Germany statutory employer s responsibilities
Income tax is an employee only contribution. If a German legal entity exists, it is the employer’s responsibility to withhold the tax from the employee’s gross income and to pay it directly to the tax office for all the company s employees.
Germany has a structured social security system. Social security is contributed to in equal parts by employer (ER) and employee (EE). It is made up of the following components:
- Health insurance
- Nursing care insurance
- Pension insurance
- Unemployment insurance
The total social security contributions, sum of ER and EE amounts, calculated as a percentage of the gross income, are collected by each employee s health insurance and paid by the employer.
The rate varies (borne by EE only, withheld by ER) - EE: 100%
Applicable only if EE is a church member, rate varies by state, 8 – 9% of income tax (1) - EE: 100%
Reunification tax, rate 5,5% of income tax (1) - EE: 100%
Total: 14,6% - ER: 7,3% (+ 1,1%)2 - EE: 7,3% + additional contribution rate 3 - capped at €4.237,50 per month (max. base amount) income limit for obligatory insurance:4 €4.687,50
Nursing Care Insurance
Total: 2,35% - ER: 1,175%5 - EE: 1,175%5 - capped at €4.237,50 per month (max. base amount) income limit for obligatory insurance4 €4.687,50
Total: 18,7% - ER: 9,35% - EE: 9,35% - capped at €5.400,00 per month (max. base amount, former east Germany) - capped at €6.200,00 per month (max. base amount, former West Germany)
Total: 3,0% - ER: 1,5% - EE: 1,5% - capped at €5.400,00 per month (max. base amount, former east Germany) - capped at €6.200,00 per month (max. base amount, former West Germany)
Continued payment of income in case of sickness rate varies by health insurance, 0,4 – 3,9% ER: 100%
Continued payment of income in case of maternity rate varies by health insurance, 0,12 – 0,39% - ER: 100%
Rate 0,15% - ER: 100%
Worker s compensation / ER liability insurance, rate varies by industry and individual employees job average: 1,31%, paid yearly - ER: 100%
1 Under certain conditions employees may choose to be privately health insured. In this case the total contributions for health- and nursing care insurance are set by the private health insurance. The employee will receive an employer contribution, capped at 309.34 € / 49.79 € per month max. (Health/nursing care insurance).
2 Additional contribution for employed pensioner’s
3 For each health insurance company (0,0 to 1,3%)
4 This limit is used to assess, if the contribution / participation in the public health and pension insurance is obligatory for EE
5 In Saxony: ER 0,675%; EE 1,675%; note: additional rate for childless EEs older than 23 years: 0,25%
6 Please refer to the detailed explanation below
Continued payment of income insurance (sick leave and maternity leave (U1 and U2)
German Law on the Reimbursement of Employer Expenditures (Aufwandsausgleichsgesetz AAG) reduces the risk of income loss of the employer due to continued payment of employment compensation to incapacitated employees (sick leave pay U1) and to expenditures required by the Maternity Protection Act (maternity leave pay U2).
The reimbursement procedure U1 applies to employers who as a rule employ no more than 30 people. Part‐time employees will be taken into account in accordance with their regular weekly working hours on a factor of 25% per each 10 hours per week. All employers, regardless of the number of employees, will participate in the U2 reimbursement procedure.
U1 – reimbursement of sickness expenses (sick leave pay)
The health insurance company reimburses employers for the bulk of their expenditures for the statutory continuation of payment of employment compensation to the employee (sick leave pay). The reimbursement rates are set by the health insurance on an individual basis and vary between 40% and 85% of the gross payment.
The funds for the U1 reimbursement procedure are provided in full by a special benefit cost contribution from the participating employers. The amount of the special benefit cost contribution is set by the health insurance individually and varies between 0,4% and 3,9%.
The benefit cost amounts assessed are entered together with the total social insurance contributions in the contribution account statement (contribution group U1). The reimbursement request must be submitted by electronic data transmission. It is based on the doctor’s certificate provided for by the employee.
U2 – reimbursement of maternity expenses (maternity leave pay)
The health insurance reimburses employers regardless of the number of employees for the following:
- The maternity benefit subsidy for the protection periods before and after childbirth (six weeks before and eight weeks after). The subsidy amounts to the employee s net payment during the protection period and
- The employment compensation paid to compensate for a reduction in earnings, which occurred due to the prohibition of employment. This subsidy amounts to the gross payment plus the employer’s social security contributions. Financing is provided by a special benefit cost contribution assessment of participating employers. The basis for the U2 assessment is the employment compensation of all employees in the company. The assesse amounts for compensation of maternity expenses are also to be documented and paid along with the rest of the social insurance deductions on the contribution account statement (contribution group U2). The reimbursement requests must be submitted by special form. It is based on a doctor’s certificate provided for by the employee.
Minimum wage introduced in 2015
Minimum wage = EUR 8.50 gross per hour, applies nationwide and industry-independent. This applies to all employees who are employed in Germany (even if the employer is non-German). For industrial sectors that already have a higher minimum wage the higher minimum wage applies.
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- German Income tax Explained Pt2
- Church Tax Explained
- Final withholding tax
- Germany statutory employer s responsibilities
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- Pension Insurance
- The German Social Security System