Starting in 2026, payroll processes in Germany are going to look very different. New rules around how businesses communicate with tax and social insurance authorities are coming into effect, and they’re not optional. These updates are essential for compliance, but here is the catch: older ERP platforms will fall short of the capabilities to handle them.
For businesses still running on SAP ERP 6.0, including anything up to EHP5, or similar ERP systems like Oracle E-Business Suite or Microsoft Dynamics AX, these changes will not be supported, creating a compliance risk that could lead to fines, reporting errors, and, in worst-case scenarios, reputational damage.
Why German employment law is a bellwether for global payroll
Germany’s labour laws are among the most complex in Europe. They’re designed to protect employee rights and ensure data privacy, and they’re continuously being updated. While modern ERP platforms are built to keep up with these changes, older ones, whether SAP or other legacy solutions, often fall short. If your system is out of date, your business could be left exposed. Why? German labour laws require constant updates to ERP platforms to remain compliant.
And while the spotlight is on Germany today, as global businesses transform digitally and regulations tighten, this is a snapshot of tomorrow for all organisations. The EU Pay Transparency Directive is just another example of how regulatory pressure is mounting across Europe.
Breaking free from the legacy platforms under German employment law
Older ERP platforms can’t integrate with modern HR tools or third-party apps, creating data silos that become bottlenecks. Reporting becomes a manual headache, and with cybersecurity threats evolving fast, unsupported systems leave your payroll data vulnerable.
In Germany, manual processes still dominate key parts of payroll. Health insurance checks, for example, are often done one by one on external platforms. This outdated approach has led to a surge in overpayments, simply because reporting is delayed. It’s a clear example of how payroll system limitations and fragmented workflows slow processes down, cost money, create compliance risks, and break down trust. When these inefficiencies pile up, the impact can be felt everywhere, from strained finance teams to frustrated employees and increased audit exposure. Payroll in Germany continues to rely on outdated workflows that increase risk and reduce efficiency.
The cost of falling behind when it comes to German employment law compliance
Yes, payroll errors can trigger audits, fines, and reputational damage. But the risks go deeper. Inaccurate reporting affects employee trust, financial forecasting, and operational stability. And with only a third of companies achieving high payroll accuracy, the margin for error is shrinking.
At the same time, companies are facing a talent crunch. Payroll professionals with deep local expertise are in short supply, and teams are being asked to do more with fewer resources. It comes as no surprise that 69% of companies are considering outsourcing their payroll functions.
Why technology alone won’t fix payroll in Germany
Upgrading to SAP S/4HANA or another ERP system is a step in the right direction to mitigating payroll compliance risks. But technology must be paired with process clarity, team alignment, and local expertise. This rings especially true when it comes to payroll in Germany, where the process involves navigating DATEV systems, local providers, and strict deadlines.
Global payroll teams need visibility into local risks, and local teams need support from global systems. Without that alignment, migrations stall, compliance slips, and costs shoot up. Understanding the German SAP migration requirements is key to staying compliant and operational.
So, what should you do?
Start by clearly assessing your current setup:
- Can your system handle the upcoming changes?
- Are there gaps in functionality?
- Is your infrastructure ready for an upgrade to meet German payroll regulations 2026, or are you patching things together just to get by?
The deadlines are clear:
- 2025: End of mainstream maintenance for older SAP versions and other legacy ERP platforms.
- 2027: End of extended maintenance SAP releases, with similar timelines affecting other systems.
By planning ahead, you’re giving yourself time to test your systems, train your teams, and avoid making on-the-fly decisions that could become costly mistakes when it comes time for changes to payroll in Germany.
How Payrollminds helps you stay ahead of new global payroll regulations
We’ve seen what happens when companies try to go it alone, and when they get it right. The difference? A clear plan, the right people, and a partner on the ground who knows the terrain.
Our Migration Readiness Assessment bridges the gap between global systems and local realities to help businesses:
- Understand the specific payroll requirements that will define payroll in Germany post 2026.
- Assess whether their current systems can meet 2026 standards.
- Align global and local teams before migration begins.
- Build a practical plan, nuanced by region, that works.
Ready to future-proof your payroll?
The changes coming to payroll in Germany are a chance to rethink how your systems support your business, and how prepared you are for what’s next.
Explore how we can help your organisation do that through our brochure of the Payrollminds Migration Readiness Assessment below.
A clear assessment delivers fewer surprises, smarter decisions, and a smoother path to transformation.
