Social security in Germany consists of statutory compulsory insurances for the majority of the population against losses that endanger the social livelihood of the insurance members and the insured community.
The solidarity community is based on the principle of solidarity as opposed to voluntary individual insurance. As part of the Germany’s social policy, its goal is to prevent the loss of income due to reduced earning capacity, i.e. as a result of illness or accident, unemployment, old age or disability, and to compensate for risks resulting from pregnancy or death.
The legal basis is the Social Security Code. Social insurance is a mixed form of insurance (financing through contributions), care (compensation according to social aspects) and welfare (benefits for rehabilitation).
What are the 5 pillars of social security?
- Pension insurance
- Unemployment insurance
- Health insurance
- Nursing care insurance
- Accident insurance
The five pillars of statutory social security insurance provide protection against loss of income due to illness, accident, reduced earning capacity, old age or unemployment. They also cover the costs of long-term care.
In Germany, most people are compulsorily insured. With their contributions, they finance the benefits of statutory social insurance almost entirely.
The amount of contributions depends largely on their income. Overall, contributions account for about 40% of the income. Since, with a few exceptions, they are mainly paid in equal parts by employers and employees, employees account for about 20 percent of gross salary on average.
In addition, social security insurance also receives tax funds from the federal budget to fulfill its additional tasks.
What are the social security contribution rates in 2022?
| Social security insurance | Total | Employee contribution |
| General pension insurance | 18.60% | 9.3% |
| Unemployment insurance | 2.40% | 1.2% |
| General health insurance | 14.60% | 7.3% |
| Average additional contribution | 1.30% | 0.65% |
| Nursing care insurance | 3.05% | 1.525% |
| Additional contribution to long-term care insurance for childless persons | 0.35% | 0.35% |
| Total | 39.95% | 19.975% |
The contributions to the statutory accident insurance are covered by the employers alone.
Pension Insurance
With more than 57 million insured persons, the statutory pension insurance is the central system for old-age provision. Almost 19 million people receive an old-age pension through it. In addition, the German pension insurance also provides pensions for reduced earning capacity and for surviving dependants. It also provides extensive rehabilitation and preventive services.
The pension insurance contribution rate is currently 18.6% of gross salary up to the monthly contribution assessment ceiling of 7,050 euro in the old federal states and 6,750 euro in the new federal states (as of 2022). Employees and employers each pay half of the amount.
Unemployment Insurance
Statutory unemployment insurance pays unemployment benefits, short-time working benefits, bankruptcy benefits and bad weather allowance* to affected employees. It also supports measures to maintain and create jobs.
In Germany, bad weather allowance was a compensation payment granted by the labor office in construction companies in the period from November 1st to March 31st if work was not performed on individual days for weather-related reasons.
The contribution rate for unemployment insurance is 2.4% of gross income. Employers and employees also share this contribution equally.
The length of time unemployment benefits are paid depends on how long those affected were employed before becoming unemployed and on their age. Those younger than 50 receive unemployment benefits for a maximum of 12 months; those 50 and older can receive unemployment benefits for up to 24 months.
Unemployment benefit II (ALG 2)
Those who have not found a new job after this period must usually apply for the much lower unemployment benefit (“Arbeitslosengeld 2”, also commonly known as “Hartz 4”). In case of need, unemployment benefit is paid to all unemployed persons aged 15 to under 65 who are not entitled to the regular unemployment benefit or whose entitlement period has expired. For non-employed family members in the same household, there is the “Sozialgeld”, which corresponds to the standard rate of unemployment benefit.
Health insurance
The statutory health insurances pay for the necessary services in case of illness and finance measures for early detection and prevention of illnesses. They also pay sickness benefits to replace wages in the event of prolonged illness.
In Germany, health insurance is compulsory. Employees whose annual earnings do not exceed the compulsory insurance limit of 64,350 euro (5,362.50 euro per month, as of 2022) must take out insurance in a statutory health insurance fund. Those who earn more can alternatively switch to private health insurance.
Currently, around 73 million people have statutory health insurance. The insured can choose from around 100 statutory health insurance funds.
The contribution rate for statutory health insurance is made up of the general contribution rate and the additional contribution.
The general contribution rate is set by law at 14.6% of gross income (up to the contribution assessment ceiling of currently 58,050 euro per year, 4,837.50 euro per month, as of 2022). The general contribution rate applies equally to all statutory health insurance funds.
In addition, all health insurance funds can levy a freely selectable additional contribution to finance their expenses. Employees and employers each pay half of the health insurance contribution.
Long-term care insurance
Statutory long-term care insurance covers the risk of needing long-term care by providing assistance for home care and inpatient care. The nursing care insurance funds are responsible for the benefits of the statutory nursing care insurance, each of which is assigned to the statutory health insurance funds. This means that each statutory health insurance fund has a nursing care insurance fund attached to it.
The amount of benefits from the statutory long-term care insurance is graded according to the degree of need for care. The need for care is measured in care degrees 1 to 5. This is intended to give all people in need of long-term care equal access to long-term care insurance benefits, regardless of whether they are affected by physical, mental or psychological impairments.
The contribution rate for long-term care insurance is 3.05%. Here, too, employers and employees share the contribution equally. However, there is a surcharge of 0.35% for childless persons over the age of 23, which they pay alone.
Saxony is an exception: there, the employer pays only 1.025%, while employees pay 2.025% plus a 0.35% child supplement, if applicable. And: pensioners must pay their long-term care insurance contributions by themselves.
Accident insurance
Statutory accident insurance protects all employees against the economic consequences of accidents at work and on the way to work, as well as occupational diseases.
The contributions for the statutory accident insurance are covered by the employers alone.
The amount of the contribution depends on the remuneration of the insured and the degree of accident risk in the respective company. In addition to medical treatment and rehabilitation, the benefits provided by statutory accident insurance also include care allowance, injury allowance, occupational assistance, transitional allowance and injury pension.
Further information
- Pension insurance: www.deutsche-rentenversicherung.de
- Unemployment insurance: www.arbeitsagentur.de
- Accident insurance: www.dguv.de
- Health insurance: www.krankenkassen.de
- Long-care insurance: www.bundesgesundheitsministerium.de
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