Employee benefits in Germany

Benefits

1. Healthcare / Private Medical Insurance

State healthcare is great in Germany, and only 10% of employers provide supplemental coverage. When they do, it’s usually payable by employees. Supplemental dental and vision is also not common. That said, demand for supplemental health coverage has been increasing in Germany. 

Some popular providers include:

• Allianz
• AXA
• AOK
• Barmer

Click here to view our catalogue on PMI providers in Germany.

2. Income Protection & Disability

Income protection and disability are covered by the state social security, and employee & employer contributions are included in retirement contributions. Supplemental provision for accidental death & disability is common, and paid for by the employer, with employee options to flex up coverage. 

Leading providers include:

• Allianz
• AXA
• Canada Life
• Feather

Click here to view our catalogue on insurances in Germany.

3. Life Insurance

About a third of companies provide supplemental life assurance. This is typically included in the pension plan, but the latest trend is to offer a separate death benefit, insured with a “collective risk insurance product.” The beneficiary is usually paid 50-60% of the deceased’s entitlement, should the deceased have managed to work until retirement age. An orphan pension pays 10-15% (doubled for full orphans) of the actual or projected pension amount to orphaned children until age 18, or 25 if in full-time education. 

It’s becoming more popular for multinational companies to provide a 1x salary lump sum to their German subsidiary employees. 

Some popular providers include:

• Allianz
• AXA
• Canada Life
• Feather

Click here to view our catalogue on insurances in Germany.

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4. Retirement

There are three pillars to pension schemes in Germany. The first, core pillar is the statutory system, which employers and employees contribute to equally, financing current pensioners. The second pillar is the occupational system, which is increasingly popular. It’s important to know that every employee in Germany has a legal right to a company pension, even if the employer is not currently offering one. When an employee asks their manager or HR department for a pension, it is the responsibility of the company to begin offering one of the 5 company pension types.  The third pillar is the private pension plan. As the German demographic is ageing, many pensioners now draw on all three pillars as they approach retirement planning, wherever possible.  

Statutory (Social Security): Employer and employee jointly contribute 18.6% of employees’ net salary toward the pension fund (9.3% each) with a monthly contribution ceiling of 7,300 euros in West Germany and 7,100 euros in Germany’s Eastern states (as of 2023). This disparity is in part due to historically lower wages in the former GDR, and the federal government plans to even out contributions by 2024.

Company pensions: There are 5 types of company pensions in Germany, differing based on who is responsible for payments to the employee. It can be a life insurance provider, a pension company, or the employer itself, with a fund set up one of a few different ways. 70% of employers provide a supplemental retirement plan. Around 25% of these companies provide a DB plan, and 90% offer a DC plan (larger companies are more likely to provide a DB plan). For DB plans there is no employee contribution. For DC-hybrid plans, employees can contribute 3-15% of their salary as a pre-tax, salary sacrifice. The combined employer, employee contribution is generally limited to 8% of SSCC (Social Security Contribution Ceiling).

There is a strong trend switching from DB to DC plans, and most DB plans reflect grandfathering rules.  

By law, employers must co-pay a minimum of 15% of what the employee has contributed into the pension scheme. The most popular providers are:

• Allianz
• Alte Leipziger Lebensversicherung
• Canada Life
• Volkswohl Bund
• Nürnberger

Private pensions can be set up through banks or insurance providers, and two of the biggest private German pension plans are the Riester and Rürup plans. Depending on which pension you invest in, you’ll receive different tax and government subsidy benefits. 

Click here to view our catalogue on insurances in Germany.

5. Childcare

There are essentially two different programs: Kindergeld and Kinderfreibetrag.

• Kindergeld is the child benefit of €219-250 pm/per child, (parents receive a bit more money per successive child), and it’s typically paid directly into a german bank account from the government. Parents receive at least €219 per month for the first two children. For your third child, you receive €225, and for your fourth and further children, the amount increases to €250 each.
• Kinderfreibetrag is the tax-free allowance, and parents are entitled to 6,024 € for 2023 (single parents receive half of that). That amount is removed from your pre-tax income like a salary sacrifice, so you pay less in taxes.

Importantly, parents receive one or the other, and when you file your taxes, the Finanzamt (German tax authorities) automatically check whether Kinderfreibetrag saves you money or not. It’s also worth noting that Kinderfreribetrag is only issued once a year when you file taxes, while Kindergeld is a recurring monthly payment.

6. Other tax advantaged benefits

Sachebezug vouchers 

Sachebezug vouchers are a popular, tax-advantaged benefit in kind in Germany. Through this system, employees can make a monthly selection of up to a €50 value voucher from dozens of popular retailers, and the employer can pay for it, tax-free. This amounts to a total possible value of €600 / year. These vouchers are redeemed at the partner shop, but cannot be exchanged for cash or salary. 

See our full list of Sachbezug voucher options here.

Tax-free employee gifts

Up to 3 times a year, employers can give employees gifts of up to 60 euros (180 € / year). This is tax and duty-free and can be deducted as a business expense for the employer. 

Meal Allowance

Employers can offer employees a tax-free meal allowance of up to €103.50  / month. 

Mobility Allowance

When employees use local public transport (ÖPNV) or long-distance passenger transport to commute to work, employers can subsides the cost as a benefit that is completely exempt from tax and social security contributions for both employers and employees. Employers can choose a budget to support employees in sustainable mobility behaviour. 

Recovery/Relax/Recreational Allowance

Employers can provide employees with a recovery allowance every year which is taxed only at a flat rate of 25%. This is also exempt from social security. It is meant to subsidise a vacation trip or any other form of recreation.

The payment amount is: 

• 156 € for each employee
• 104 € additional for spouse
• 52 € additional for each child

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The max allowance amount is 416 € (one spouse and 3 children).

Internet Subsidy

Employers can reimburse up to 600 € of private internet expenses per employee. This includes is taxed only at a flat rate of 25% and includes both one-off costs for setting up internet access and ongoing bills. 

All Benefit in Kind Value

All together, Employers can offer a benefit in kind package with a net value of up to €10,000 to employees annually. This will be taxed at the flat rate of 30% and are subject to social security contributions. 

Policies

1. Annual Leave

Mandatory holiday is 24 days for a six-day working week, and 20 days for a five-day working week. There are an additional 9-13 public holidays per calendar year, depending on the region. 

2. Sick pay

Employers must pay 100% salary for the first 6 weeks (lohnfortzahlung), after which the health fund pays for short-term disability, which is 70% of salary for up to 78 weeks within a 3 year period. 

Employers with fewer than 31 employees can get reimbursements for 50-80% of salary paid to employees on sick leave. 

3. Maternity & Paternity

Statutory maternity pay covers 100% of earnings, typically 6 weeks before the birth and 8 weeks after (12 weeks if twins). Employers are reimbursed by the state in full. Expectant mothers cannot work overtime, at night, on Sundays, on public holidays or perform strenuous activities. 

German law has no provision for paternity leave. Some companies provide paternity leave pay. 

Parental and adoption leave is 12 months, paid by the government at 67%.

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