Germany’s employee benefits system is among Europe’s most generous and strictly regulated. It mandates a wide range of protections and entitlements to ensure worker well-being.
In this article, we’ll provide a detailed overview of Germany’s statutory minimum benefits, covering mandatory requirements and recommended supplementary perks for companies hiring in Germany.
Statutory Benefits in Germany
In Germany, statutory benefits are mandatory benefits that employers must legally provide their employees. German employment law dictates the terms of the benefits, which includes minimum wage, paid sick leave, and health insurance.
While full-time employees and part-time workers are entitled to statutory benefits regardless of the number of hours worked, independent contractors are not.
Minimum Wage & Overtime Pay
Germany’s government-mandated minimum wage is EUR 12.41 per hour as of January 1, 2024, and will increase to EUR 12.82 in 2025.
Most Germans work a five-day work week, averaging eight hours per day. The exact number of working hours can fluctuate; however, the German work week has a cap of 48 hours. Overtime hours are compensated at 1.5 times the regular pay, which a work council or collective bargaining agreement can adjust.
Social Security Contributions
Both employers and employees share equally in Social Security contributions, which total approximately 20% of the employee’s salary. These contributions fund various social security programs, including:
- Pension Insurance: 9.3% of gross salary (capped at €7,300)
- Health Insurance: 7.3% of gross salary (capped at €59,850)
- Long-Term Care Insurance: 1.7% of gross salary (capped at €4,987.50)
- Unemployment Insurance: 1.3% of gross salary (capped at €7,300)
We’ll examine each of these benefits in more detail below.
Pension Contributions
Germany’s pension plan system provides financial assistance for residents once they reach retirement age. There are three tiers:
- Mandatory State Pension (Gesetzliche Rentenversicherung): Employees and employers split the contribution, approximately 18.6% of the employee’s gross salary.
- Company Pension Schemes (Betriebliche Altersversorgung): Employer-sponsored plans provide additional benefits for employees without requiring an employee ****contribution.
- Private Pensions Plans (Private Altersvorsorge): Voluntary plans like Riester Rente and Basis Rente offer additional pension schemes to build retirement savings
Health Insurance
Health insurance is mandatory for all German employees, and the public health insurance system Gesetzliche Krankenversicherung (GKV) covers most of the population. The contribution rate for statutory public healthcare plans is 14.6%, split evenly between employers and employees.
Employees earning less than EUR 5,775 monthly must be insured with a statutory health insurance fund. Those earning more than EUR 64,350 per year can opt out of the public plans, select a private health insurance plan (Private Krankenversicherung), and customize coverage according to their needs.
Long-term Care Insurance
Long-term care insurance (Pflegeversicherung), governed by Book XI of the German Social Code, supports workers who need prolonged care due to an accident, illness, or old age.
Contributions are automatically deducted from an employee’s gross salary, totaling 3.4% of their income as of January 2024. Typically, employers cover half of this cost, while employees pay the other half.
Unemployment Insurance
Germany’s unemployment insurance (Arbeitslosenversicherung) provides financial assistance to employees who are dismissed or resigned from their jobs. The contribution rate is 2.5% of the employee’s gross income, with the employer and employee paying half each.
Contributions are not required above annual income thresholds, which are EUR 90,600 in West Germany and EUR 89,400 in East Germany.
Employees must have been employed in Germany and paid social security contributions for at least 12 months in the past two years to qualify for unemployment benefits. Meeting other criteria, such as being an EU/EEA/Swiss citizen or holding a valid work permit, is also required.
Workers’ Compensation Insurance
All German employers must have workers’ compensation insurance (Unfallversicherung) to cover an employee’s medical expenses in the event of work-related accidents or illnesses. The employers handle everything — from registering their staff with the relevant Employer’s Liability Insurance Association to paying the required contributions directly. This coverage also encompasses anyone engaged in temporary, essential, and economically valuable work that resembles an employment relationship.
Leave Entitlements
Paid Time Off and Vacation
Employees working a standard five-day workweek receive at least 20 days of annual leave, and that jumps to 24 days for employees working a six-day workweek. The Federal Leave Act ensures that employees receive their full salary during vacation, and unused days can be carried over until March 31st of the following year (with employer consent).
Additionally, Germany observes several paid public holidays, some nationwide and others specific to certain regions, such as Assumption of Mary in Bavaria and All Saints’ Day in Baden-Württemberg.
Other types of paid leave in Germany include:
Sick Leave
Employees are eligible for paid sick leave after four weeks of employment. If an employee cannot work due to illness, they are entitled to receive their full salary from their employer for up to six weeks.
Maternity Leave
Mothers are entitled to 14 weeks of paid maternity leave, six weeks before their due date and eight weeks after the child’s birth. If a child is born prematurely or if there are multiple births, this post-natal coverage can extend to 12 weeks, ensuring mothers have ample time to recover.
Parental Leave
Following maternity leave, parents are entitled to 24 months of parental leave (Elternzeit) before the child turns three years old. For mothers, this leave would start at the end of maternity leave. Fathers can begin their leave as soon as the child is born.
Employers do not pay a parent’s salary during parental leave. However, new parents may qualify for parental allowance, or Elterngeld, which is financial assistance provided by the German government. It compensates for the loss of earnings during parental leave for up to 24 months.
Other Employee Benefits
To be seen as an employer of choice, many employers offer a benefits package above and beyond those required by the German government to help improve employees’ work-life balance. Some widespread optional benefits and subsidies include:
- Employee Assistance Programs (EAPs): EAPs provide confidential support for employees facing personal or work-related challenges, including mental health issues, stress management, and financial advice.
- Additional Paid Time Off (PTO): Some employers offer extra paid time off beyond the statutory vacation days, providing employees more time to recharge.
- 13th-Month Pay: An additional payment typically paid at the end of the year, 13-month pay provides employees with extra financial support during the Christmas season.
- Company-sponsored Wellness Programs: These programs may include fitness challenges, subsidized gym memberships, health screenings, nutrition workshops, and stress management seminars.
- Remote Work: Many German employees highly desire flexible working schedules, especially regarding remote work. In a recent survey, 47% of German employees said they would consider quitting their jobs if their ability to work remotely was eliminated or severely reduced.
An EOR Can Help Navigate German Employee Benefits
A complex array of laws governs Germany’s statutory benefits landscape, ensuring employees receive various protections and entitlements. However, these regulations can change over time, making it essential for businesses to stay informed and compliant to avoid the potential of significant fines and penalties.
Partnering with an Employer of Record like Remofirst enables companies to ensure compliance with local labor laws and regulations when hiring employees, including in Germany. Book a demo to learn more about building your global workforce.
