Germany’s employee benefits system is among Europe’s most generous. It’s strictly regulated and mandates a wide range of protections and entitlements to ensure workers’ well-being.
In this article, we’ll provide a detailed overview of Germany’s statutory minimum benefits, covering mandatory requirements and recommended supplementary perks so you can attract the country’s best talent.
Who is entitled to employee benefits in Germany?
All full-time employees — those who work at least 30 hours per week — and part-time employees in Germany are entitled to statutory benefits.
Full-time employees receive the full range of these benefits, including paid leave, health insurance, and pension contributions. Part-time employees, on the other hand, typically receive benefits on a pro rata basis, or in proportion to their working hours.
Both part-time and full-time employees must work a minimum number of weeks — commonly, four weeks of continuous employment — to be eligible for certain benefits.
Contract, freelance, and self-employed workers don’t automatically qualify for statutory benefits, but sometimes benefits can be factored into employment contracts. Some contractors can also make voluntary contributions to statutory state pension insurance.
Statutory Benefits in Germany
In Germany, statutory benefits are mandatory benefits that employers must legally provide their employees. German employment law dictates the terms of the benefits, which include health insurance, paid sick leave, and pension.
While full-time employees and part-time workers are entitled to statutory benefits regardless of the number of hours worked, independent contractors aren’t.
Also, it’s important to note that German employees generally receive other benefits, including supplemental health insurance and disability benefits, which we’ll delve into later.
Minimum Wage & Overtime Pay
Germany’s government-mandated minimum wage is EUR 12.82 per hour as of January 1, 2025.
Most Germans work a five-day work week, averaging eight hours per day. The exact number of working hours can fluctuate; however, the German work week has a cap of 48 hours.
While there’s no statutory mandate on overtime compensation, there’s a general rule that employees will be compensated either via overtime pay or additional time off.
Social Security Contributions
Both employers and employees share equally in social security contributions, which fund various social security programs, including:
- Pension Insurance: 9.3% of gross salary
- Health Insurance: 7.3% of gross salary
- Long-Term Care Insurance: 1.5% of gross salary
- Unemployment Insurance: 1.2% of gross salary
We’ll examine each of these benefits in more detail below.
Pension Contributions
Germany’s pension plan system provides financial assistance for residents once they reach retirement age. There are three tiers:
- Mandatory State Pension (Gesetzliche Rentenversicherung): Employees and employers split the contribution, approximately 18.6% of the employee’s gross salary.
- Company Pension Schemes (Betriebliche Altersversorgung): Employer-sponsored plans aren’t mandatory, but they’re common because they provide additional benefits for employees without requiring an employee contribution.
- Private Pensions Plans (Private Altersvorsorge): Voluntary plans like Riester Rente and Basis Rente offer additional pension schemes to build retirement savings
Health Insurance
Health insurance is mandatory for all German employees, and the public health insurance system, Gesetzliche Krankenversicherung (GKV), covers most of the population. The contribution rate for statutory public healthcare plans is 14.6%, split evenly between employers and employees.
Employees earning less than EUR 5,775 monthly must be insured with a statutory health insurance fund. Those earning more than EUR 64,350 per year can opt out of the public plans, select a private health insurance plan (Private Krankenversicherung), and customize coverage according to their needs.
Long-term Care Insurance
Long-term care insurance (Pflegeversicherung), which is also known as nursing care insurance, is governed by Book XI of the German Social Code, supports workers who need prolonged care due to an accident, illness, or old age.
Contributions are automatically deducted from an employee’s gross salary, totaling 3.4% of their income. Typically, employers cover half of this cost, while employees pay the other half.
Unemployment Insurance
Germany’s unemployment insurance (Arbeitslosenversicherung) provides financial assistance to employees who are dismissed or have resigned from their jobs.
The contribution rate is 2.5% of the employee’s gross income, with the employer and employee paying half each.
Contributions are not required above annual income thresholds, which are EUR 90,600 in West Germany and EUR 89,400 in East Germany.
Employees must have been employed in Germany and paid social security contributions for at least 12 months in the past two years to qualify for unemployment benefits. Meeting other criteria, such as being an EU/EEA/Swiss citizen or holding a valid work permit, is also required.
Workers’ Compensation Insurance
All German employers must have workers’ compensation insurance (Unfallversicherung), also known as occupational accident insurance, to cover an employee’s medical expenses in the event of work-related accidents or illnesses.
The employers handle everything — from registering their staff with the relevant Employer’s Liability Insurance Association to paying the required contributions directly. Contribution rates vary based on employees’ industry and accident risk.
This coverage also encompasses anyone engaged in temporary, essential, and economically valuable work that resembles an employment relationship.
Leave Entitlements
Paid Time Off and Vacation
Employees working a standard five-day workweek receive at least 20 days of annual leave, and that jumps to 24 days for employees working a six-day workweek.
The Federal Leave Act ensures that employees receive their full salary during vacation, and unused days can be carried over until March 31st of the following year (with employer consent).
Additionally, Germany observes several paid public holidays, which aren’t included in the paid leave entitlement; however, employers typically provide paid time off for the following ones:
- New Year’s Day
- Good Friday
- Easter Monday
- Labor Monday
- Ascension Day
- Whit-Monday
- German Unity Day
- Christmas Day
- St. Stephen’s Day
Some German holidays are specific to certain regions, such as Assumption of Mary in Bavaria and All Saints’ Day in Baden-Württemberg, and employees often expect to receive time off for these.
Sick Leave
Employees are eligible for paid sick leave after four weeks of employment.
If an employee can’t work due to illness, they’re entitled to receive their full salary from their employer for up to six weeks, but the employee must provide a sick note from a doctor after three days of illness.
If the employee is still ill after six weeks, their health insurance kicks in and pays them a prorated salary.
Maternity Leave
Mothers are entitled to 14 weeks of paid maternity leave, six weeks before their due date and eight weeks after the child’s birth. If a child is born prematurely or if there are multiple births, this postnatal coverage can extend to 12 weeks, ensuring mothers have ample time to recover.
During this time, the mother receives a full salary, which is paid partly by the employer and partly by insurance.
Parental Leave
While there’s no specific leave for fathers yet, there’s been discussion of mandating paternity leave, or Vaterschaftsurlaub since the EU said that fathers have the right to take at least ten days of paid leave.
However, fathers are entitled to Elternzeit, which we’ll explore below.
Parental Leave
Following maternity leave, parents are entitled to 24 months of parental leave (Elternzeit) before the child turns three years old. For mothers, this leave would start at the end of maternity leave. Fathers can begin their leave as soon as the child is born.
Employers do not pay a parent’s salary during parental leave. However, new parents may qualify for parental allowance, or Elterngeld, which is financial assistance provided by the German government. It compensates for the loss of earnings during parental leave for up to 24 months.
Caregiver Benefits
Employees are also entitled to unpaid time off (10 days for emergency short-term care and up to six months for long-term care) to tend to close relatives.
Read more about paid leave laws in Germany.
Other Benefits to Attract Top German Candidates
To be seen as an employer of choice, many employers offer a benefits package above and beyond those required by the German government to help improve employees’ work-life balance. Some widespread optional benefits and subsidies include:
- Employee Assistance Programs (EAPs): EAPs provide confidential support for employees facing personal or work-related challenges, including mental health issues, stress management, and financial advice.
- Additional Paid Time Off (PTO): Some employers offer extra paid time off beyond the statutory vacation days, providing employees more time to recharge.
- 13th-Month Pay: An additional payment typically paid at the end of the year, 13-month pay provides employees with extra financial support during the Christmas season.
- Stock Options: Offering stock options or equity grants is an enticing perk that also helps foster shared ownership and vision among workers.
- Private Medical Insurance: Providing additional medical coverage can give employees access to a larger selection of doctors and quicker access to appointments.
- Retirement Plans: Companies can offer additional pension schemes to help fund retirement.
- Company-sponsored Wellness Programs: These programs may include fitness challenges, subsidized gym memberships, health screenings, nutrition workshops, and stress management seminars.
- Remote Work: Many German employees highly desire flexible working schedules, especially regarding remote work. In a recent survey, 47% of German employees said they would consider quitting their jobs if their ability to work remotely was eliminated or severely reduced.
Termination
While the termination process in Germany can vary based on an individual’s employment agreement, notice must be given in all cases except in severe cases, such as abuse or embezzlement.
Periods for termination are generally four weeks; however, they can be up to seven months depending on the employee’s length of service.
German labor laws don’t mandate severance payments. Instead, this is determined by the local works council or the collective bargaining agreement in the employee’s contract.
Learn more about terminating international employees.
Compliance Considerations
Complying with local labor laws is essential when providing employee benefits in Germany. Employers must ensure that their benefits packages meet the minimum legal requirements under the German Labor Code and any relevant collective agreements.
This can be challenging since the country’s employment legislation is known for its complexity, but failing to provide benefits packages that meet these requirements can lead to legal consequences, hefty fines, and reputational damage that can make it difficult to hire German employees in the future.
The easiest way to stay compliant? Partnering with an Employer of Record (EOR).
Learn more about how companies stay compliant in Germany.
An Employer of Record Can Help Navigate German Employee Benefits
A complex array of laws governs Germany’s statutory benefits landscape, ensuring employees receive various protections and entitlements. However, these regulations can change over time, making it essential for businesses to stay informed and compliant to avoid the potential of significant fines and penalties.
Partnering with an Employer of Record like RemoFirst enables companies to ensure compliance with local labor laws and regulations when hiring employees. With us, you can easily employ workers in 185+ countries and manage and pay contractors in 150+ countries.
Book a demo to learn more about building your global workforce in Germany and beyond.
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