Expats starting work in Germany are often frustrated when they realize that their net income is much smaller than expected. However, this is the price for the German social security system, that is Germany’s outstanding social benefits, such as paid maternity and paternity leave, sick pay, and retraining after an accident on the job. In this guest post, Mirja Link-Lundehn, managing director of the independent insurance brokerage KremerLundehn GmbH, which among other things specialises in health insurance for expats, gives Employland an overview about the German social security system.
Comprehensive protection for employees in Germany
In Germany, employees and workers are on the safe side. Our world-famous social welfare system protects workers against the risks and financial aftermaths of:
- Long-term nursing care
- Occupational accidents
- Vocational diseases
- Pensionary poverty
Employees in Germany are automatically and obligatorily covered in all these areas of the German social security system. This system is based on the so-called “principle of solidarity” and the “principle of parity”. Employees contribute to the social security system based on their financial capability. This means they pay a percentage of their salary to finance social security. Employers are also engaged in funding the system, in a roughly fifty-fifty split. Altogether, the employee’s social security input deducted from gross salary is 20-21%.
Obligatory components of the German Social Security System
Social insurance in Germany rests on five pillars:
- Takes care of preservation, recovery and improvement of the insured’s health
- Pays for benefits like medically necessary assistance in the event of illness or accident
- Disburses sick pay when the employee is incapable of working and the employer stops paying the salary
- Pays compensation during unemployment
- Provides support for vocational reintegration
- Pays a life-long retirement pension
- Provides pension in the event of reduction in earning capacity and for surviving dependents after the insured’s death
- Cares for rehabilitation for sick or handicapped persons to make them employable again
- Campaigns for preventing vocational accidents and work-related diseases
- Pays for medical treatment
- Pays for processes to help insured return to working ability
- Indemnifies the insured persons or their bereaved by paying cash benefits
Long-term Nursing Care Insurance
- Provides support for people who need nursing care, for instance in nursing homes
- Helps to finance the dramatic financial gaps when long-term nursing care is needed
Qualifying periods within the Social Security System
Some of the mentioned benefits require a minimum period of coverage before they become active. For instance, the German pension insurance only provides benefits when the employee and employer have paid contributions for at least five years. And regarding unemployment benefits, employees are automatically covered after being salaried in Germany for twelve continuous months. Accident insurance and health insurance become valid immediately once premiums are paid, but the long-term nursing care insurance only renders services after a waiting period of five years. If the insured can prove that he was already comparably insured in the past, this period can be deducted from the qualifying period.
Exceptions from general obligatory insurance
Employees cannot jump out of social insurance – neither by arrangement nor by contract. But there are a few exceptions, for example, in the case of mini-jobs or temporary jobs. And there is another special rule regarding health insurance: Here employees who earn more than the so-called social ceiling (2017: 57.600 € gross per year) may opt for a private health insurance, where premiums are individually fixed based on entry-age, state of health, and range of required benefits.
Necessity of individual private add-ons
The above mentioned social benefits secure peoples’ basic needs in Germany. While these benefits are comprehensive, people are different, so requirements are often individual. This means the German social security benefits might not always be sufficient for every person. Therefore, everybody is free to establish his or her own individual insurance precautions.
Also in our blog: Are you a newcomer to Germany and still in search of an apartment? Then this may be interesting for you: Find a flat in Germany – Six tips for your apartment search. Overwhelmed by the challenges of being new in Germany? Not knowing certain rules, regulations or norms may cause you as an expat some trouble: In his guest commentary, James Meads, author of the website LiveWorkGermany, tells you what you should know to avoid 5 common banana skins for newcomers to Germany.