surprise many new employers:

• You must set up a payroll administration and file payroll tax monthly

• The hourly minimum wage is € 14.71 (from age 21, as of 1 January 2026)

• In case of sickness you generally continue paying salary for two years

• Employment terms must match the collective labour agreement of your sector

• Every employment contract must meet statutory requirements

The good news: schemes exist that lower the burden. Small employers pay a lower percentage for the Work Resumption Fund and there are premium discounts for young people and people with a distance to the labour market, for example. The choice between an employment contract and a freelance assignment also needs care, because false self-employment is actively enforced.

We handle the full payroll administration — payslips, filings, annual statements and contracts — and advise on the right structure before you sign the first employment contract.