Germany Employee Compensation & Benefits
Capital
Berlin
Official Language
German
Currency
Euro
Payroll cycle
Monthly
Quick facts about Germany
Germany, which boasts the largest economy in the European Union, is a home to booming sectors such as tech, banking, and healthcare. As the world’s fourth largest economy, Germany is a hub for some of the world’s top talent, with multinational firms, tech companies, and startups setting their sights on building local HQs in Berlin, Frankfurt, and other cities.
Germany has some of the strongest regulations around employee compensation and benefits, including healthcare and salary, especially when compared to other countries in the EU. Germany employment laws strongly protect the employees, so making sure that employees are provided with the right benefits will help you meet statutory expectations and avoid costly lawsuits.
As an employer looking to recruit top talent, you will need to understand not only what’s required, but also what supplement perks you should be offering in order to stand out to top talent.
This article goes over all employee benefits that employers need to provide workers with, as well as what employees should expect for compensation.
Mandatory compensation and benefits in Germany
Social Security
The country bases the deductions for social security for employees on their base income. The percentage that each employee contributes to social security will differ.
In Germany, employer deductions for social security equal around 20.64% of an employee’s salary, with different percentages earmarked for specific funds. Employees pay anywhere from 22-31% of their salary into social security.
Social security covers 4 main areas:
Unemployment insurance
Pension
Health insurance
Nursing care insurance
Employers also pay into a 5th category, accident insurance.
Paid leave
Per regulations, employees are entitled to 24 paid days off per year, as set forth by the Holiday Act Collective Agreement. In some industries, this number can be increased up to 30 days. For high-risk or dangerous industries, additional leave may be negotiated based on the collective agreement between employer and employee.
Public holidays
There are a lot of local holidays in Germany that are recognized by specific states, cities, or even towns. Federally, there are 9 national public holidays that employees across the country are allowed to take for vacation:
New Year’s
Good Friday
Easter Monday
Ascension Day
Whit Monday
Pentecost Monday
1st of May
Day of German Unity
25th of December
26th of December
Sick days
Employees who have been employed for more than 4 weeks are entitled to 100% of their regular income for sick days, up to 6 weeks.
After 6 weeks, the employee health insurance fund pays between 70%-90% of the employee’s regular salary, based on the insured employee’s fund level. This can occur for up to 78 weeks in a 3-year period. Sick days can only be compensated for up to 78 weeks, if the employee is unable to work due to the illness that was documented by the employer when symptoms initially appeared.
Employees must also inform their employer of their illness right away and an estimated amount of time they will need off. Employees taking more than 3 sick days in a row must submit a doctor’s note to their employer for approval and payment.
Maternity leave
Employees are entitled to 14 weeks of paid maternity leave. This time off can be extended to 18 weeks with approval from the employer.
Maternity leave in Germany consists of 2 periods. First, the prenatal period requires employees to take a minimum of 6 weeks off before their expected due date. Second, the postnatal leave requires the remaining 8 weeks of leave be taken after the birth of the child.
This leave is paid through the public health insurance fund. The payment is equivalent to the average sum of the net wages for the 3 months prior to the pregnancy. Public health insurance pays up to a maximum of 13 (EUR) per day.
Parental/paternity leave
In Germany, new parents are entitled to unpaid parental leave. The request for parental leave must be submitted to the employer 7 days in advance.
The employee is entitled to parental leave for 36 months and this leave can be shared between the 2 parents. However, the first 12 months of parental leave must be taken in the first 3 years of child’s birth. With permission from the employer, the rest of the leave can be used between the child’s 2nd and 7th birthday.
Parents can also choose to work part-time for 30 hours per week, granted they have permission from their employer during the parental leave time frame.
Other leave
Depending on the employment contract and collective agreement between employer and employee, employees may be allowed additional forms of leave, including Family Care Time, bereavement, and marriage leave.
Recommended Benefits in Germany
While offering mandatory benefits keeps employers compliant with laws, companies should also consider offering the best-in-class perks and supplemental benefits.
Gym allowances
Many companies, especially tech startups, are giving their team members a gym allowance or gym reimbursement. Many people in Germany use gym facilities, so giving employees a gym membership will allow you to stay competitive and encourage a healthy lifestyle.
Company bikes or cars
Many people in Germany opt to ride their bikes in the cities. Giving them a company bike to go to and from work is a great incentive and encourages eco-friendly transportation.
For employees who live or work in rural areas, offering a company shuttle or car can help ease the burden of commuting.
13th month bonus/salary
Germany does not require employers to provide their employees with a 13th-month bonus pay. However, many employers opt to give their employees a 13th month salary to reward their work at the end of the year in December.
Remote work
For some industries, especially in finance and tech, offering your employees the ability to work from home is another great option. This gives them a bit more flexibility and reduces the environmental and financial cost of commuting.
Four-day work weeks
Germany has five-day working weeks, but some companies in Germany allow their employees four-day work weeks as a bonus incentive.
Paid lunch
Giving employees the option for their lunch period to be paid is another extra incentive to stay competitive in the German job market. This gives employees just a bit of a bump in their weekly salary. Some companies also provide meal vouchers.
Private health insurance
Many companies offer private health insurance, on top of the public social security system. This gives employees access to certain healthcare providers that they wouldn’t normally be able to see through the public social security system. Some employers opt to cover the whole cost of private health insurance, including specialties like vision and dental, while others choose to give it to employees at a lower rate.
Partnering with Via for payroll and benefits in Germany
As most benefits are mandated by the German government, knowing what supplementary benefits to offer potential employees is a must. This is where using a global EOR service like Via is a strategic move. As your EOR in Germany, we have valuable knowledge about benefit packages and can support you along the way to attract talented employees.
Companies of all sizes want to hire employees in Germany, but don’t know how to navigate the country’s complex social security and benefit system. Via makes hiring German talent and building your global team seamless. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as work visas & permits, benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity in Germany, Via assumes responsibility for all legal compliance, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time employees or contractors in Germany with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.
