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back2.3 Social Security System
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In general, any employee who works in Germany must contribute to
Germany's compulsory social security system. So he/she is entitled to
benefit from it.
It includes pension scheme, health insurance, and other services.Still, some people may want to be exempted from this rule for different reasons and stay with the social security system in their home country.
Germany has signed bilateral agreements on social security schemes defining who must join and who need not to do so. Moreover, there is a mutual recognition of social security systems within the European Union and the European Economic Area.
Because of this in Germany in addition to the wage tax some insurances will reduce your salary. Here is a list of the obligatory insurances:- Health insurance
- Nursing care insurance
- Pension insurance
- Unemployment insurance
- Accident insurance
In contrast to some other countries, in Germany an employee receives a wage or salary from which tax and social security contributions have already been deducted (net). The employer calculates the gross wage, but withholds a percentage of it and transfers this to the health insurance company responsible for collecting the complete social security contribution and to the tax authority. Gross incomes are therefore much higher than the amount actually paid out. An example:Employee salary Employer cost Total gross (€) 2,400 2,400 Deductions: Wage tax - 114 (individual) Health insurance* - 159 Rate 13.3%
(= 319)159 Nursing care insurance* - 20 Rate 1.7%
(= 40)20 Pension insurance* - 238 Rate 19.9 %
(= 477)238 Unemployment insurance* - 50 Rate 4.2 %
(= 100)
50 Special HI contribution - 22 Rate 0.9 % Total (€) 1,797 2,867
This means: The employee is paid out 1,797 € (net), and the cost for the
employer is 2,867 € plus accident insurance.
(Quotation of www.invest-in-Germany.de)
For further information about the German Health System please have a look at page 101 of
Business Guide to Germany
(Quotation of www.invest-in-Germany.com)
