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Blog, Employee Benefits, Global

Spotlight on Germany – A guide to implementing employee benefits technology

04.03.25

Germany has a highly regulated labor market with a strong social security system that provides comprehensive protections for employees. Employers are required to provide statutory benefits; however, many offer additional voluntary benefits to attract and retain top talent. Germany’s benefits landscape is shaped by Collective Bargaining Agreements (CBAs), legal requirements, and employer-driven enhancements.

One of the more complex aspects of offering benefits in Germany is navigating the taxation rules. For example, dental insurance may be considered a taxable benefit – unless specific conditions are met based on the wider benefits package offered to an employee. Understanding these nuances is essential to designing compliant and cost-effective offerings.

Employers in Germany usually provide employees with information on their fixed core benefits provision, as well as offering some additional online benefits. Employees can choose to flex or add to their existing provision, as well as update cover and add dependents, often at their own expense, allowing for a more personalized and flexible benefits experience.

Mandatory benefits

Germany’s social security system is funded through employer and employee contributions, ensuring essential protections for all workers through mandatory benefits:

Social security contributions (Sozialversicherungsbeiträge)

Employers and employees each contribute approximately 20% of gross salary towards social security, with these contributions covering pensions, healthcare, unemployment insurance, and long-term care.

State pension system (Gesetzliche Rentenversicherung – GRV)

Employers and employees each contribute 9.3% of gross salary to the public pension system, which provides retirement income for the employee based on their salary history and years of contributions.

Healthcare benefits (Gesetzliche Krankenversicherung – GKV)

Employees earning below €69,300 per year (as of 2024) must enroll in statutory health insurance (GKV). Employers cover 50% of the health insurance premium, up to a maximum of 7.3% of the employees’ salary. Higher earners can opt for private health insurance (PKV) instead.

Unemployment insurance (Arbeitslosenversicherung)

Employers and employees each contribute 1.3% of the employees’ salary. This insurance cover provides financial support for unemployed individuals who meet eligibility criteria.

Parental leave and benefits (Elterngeld & Elternzeit)

Employees entitled to parental leave can take up to three years of unpaid parental leave per child. For parental benefits (Elterngeld), parents receive between 65-100% of their income for up to 14 months.

Sick leave and continued pay (Entgeltfortzahlung im Krankheitsfall)

Employers must pay 100% of the employees’ salary for the first 6 weeks of sick leave. After 6 weeks, their health insurance covers 70% of their salary for up to 78 weeks.

Annual leave (Urlaubsgeld)

Employees are entitled to a minimum of 20 days of paid vacation per year, but many employers offer 25-30 days, depending on the industry and CBAs.

Core benefits

To attract and retain employees, many German employers provide additional benefits beyond statutory requirements:

Supplementary pension plans (Betriebliche Altersvorsorge – bAV)

Employers offer private pension plans, often contributing 3% to 10% of an employees’ salary. Employees can also make additional voluntary contributions, with tax advantages.

Private health insurance contributions

Some employers offer subsidized private health insurance for high-earning employees, which covers additional benefits like private hospital rooms and alternative treatments.

Life and disability insurance (Gruppenlebensversicherung)

Many companies provide group life insurance, covering a lump sum for beneficiaries, with some policies also including disability insurance for income protection.

Commuter and transportation benefits

Employers may provide public transport subsidies or company cars for employees. However, recently job bikes (leasing of bicycles or e-bikes) are becoming increasingly popular among employees.

Popular benefits

German employers are focusing on work-life balance and financial security through additional benefits:

Flexible benefits

With flexible and voluntary benefits, employees can select the benefits most relevant to them and often benefit from salary sacrifice or employer contributions. Typical flexible benefits include:

  • Health assessments
  • Kindergarten allowances
  • Cycle schemes
  • Dental
  • Discount shopping portal

Those looking to be above market median may offer a savings plan, holiday buy and travel insurance in addition.

Lunch vouchers

Where there are no subsidized catering facilities, paper lunch vouchers, monetary refunds or prepaid cards are provided to employees. At present, employees can receive a maximum of €7.23 per lunch voucher/meal. Of this, the employer pays €3.10 tax free, and the employee pays the remaining €4.13 to be exempt from tax and social security contributions.

Car allowances

Car allowances typically include electric vehicles as organizations look to align their benefits provision with their corporate ESG goals and values; and support employees to make greener choices.

Wellness allowances

These are beginning to replace gym or sports memberships and can be used for online classes as well. These are tax free up to €600, if they can be shown to contribute to the health and wellbeing of the employee.

Key considerations for implementing employee benefits in Germany

  1. Local language matters. German is the preferred language for employee communication in most organizations. Providing benefits information in German ensures employees fully understand what’s on offer and helps drive engagement with the platform.

  2. Work Councils and unions play a central role. In Germany, unions and Work Councils have significant influence over employee benefits. Any changes to the benefits package or the implementation of new technology – such as a global platform – must be agreed with these bodies. Early collaboration and transparency are key to a smooth rollout.

  3. Automation reduces administrative burden. Administering benefits manually in Germany can be time-consuming and error-prone, especially given the complexity of local schemes. A global benefits platform can help streamline key processes – such as allowing employees to manage supplementary pension contributions – and reduce the pressure on HR teams.

  4. Flexibility is the way forward. As employee expectations evolve, there’s a growing appetite for more personalized and flexible benefits. Employers who want to be above market can offer flexible cover for core benefits like life and accident insurance, as well as expand into voluntary benefits tailored to employees’ lifestyles and life stages.

To learn more about how to navigate the complexities of the employee benefits landscape in Germany, or for help prioritizing your global rollout, speak to one of our benefits experts. 

04.03.25
Picture of Clare Dolan

Clare Dolan

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