Employee Benefits in Germany: A Guide to Mandatory and Common Benefits

Hiring talent in Germany is more than just a business decision. It's an opportunity, one that opens doors to a highly skilled workforce, a robust economy, and, yes, a new set of challenges. But here's the thing: if you're thinking about hiring there, you can't just show up and start offering jobs. Germany has a very clear set of rules when it comes to labor laws. One of the most important? Mandatory benefits. Employers, foreign or local, are required by law to provide certain benefits to their employees. It's part of the deal.

And it doesn't stop there. If you're really looking to compete, you have to go beyond the basics. Supplemental benefits become your ticket to standing out. These are the perks that can make a real difference, the ones that show you're invested in your people, not just legally compliant.

If you're wondering how to get all of this right, how to provide the benefits that keep you in the good graces of both the law and your employees, well, that's what this guide is for. We'll walk you through the mandatory benefits, the extras you might want to consider, and how to make sure you're doing everything by the book.

Employee benefits in Germany: What's included?

Mandatory employee benefits in Germany include national health insurance, national pension, unemployment insurance, long-term care insurance, and occupational accident insurance. Additionally, German employees typically receive supplemental benefits, such as a private pension, supplemental health insurance, and supplemental life and disability benefits.

Mandatory employee benefits in Germany

German employment law requires employers to provide several statutory benefits to employees. Below are mandatory employee benefits required by law.

Learn more: What Are Statutory Benefits?

Health insurance

German law requires everyone working or living in Germany to carry health insurance, and most are on public health insurance plans. Companies interested in hiring employees in Germany must contribute to their health insurance premiums.

The flat contribution rate for statutory health insurance is 14.6% and is shared evenly between the employee and employer. Individuals earning over €64,350 annually may choose to opt out of public health insurance and enroll in private health insurance.

Read also: 8 Countries With the Best Healthcare for Employees

Pension plan

There are three aspects of the German retirement system: company pension plans, private retirement investments, and the public retirement insurance system (social security). Company pension plans typically supplement the public retirement system.

Germany's social security plan is mandatory for all employers and employees, and both must contribute. The current contribution rate for public pension is 18.6% and is shared evenly between the employee and employer.

While company pension plans aren't mandatory, many companies offer a pension to help cover shortfalls from the public retirement insurance system.

Long-term care

Long-term care insurance, or nursing care insurance, covers employees that need ongoing treatment or care due to an accident, illness, or old age. The contribution rate for long-term care insurance is 3.05% and is shared evenly between the employee and employer.

Unemployment insurance

All German employees who work at least 18 hours per week qualify for unemployment insurance. Employees who have been employed for at least 12 months of the previous two years receive the benefit from the first day of being dismissed from work or 12 weeks after resignation. The contribution rate for unemployment insurance is 2.5% and is shared evenly between the employee and employer.

Occupational accident insurance

Also known as workers' compensation, occupational accident insurance covers employees who experience work-related accidents or illnesses. Contributions are borne by the employer and cover payments for medical treatment and services needed to aid employees' reintegration into the workforce. Contribution rates depend on the industry and employees' accident risk.

Mandatory leave in Germany

German companies must provide three types of mandatory leave: annual, parental, and sick leave.

Annual leave

German employers must provide 20 paid days off for employees per year based on a five-day work week (and 24 days off for employees working a six-day work week).

While not included in the paid leave entitlement, German employers typically give their employees paid time off for the following national public holidays:

• New Year's Day
• Good Friday
• Easter Monday
• Labor Monday
• Ascension Day
• Whit-Monday
• German Unity Day
• Christmas Day
• St. Stephen's Day

Holidays in Germany also vary by region, so certain employees may expect to receive time off for regional-specific holidays in addition to national public holidays.

Maternity and paternity leave

German employment law requires employees who give birth to receive six weeks of paid maternity leave before their due date and another eight weeks after birth. Employees who have premature or multiple births are allowed up to 12 weeks.

On top of that, German employees who become parents can take up to 24 months of leave within three years of birth-the cost of which is covered by the government. Companies cannot terminate employees during maternity or paternity leave.

Read more in our complete guide to paid maternity leave by country.

Sick leave

German employers must provide their employees with six weeks of paid sick leave upon four weeks of employment. However, employees must submit a doctor's note to their employer for sick leave that extends beyond three days.

Learn more about Germany's statutory employee benefits and labor laws.

Common employee benefits in Germany

In addition to those mandatory benefits, many German companies provide supplemental benefits to attract new talent. Below are several common employee benefits that give employers a competitive edge.

Learn more: What Are Supplemental Benefits?

Private pension plan

Many companies offer private pension plans to employees to supplement the public retirement system. Employees may see a decrease in social security benefits in the future, making private pensions an attractive benefit for German employees.

Supplemental life and disability benefits

Life insurance is another common supplemental benefit that German employees typically receive. Life insurance benefits usually amount to two times the pensionable pay to the employee's survivors and are subject to income tax.

Supplemental benefits packages in Germany often include long-term disability (LTD) or total permanent disability (TPD) benefits. The TPD benefit is typically a lump sum and amounts to twice the pensionable pay, while the LTD benefit is an annuity at about 20% of pensionable pay. The annuity is usually payable until recovery, retirement, or death. Additionally, both disability benefits are subject to income tax.

Supplemental health insurance

While 90% of employees in Germany qualify for public health insurance, employees earning more than €64,350 may choose to enroll in private health insurance instead. Private health insurance typically offers a broader range of coverage than statutory health insurance, making it an attractive benefit for talent that wants or needs more comprehensive health benefits.

Attracting top talent with additional fringe benefits in Germany

To attract and keep top talent in Germany, companies need more than just basic benefits. Enter fringe benefits, those extras that improve quality of life. Think additional time off or wellness funds. These perks show employees they're valued, creating an environment where they can truly thrive.

Below are a few common fringe benefits German employees enjoy:

• Additional PTO. Companies may opt to offer more paid annual leave for employees as a fringe benefit (beyond the 20 days required by law).
• Housing and child subsidies. Housing subsidies may attract talent who must relocate for work. Child subsidies typically reimburse employees who pay for childcare.
• Equity compensation. Granting equity awards to employees gives them a small stake in your company, which encourages employee engagement and retention.
• Travel allowance. A typical travel allowance covers employees' travel to and from work. For example, an employee may receive a stipend of €0.30 per kilometer.
• Wellness funds. Wellness funds are gaining in popularity and typically cover the cost of a gym membership.

Learn more: What Are Fringe Benefits?

What about 13th-month pay in Germany?

While it's not mandatory to offer 13th-month pay in Germany, many companies choose to provide an extra month's pay to employees, typically paid out in November.

Start hiring in Germany-and let Pebl handle the tricky parts

If you're thinking about hiring employees in Germany, there's a lot you need to know. Beyond the usual expectations, companies have to navigate a maze of mandatory and common employee benefits to stay compliant. And let's be honest, it can feel overwhelming. But here's the thing, you don't have to face it alone.

Pebl has your back. With our Global Benefits services, companies can offer employee benefits that not only meet but also exceed the minimum requirements. It's about going above and beyond, creating reward packages that stand out in a competitive market. Our team of experts crafts tailored solutions, making sure everything aligns with local laws, but also helping you attract and retain the best talent.

So if you want to build a top-tier remote team, and gain an edge over your competitors, reaching out to Pebl might just be the smartest move you can make.

Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided "as is," and no representations are made that the content is error-free.

© 2025 Pebl, LLC. All rights reserved.