Do you want to strengthen your workforce or fill employment gaps with German talent? You’re not alone. German workers are highly capable, with skills that lend themselves well to industries like healthcare, biotechnology, IT, and much more.

However, if you go in blind without a full understanding of the benefits German authorities require and employees expect, you’re setting your business up for difficulty. The labor laws in the country cover a wide variety of provisions and warn of the consequences of failing to follow the regulations.

To ensure compliance with the country’s labor laws and bring in the most qualified talent, your employee benefits plan must be excellent. And we’ll help you with that in this article. Read on to learn the basics surrounding employee benefits in Germany.

Labor Laws in Germany

Germany goes to great lengths to protect their workers from mistreatment and ensure they are happy and healthy. You can find Germany’s labor laws in the Federal Ministry of Labour and Social Affairs. On the official website, you’ll find information about the mandatory benefits German employees should receive.

Statutory Employee Benefits in Germany

Statutory (or mandatory) employee benefits in Germany are rather extensive compared to other countries. We’ll get into them in this section.

Unemployment Insurance

German employees who work at least 18 hours per week are entitled to enroll in an unemployment insurance plan. The main advantage of this benefit is that whenever a German employee has held a job for at least 1 of the last 2 years, they will receive monetary assistance if they become jobless.

The unemployment insurance plan should be funded jointly by the employer and the employee. Both contribute 1.25% of the employee’s salary.

For more information, reference the Unemployment Insurance section of the Social Security at a Glance document.

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Workers’ Compensation Insurance (Also Called Statutory Accident Insurance)

According to Germany labor laws, when your German employee is injured at work, they should be able to pull funds from a workers’ compensation account per its stipulations. This insurance coverage will help to cover treatments and services that help to facilitate their recovery, including:

  • Funeral allowance
  • Long-term care allowance
  • Injury benefit (80% of gross pay)
  • Pension (in certain cases)

The employee doesn’t make any contributions to the workers’ compensation insurance plan – only the employer does. As of the time of this writing, the employee contribution amount is not consistent across the board. It depends mainly on the employees’ level of work-related risk and the industry in which they work.

For more information, reference the Accident Insurance section of the Social Security at a Glance document.

Health Insurance Plan

Health insurance plans are a legal requirement for employees residing in Germany. Whether the employee uses public health insurance or a private health plan, the employer must make regular contributions.

Employers contribute 7.3% of the employee’s salary, and so does the employee. Any employee who makes less than €64,350 per year can forego public health insurance and sign up for a private plan instead.

To learn more, read the Health Insurance section of the Social Security at a Glance document.

Pension Scheme

Germany has a mandatory public social security plan that provides pension benefits for employees. And the employer and employee must both contribute 9.3% of the employee’s salary to it. This insurance plan ensures that the worker has a source of income after they retire.

Maternity Leave

Working women in Germany get 14 weeks of maternity leave in general (6 weeks before the birth and at least 8 weeks afterward). If there are complications or multiple births, that minimum leave time jumps up to 12 weeks after the birth instead of 8 weeks. Your employee can take her maternity leave any time within 6 weeks of their due date.

Some employers may think that they don’t have to pay maternity leave for their German employees, but that’s not the case. Yes, the public health insurance policy pays the employee throughout their maternity leave.

However, if the employee makes more than €390 per month, you, as the employer, will have to make top-up payments equal to the difference between the insurance policy payout and the employee’s typical pay.

Maternity leave information is covered in-depth in the Maternity Protection section of the Social Security at a Glance document.

Parental Leave

Parents residing in Germany can take up to 2 years of leave between the child’s third and eighth birthday. The government will pay the employee during the leave.

To learn more about parental leave, read the Parental Allowance section of the Social Security at a Glance document.

PTO for Holidays

German law gives workers ample vacation time – in most cases, it’s about 20 days per year. This is the case regardless of their level of seniority in their current company.

Here are the public holidays that German employees observe:

  • New Year’s Day
  • Good Friday
  • Easter Monday
  • Labor Monday
  • Ascension Day
  • Whit-Monday
  • German Unity Day
  • Christmas Day
  • St. Stephen’s Day

Public holidays do vary by region. View this International Trade Administration resource for more information.

Nursing Care

Prolonged illnesses and accidents could happen to any of us, including your German employees. And that’s why there’s a long-term nursing care insurance requirement in place to cover those costs. Employers are expected to contribute 1.525% of the employee’s salary. And the employee will contribute the same.

Note: This benefit may also be applied to old age-related care.

Sick Days

Employers who hire German employees should be prepared to pay 100% of the employee’s typical gross salary for up to six weeks of illness. After six weeks, the health insurance will take over and pay up to 70% of the employee’s normal gross salary or up to the contribution assessment ceiling (not more than 90% of their most recent take-home pay).

To learn more about sick leave, read the Health Insurance section of the Social Security at a Glance document.

Benefit Employer Contribution Employee Contribution
Unemployment Insurance 1.25% of the employee’s salary 1.25% of the employee’s salary
Worker’s Compensation Insurance Varies by industry and work-related risk None
Health Insurance 7.3% of the employee’s salary 7.3% of the employee’s salary
Pension Scheme 9.3% of the employee’s salary 9.3% of the employee’s salary
Maternity Leave Top-up payments for any amount exceeding €390 per month (difference between public payout and typical pay). None
PTO for Holidays Full pay for vacation and public holidays None
Nursing Care Insurance 1.525% of the employee’s salary 1.525% of the employee’s salary
Sick Days Full salary for up to 6 weeks None

Supplementary Employee Benefits in Germany

When your German employees are sifting through their employment options, they may already be on the lookout for the mandatory benefits referenced in Germany labor laws. These benefits are extremely important to have. However, it’s the supplementary benefits that can tip the scale in your favor when it comes to luring in the absolute best talent.

Here are some supplementary employee benefits to consider adding to your German employee benefit packages:

  • The ability to work from home all or a portion of the week.
  • Performance bonuses doled out when an employee does an exceptional job.
  • Employee of the month awards for top-performing employees.
  • Expanded insurance options (medical, vision, dental).
  • More sick days than the mandated minimum.
  • Extra days off around public holidays.
  • Health and wellness allowances and memberships.
  • Company car or bike for easier commuting.
  • Housing support to assist in an employee’s initial move.
  • PTO for volunteering.

Building Your Employee Benefits Package for German Employees

Formulating an employee benefits package for German employees is no small endeavor. But most employers can successfully do so with the right information and guidance. Here are a few tips to keep in mind in this regard:

  • Remember that legal compliance should be of the utmost importance.
    Dive into the labor laws in Germany and double and triple-check them before finalizing the plan and sharing it with candidates. Explore the Federal Ministry of Labour and Social Affairs website, specifically the labour laws outlined there.

    And if you come across any questions or need assistance, don’t hesitate to reach out to HR or legal professionals. Be sure that they have direct experience in dealing with international work situations.
  • Build your benefits package based on priority. Start with all of the mandatory benefits and then add the supplemental benefits that are both relevant and economically feasible for your business.
  • Don’t overextend yourself. If you find the benefit plan creation or management processes to be overwhelming or unfeasible, look into other options like Professional Employer Organizations (PEOs) or Employers of Record (EORs). Depending on your situation and needs, these organizations may be able to remove a substantial volume of work from your plate.

So, there you have it – everything international employers need to know about employee benefits in Germany. With the information in this article, you’re well-equipped to get started formulating a benefits plan that not only satisfies the legal authorities but captivates your ideal candidates.