1. Legal Framework
In Germany, employees belong to the national social security system by law. The statutory social security system is regulated in the Social Security Codes (SGB).
2. Required Contributions
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.
3. Insurances
The social security system covers the following principal areas: health insurance, unemployment insurance, nursing care insurance, pension or old-age benefits and accident insurance.
4. Required Maternity/Sickness/Disability/Annual Leaves
a. Maternity and Parental leave
Female employees are entitled to paid maternity leave 6 weeks prior to the expected date of birth and 8 weeks after childbirth. Depending on specific circumstances (e.g. health reasons, twins), such periods may be extended. Payments to the employee during this period are made partly by the statutory health insurance provider and partly by the employer.
After 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 (up to 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 his/her position.
b. Sickness
After four weeks of employment, the employee is entitled to continued payment by the employer in case of sickness for a duration of six continuous weeks pursuant to the German Act on continued remuneration (EFZG). The regular payment, which the employee would have earned without sick leave, needs to be paid by the employer. If an employee is sick for several times during a calendar year, he/she might be entitled for continued payment several times even beyond an overall duration of six weeks.
c. Disability
An employee, who is severely disabled, enjoys several benefits in order to be treated with respect to such disability. Employees who are severely disabled are protected against termination. Authorization by a public authority is necessary prior to a termination.
After six months of employment, a severely disabled employee may claim additional holiday in the amount of five working days. He/She may also claim part-time employment, if this is necessary with respect to the disability. A severely disabled person may refuse to work overtime. The conditions of employment need to be organized taking into account the restrictions of the disabled person. The employer may only deny such organizational measures, which are unreasonable or disproportionate.
If the employer employs more than 20 employees, but does not employ disabled persons in a specified number, he is obligated to pay compensation. The number of disabled persons, who need to be employed, depends on the number of employees. Generally, at least 5 percent of the employees should be disabled persons.
d. Annual Leave
Any employee is entitled to annual leave of 24 days, based on a 6-day-week pursuant to the German Federal Vacation Act (BUrlG). 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 24 days and 30 days, based on a 5-day-week.
5. Mandatory and Typically Provided Pensions
The public retirement insurance system (GRV), company pension plans (bAV) and private individual retirement investments are the three pillars of the German pension system. The public retirement insurance, in which currently about 85% of all employees are enrolled, has always been „pay-as-you-go“, with the current pensions of the retired paid from the current premiums of the not yet retired.