When you’re hiring employees in Germany, one important aspect of onboarding you’ll need to take care of diligently is putting the employee benefits package together. It’s crucial to offer the right benefits both to stay compliant with German labor laws and to attract and retain high-quality talent.
In this guide, you’ll learn everything you need to know about offering benefits that meet the statutory minimum requirements under German employment law, as well as how to go above and beyond for your employees in Germany.
What employee benefits are mandatory in Germany?
German labor laws aren’t so much a unified code as a series of Acts, Codes, and Agreements that cover a wide range of employment-related issues, including which benefits full-time employees in Germany are legally entitled to. While the thought of navigating the separate pieces of legislation might seem daunting to someone unfamiliar with the system, it’s crucial to remember that you must include all statutory benefits required under the umbrella of German employment laws. Otherwise, if you employ a German worker and fail to offer one or more of the mandatory benefits, you could find yourself facing legal repercussions.
Before we dive into what’s required of you as an employer, there are two important things you need to keep in mind. First, these statutory benefits are the minimum required by the German government. Companies are welcome to offer more to their employees, and many do. Second, only employees in Germany are entitled to these benefits. Independent contractors are not.
Employers in Germany are not legally required to offer company-provided pension schemes since the state offers a statutory social security plan that will cover Germans’ financial needs once they reach retirement age. However, both employers and employees are expected to contribute to the mandatory social security plan; the contribution rate is 18.6%, split evenly between the company and the worker.
According to German employment laws, unemployment insurance is a mandatory benefit for employees and covers them in the event they are dismissed from or resign from their jobs. All German employees who work a minimum of 18 hours a week qualify for unemployment insurance. Those who have worked at least 12 months over the past two years for the same company are entitled to receive benefits the day after they’re dismissed from their jobs, while those who voluntarily resign will start receiving their benefits 12 weeks after they’ve departed the company. Employers and employees each contribute half of the 2.5% rate.
The minimum amount of paid vacation days German employees are legally entitled to depends on how many days a week they work, but normally, they receive about 25-30 days per year. If they don’t use up all their days, they’re permitted to roll them over into the following year, provided they take the remaining vacation time by March 31st.
To ensure you are fully clear on the rules: employees who work a five-day week are entitled to a minimum of 20 paid vacation days annually; those who work a six-day week receive at least 24 paid days off each year. And, employees who are severely disabled are entitled to five additional paid vacation days beyond these minimums.
Employers do not have to grant vacation requests if the employee has been working for the company for less than six months.
Employees in Germany are entitled to different statutory holidays depending on which of the 16 German states they live in.
All companies in Germany are required to have a workers’ compensation insurance policy that will cover the medical bills of employees who have experienced work-related accidents or illnesses that render them unable to do their jobs for a period of time. Policy coverage also includes any services the employee requires to facilitate their ability to return to the workforce. Unlike other types of insurance, the contribution rates are covered by the employer alone.
German law has made health insurance mandatory for people who live and work in Germany, most of whom are covered under a public health insurance plan. If they make more than 64,350 EUR a year, workers can opt out of the public plans and instead select a private health insurance policy.
In both cases, employers are legally required to contribute to health insurance premiums.
The flat contribution rate for statutory public healthcare plans is 14.6%, which is split evenly between employers and employees.
Paid sick leave
German employers are required to pay employees who are on sick leave 100% of their salary for the first six weeks of their illness. Should their illness extend beyond six weeks, you are no longer responsible for paying them while they’re out–that becomes the responsibility of their private health insurance provider.
It’s important not to automatically interpret the six weeks of employer-paid sick leave as “employees get six weeks of paid sick leave each year.” If the worker gets sick again and the illness isn’t the same as last time, that six-week period of paid leave starts all over again.
Interestingly, employers are not required to pay workers who are out sick for less than three consecutive days. Paid sick leave only kicks in after the three days have passed, and then, your employee is required to provide you with a doctor’s note.
Maternity and parental leave
Pregnant women in Germany are entitled to a total of 14 weeks of maternity leave. They can start taking this leave six weeks before they give birth and remain at home for eight weeks postpartum. The minimum required amount of leave jumps to 18 weeks for women who give birth prematurely, to multiple children, or to a child with a disability.
While the woman’s statutory healthcare policy will pay her while she’s on maternity leave, that doesn’t mean you, the employer, are off the hook entirely. If the employee’s monthly pay exceeds 390 EUR, you need to cover the difference between what the insurance policy is willing to pay and her regular wage. This is called a “top-up payment.”
While Germany doesn’t specifically have rules on new fathers, it does provide “parents” with the right to take 24 weeks of parental leave anytime during the first three years of the child’s life. Again, the burden of providing pay to the new parent falls on the state, not the employer.
One final note: German employment law protects employees from being fired while they are out on maternity and/or parental leave.
Employers in Germany are legally required to contribute to long-term care insurance, also called nursing care insurance. This type of insurance covers the needs of workers who require ongoing medical care after they’ve suffered an accident or contracted a prolonged illness. It also covers employees who need care due to old age. Both employers and employees contribute to long-term/nursing care insurance premiums and split the 3.05% contribution rate down the middle.
What employee benefits are optional in Germany?
The benefits we’ve covered so far in this guide are all mandatory and represent the minimums the German government expects employers in Germany will provide. As you can see, the list is quite extensive! Still, many German employers choose to provide additional, supplementary benefits to make their companies more attractive to prospective team members and to increase the satisfaction of their current employees. Below, we’ll receive some of the most common supplementary benefits employers offer when looking to hire employees in Germany.
One supplemental benefit German employers often opt to include in their package is an extra subsidy, either for rent and the costs associated with raising children and/or for the cost of commuting to work for those employees who use public transportation.
The 13th-month bonus
It’s common practice for employers across the globe to offer at least some of their employees an end-of-year bonus. In Germany, this is often referred to as the Christmas or 13th-month bonus because the amount the employee receives is equivalent to a full month’s worth of wages in addition to the salary they’re paid for working the regular 12 calendar months.
Working from home
During the COVID-19 pandemic, many employees who had previously been required to come into the office each day were permitted to work from home in keeping with quarantine restrictions. Once the COVID restrictions were eased, however, many companies found that their employees preferred their remote work arrangements and had some trepidations about returning to the previous way of doing things. As a result, employers started offering employees the option of working from home at least one day a week and made this a permanent part of their workplace policy once they found it was a great way to attract and retain talent.
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Disclaimer: Rippling and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.