1. Health Insurance

• Description: Health insurance is compulsory for all employees in Germany, ensuring access to essential healthcare services.

• Employer Contribution: Employers contribute approximately 7.3% of the employee’s gross salary to statutory health insurance schemes.

• Employee Contribution: Employees contribute another 7.3%, with optional surcharges depending on the insurance provider, which typically range between 0.9% and 1.6%.

• Benefits: Includes coverage for doctor visits, hospital stays, prescription medications, dental care, and preventive health measures.

• Private Health Insurance (Optional): Employees earning above a certain salary threshold (approx. €66,600 annually in 2024) may opt for private health insurance instead of the statutory option, which offers additional services and faster access to care.

2. Pension Insurance

• Description: This mandatory insurance provides employees with income during retirement. Contributions to the German pension system are based on a “pay-as-you-go” scheme.

• Employer Contribution: Employers contribute 9.3% of the employee’s gross salary.

• Employee Contribution: Employees contribute 9.3%, making the total pension contribution 18.6%.

• Benefits: Retirement pensions, disability pensions, and survivor benefits for dependents.

• Additional Note: Germany also allows employees to contribute to voluntary pension schemes (company or private pensions) that can complement the statutory pension system.

3. Unemployment Insurance

• Description: This insurance ensures that employees receive financial support if they lose their jobs involuntarily.

• Employer Contribution: Employers contribute 1.3% of the employee’s gross salary.

• Employee Contribution: Employees also contribute 1.3%.

• Benefits: Provides unemployment benefits for eligible employees, typically up to 60% of the previous salary, or 67% if they have children, for up to 12 months (or up to 24 months for older workers).

4. Long-Term Care Insurance

• Description: Covers care costs for employees who require long-term care due to illness or disability.

• Employer Contribution: Employers contribute 1.525% of the employee’s gross salary.

• Employee Contribution: Employees contribute 1.525% of their salary, with childless employees paying an additional 0.35%.

• Benefits: Covers home care, nursing care, or other forms of assistance for those unable to manage daily tasks independently. Benefits depend on the level of care required and can be provided either in cash or as direct services.

5. Accident Insurance

• Description: This insurance covers work-related accidents and occupational illnesses.

• Employer Contribution: The contribution is solely the employer’s responsibility, with rates varying by industry and risk level, typically ranging from 1% to 2% of the employee’s salary.

• Employee Contribution: No employee contribution is required.

• Benefits: Includes medical treatment, rehabilitation, and compensation for lost wages in cases of temporary or permanent disability due to workplace injuries or diseases. In extreme cases, it can provide compensation to families in the event of an employee’s death.

6. Paid Annual Leave

• Description: All employees in Germany are entitled to paid vacation leave. The statutory minimum is 24 days for employees working a six-day work week, and 20 days for those on a five-day work week.

• Employer Obligation: Employers must ensure employees take their vacation days within the calendar year (or within three months of the new year) and are paid their regular wages during this time.

• Employee Contribution: No contribution required.

• Additional Details: Many employers offer additional leave days, with the average being 25-30 days per year. Germany also allows the possibility of “special leave” for significant personal events like weddings or funerals.

7. Maternity Leave

• Description: Female employees are entitled to 14 weeks of maternity leave, divided into 6 weeks before the expected delivery and 8 weeks afterward.

• Employer Obligation: During maternity leave, the employer must continue paying the employee’s salary (reimbursed mostly through health insurance). Job protection is guaranteed during this period.

• Employee Contribution: No contribution required.

• Benefits: Mothers are protected from dismissal during pregnancy and up to 4 months after childbirth.

8. Parental Leave

• Description: Parents can take up to 3 years of parental leave per child. The leave can be taken at once or split over several periods.

• Employer Obligation: While parental leave is unpaid, employees are entitled to Elterngeld (parental allowance) from the government, which provides up to 67% of their previous salary for 12-14 months.

• Employee Contribution: No contribution required.

• Additional Notes: Both parents can share this leave, and job protection is guaranteed for the duration of the leave. Many companies also offer flexible working arrangements upon return from parental leave.

9. Sick Leave 

• Description: Employees are entitled to 6 weeks of paid sick leave if they provide a medical certificate.

• Employer Obligation: Employers must pay the full salary during the first 6 weeks of illness. If the illness lasts longer, employees receive up to 70% of their salary through their health insurance.

• Employee Contribution: No additional contribution required.

• After 6 Weeks: Employees can receive sick pay from their health insurance for a maximum of 78 weeks in any 3-year period for the same illness.

10. Public Holidays

• Description: Germany has up to 13 public holidays, depending on the federal state.

• Employer Obligation: Employers are required to provide paid leave on public holidays. If employees work on public holidays, they are entitled to additional compensation, often a 50-100% surcharge.

• Employee Contribution: No contribution required.

• Additional Notes: The number of public holidays can vary by region, with Bavaria having the most public holidays and Berlin having fewer.

Managing Benefits with EOR/PEO Services

• Employers without a German Entity: Businesses looking to hire in Germany without setting up a local entity can use EOR/PEO services like GlobainePEO to manage mandatory benefits and compliance. These services handle payroll, social security contributions, and tax obligations on behalf of the employer.

• Employers with a German Entity: Companies with an established presence in Germany are directly responsible for managing employee benefits. PEO services can still provide assistance with the administration of benefits and adapting to regulatory updates.

Additional Considerations for Global Employers

• Regular Updates: Social security contribution rates and benefit regulations are subject to change, so employers need to remain vigilant and adjust payroll and contributions accordingly.

• Caps on Contributions: There are salary thresholds for some contributions (e.g., health and pension insurance), after which no further contributions are required.

Final Thoughts

Providing and managing mandatory benefits in Germany is crucial to maintaining compliance with local labor laws and ensuring employee well-being. Employers operating in Germany, or using EOR/PEO services like GlobainePEO, must stay updated on regulatory changes and ensure that benefits are administered properly. These benefits not only ensure compliance but also contribute to employee retention and job satisfaction.