The German Social Security System offers comprehensive protection in the event of unexpected situations such as unemployment, accident, or illness. Contributions to the diverse funds is generally shared 50:50 by employer and employee and in fact the employer pays your share on your behalf. Consequently, your payroll will show these contributions as deductions from your gross salary.

Our Social Security System is based on the so-called solidarity principle. This means that every person insured contributes to the funding of the social security insurance system depending on his or her financial capacity. However, every insured receives the same benefits.

The Social Security Insurance of Germany is based on five pillars:

  • Health Insurance
  • Long-term care insurance
  • Pension insurance
  • Unemployment insurance
  • Accident insurance

The Social Security Insurance is basically for employees. They are automatically covered by all five branches of social insurance. Freelancers or entrepreneurs are not covered automatically, however, they can opt to.

In the following we will give a short insight into each of these branches.

Thereafter we will emphasize

  • How contributions to Social Security show on your payroll
  • What kind of treatments are covered by public healthcare and what extras you have to pay on your own
  • Processes to consider when ill

An overview of the five pillars of the German Social Security System


Your employer is responsible to sign you up with a healthcare insurance – or make sure you do on your own – and the healthcare insurer will take care of signing you up for the other 4 branches.

Contributions are basically shared, employee and employer both pay roughly 50% of the premium. This obligation cannot be circumvented by agreements or contracts between the employee and the employer. The only exceptions are marginal and temporary employment (i.e. mini job).

While a lot of employees will not even ask you which insurer you want to take and will simply tell you that they will sign you up with XYZ, you have in fact the free choice. If you tell them upfront which insurer you want to choose, they will either sign you up or tell you to sign-up on your own. If the latter, we can help you or our broker can help you.

The insurance premium for healthcare slightly differs but the effect is small. The coverage also differs but marginally. Some insurance will cover for health courses or sports, others might cover for acupuncture or Chinese medicine. For the severe illness they all cover the same and you don’t need to worry. An important difference for our clients is that there are a couple of insurers offering English service: TK and SBK for example.

The public, or statutory, insurances will take you as a member no matter how old or young you are or if you have preconditions. The monthly premium is based on your income alone and the maximum is

If you are married or have children, they are covered under the premium of the working person if they have no income on their own.

Long-term nursing care

The long-term care insurance covers nursing care which can be very expensive because it is usually provided for a long period of time. While the long-term car is a separate branch, the healthcare insurers actually care for its administration in order to keep cost low. Everybody contributing to healthcare automatically also contributes to long-term care. He can benefit from his payments once he has contributed for minimum 5 years. Like with the healthcare insurance, the premiums are shared between employer and employee.

Pension insurance

The pension insurance pays out once you have stopped working, basically because reaching the pension age. Pensions can also be paid in certain cases of reduced earning capacity or if a family member who provided for the family dies. Civil servants and certain self-employed individuals a exempt from statutory pensions insurance contributions and must take care of their income in old age on their own.

Premiums are also shared roughly half between employee and employer.

Contributions paid into the German Pension Fund are not lost if you return to your home country or otherwise leave the country. If you paid the contributions for a minimum of five years, you will be entitled to your pension funds – wherever you live when old. Even if you left Germany prior to five years contribution, as long as your country has a social insurance agreement with Germany your payments here will at least increase your pension in your home country. There are agreement with all EU states as well as with certain other countries. If there is no such agreement, you can ask for your contributions to be returned two years after you return home. However, only the employee’s share will be paid out.

Accident insurance

If an accident happens at work or while you are undergoing training or while on the way to or from work and you require treatment as a result, the treatment costs will be borne by the employer’s liability insurance. This insurance is financed by the employer only – you as employee don’t contribute but only benefit.

Your obligations:

  • tell the employer of your accident as soon as possible as he needs to notify his insurance.
  • Tell the doctor or hospital that you had a work accident so that your treatment can be billed accordingly. In this case, you don’t need your health card. If at a later point in time it is decided it has not been a work accident, the employer’s insurance and your health insurance will sort everything out in the background
  • If an accident is not covered by health insurance but your accident insurance, they will pay all the treatment cost. Sometimes, there are thresholds for treatment cost and the exceeding amounts may need to be paid by you. Consequently, you need to reconcile with our accident insurance to what extent a certain treatment is covered. The doctor will usually know if a treatment is standard and covered or not.

Unemployment insurance

If you lose your job employers and employees jointly step in to cushion the financial impact. The unemployment benefit is paid for a defined period of 12 months, but depends on how long you have contributed to the unemployment fund.

Premiums are shared half-half by employer and employee.

How contributions to Social Security show on your payroll

As in many other countries, the salary is distinguishing a gross and a net salary. The gross salary is what you would normally negotiate with your employer.

Since the employer is obliged to pay your contributions into the social security system on your behalf, just as he is obliged to pay your income taxes on your behalf, your gross salary is reduced by such payments. The result is the net income. This is what you receive on your bank account and it is important to have an idea of the cost of living.

Cost of living are predominantly defined by the rent for your home. You can expect to pay 1/3 of your net income into cold rent for an apartment when living somewhere urban. Consider another 200-350 EUR for side cost and consumption of utilities.

While the upper part of your payroll will disclose your earnings, i.e. basic salary, variable pay, holiday pay or bonuses, payments to saving plans etc., the lower part will contain the contributions to social security and taxes. Each income will spell out if subject income tax and/or social security contribution. Usually, the payroll programs work with abbreviations:

  • SV – Social Security Insurance as a whole (Sozialversicherung)
  • KV – Healthcare Insurance (Krankenversicherung)
  • PV – Long-term nursing care insurance (Pflegeversicherung)
  • RV – Pension Insurance (Rentenversicherung)
  • AV – Unemployment insurance (Arbeitslosenversicherung)

They will all be listed under “gesetzliche Abzüge” – statutory deductions, together with income tax and solidarity surcharge. The latter is going into a fund supporting the economical development of Germany’s eastern states as they still lack behind the western states.