In Germany, employees belong to the national social security system by law. The statutory social security system is regulated in the Social Security Codes. It covers the following principal areas: health insurance, unemployment insurance, nursing care insurance, pension and accident insurance.
All salary payments are subject to tax and social security contributions (pension, unemployment, health and nursing care insurance). These must be withheld from an employee’s salary by the employer and paid to the respective institutions.
In general, the employer and the employee each pay half of the social security contributions, and employers must pay their share in addition to the salary, based on the employee’s gross salary with certain maximum amounts applying. Contributions to the employee accident insurance are made solely by employers.
Healthcare and Insurances
The employee can choose between different statutory health insurances. Only employees with an income exceeding the annual remuneration thresholds (62,550 EUR in 2020 / expected to be 64,350 EUR for 2021) are exempt. They can become members of private health insurances. In both cases, the contributions are shared equally by the employer and the employee.
Holidays and Annual Leave
The number of public holidays vary from one federal state to another across Germany; although the minimum is 10 (e.g. Berlin, Lower Saxony) there may be as many as 12 public holidays (Bavaria, Saarland).
Every employee is entitled to annual leave of 20 days, based on a 5-day-week pursuant to the Federal Vacation Act. This means that an employee can claim an annual leave of four weeks in a calendar year. However, most employers grant a longer annual leave; depending on the industrial sector, between 25 days and 30 days.
Maternity and Paternity Leave
Female employees are entitled to paid maternity leave, which is the time period 6 weeks before and 8 weeks after giving birth. The maternity leave after the birth has been extended to 12 weeks in case of multiple births, premature births and disabled children. Payments to the employee during this period are made partly by the statutory health insurance provider and partly by the employer.
After the birth of a child, both male and female employees are entitled to a maximum of three years’ parental leave per child. During this period, the employer is not obliged to make any payments to the employee. Employees, however, have a statutory right to work part-time (between 15 and 30 hours per week) during parental leave, unless urgent business reasons prevent such part-time work. After expiry of the parental leave, the employee returns to their previous position.
Under the Maternity Protection Act, pregnant employees as well as apprentices, interns and students undertaking a mandatory internship, enjoy special protection against dismissal during pregnancy and for four months after birth. Women suffering a miscarriage after the 12th week of pregnancy are also protected against termination for the next four months. Terminating an employee during the time of special protection against dismissal will only be possible in exceptional cases. Prior permission has to be obtained from the competent state authority.
The employer is obligated to carry out a risk assessment not only for work performed by pregnant employees, but for all work conducted within the company. Necessary measures to protect pregnant employees must be implemented immediately after the employer was made aware of a pregnancy, and the employee must be offered an opportunity to discuss (further) adjustments to her working conditions.
After four weeks of employment, the employee is entitled to continued payment by the employer in case of sickness, for a duration of six weeks, pursuant to the Act on Continued Remuneration. The regular payment, which the employee would have earned without sick leave, needs to be paid by the employer.
If an employee is sick several times during a calendar year, they may be entitled to continued payment (for each occurrence) even beyond the overall duration of six weeks. This entitlement is limited only if the employee is sick for the same reason for longer than six weeks. This, however, does not apply if the employee was not out sick for the same reason for more than six months or if a period of twelve months, after the first sickness for this reason, has expired.
In small companies with less than 30 employees, the employer may participate in an apportionment procedure, which allows for a repayment of sick pay.
After expiry of continued payment by the employer, the employee is entitled to sickness allowances paid by the statutory health insurance. Generally, the statutory sickness allowances are paid in the amount of 70 % of the regular remuneration for a period of 78 weeks.
After six months of employment, a severely disabled employee may claim additional vacation in the amount of five working days, based on a 5-day-week.
- Any Other Required or Typically Provided Leave(s)
Any leave, other than the abovementioned statutory leaves (e.g. compassionate leaves, leave when moving) is subject to individual negotiations or is typically part of collective bargaining agreements/works council agreements.
Pensions: Mandatory and Typically Provided
The public retirement insurance system, company pension plans and private individual retirement investments are the three pillars of the German pension system. The public retirement insurance has always been “pay-as-you-go“, with the current pensions of the retired paid from the current premiums of the not yet retired. In view of demographic changes, pension payment levels are becoming difficult to maintain. Company pension plans have traditionally been designed to supplement statutory retirement insurance. Though company pension plans are not compulsory, they cover about three-fifths of the working population. The third pillar, individual retirement investments, is becoming more important and is subsidised by the government. Retirement used to begin at age 65, but is now gradually being increased to age 67.
- Other Required Or Typically Provided Benefits
Different types of bonus payments and other benefits exist, all of which have to be negotiated individually or are typically part of collective bargaining agreements/works council agreements, such as a company car, car allowances, gym memberships, group accident insurances, “job ticket”, child care arrangements or allowances, or additional allowance for sick pay.