In Germany, employees belong to the national social security system by law. 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.
Healthcare and Insurances
The employee can choose between different statutory health insurances. Only employees with an income exceeding the annual remuneration thresholds (53,100 Euros in 2018) are exempt. They can become members of private health insurances. In both cases, the contributions are shared equally by the employer and the employee.
The number of public holidays differs between the federal states in Germany, the minimum is nine (e.g. Berlin, Lower Saxony) and may rise to twelve public holidays (Bavaria, Saarland).
Any employee is entitled to annual leave of 20 days, based on a 5-day-week. 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 / Paternity Leave
Female employees are entitled to paid maternity leave, which is the time period 6 weeks before and 8 weeks after giving birth. 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.
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. The regular payment, which the employee would have earned without sick leave, needs to be paid by the employer. 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 holiday in the amount of five working days, based on a 5-day-week.
Pensions: Mandatory and Typically Provided
The public retirement insurance system 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.