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Economic Development Dortmund

The Social Security System

The German social security system consists of five branches in order to cover the essential risks for employees. Before you may think that this is not important for you as entrepreneur, because it is not at your own risk, please consider that you contribute partially to the financing of the social security. That means, you must pay a part of the insurance contribution.

5 social security branches

The German social security knows the following 5 branches:

As employer, your contribution to nearly all social security insurances for your employee is 50 %. An exception is the industrial accident insurance (“betriebliche Unfallversicherung”) which is contributed by your side to 100 % (cf. below).

What is the amout of the contributions to the social insurances?

Old-age pension insurance (PI), health insurance (HI), unemployment insurance (UI), and nursing care insurance (NI) are financed half the way by the employee, half the way by the employer. The amount of the contribution is measured by the salary of the employee.

Example: your employee earns a monthly salary of € 3,500. The contributions to the social insurance are composed as follows:

* The contribution rates of the sick benefit funds (“Krankenkassen”) are different. The average contribution rate in 2004 is 14.2 %

It is important for you as entrepreneur that the contribution of the employee will be taken from the gross salary, i.e. you have to pay your contribution additionally. With respect to the calculation of the labor costs, your social insurance contribution of € 733 has to be added to the gross salary of € 3,500.

Are there maximum limits of the social insurance contributions?

Yes, there are, namely the so-called income thresholds (“Beitragsbemessungsgrenzen”). These thresholds are pay scales to calculate the contribution to the social insurance. All that is above this limit will not be included in the calculation. Currently, the income thresholds are:

• West Germany: (monthly) € 5,150 for the old-age pension insurance and the unemployment insurance, € 3,487,50 for the health insurance and the nursing care insurance.
   
• East Germany: (monthly) € 4,350 for the old-age pension insurance and the unemployment insurance, € 3,487 for the health insurance and the nursing care insurance.

An example to explain the functionality: you employ someone in Dortmund, West Germany, earning a monthly gross salary of € 6,000.

Registration of Employees

It is your duty as employer to register your employees at the corresponding social insurance institutions and to pay the contributions to the different insurances. The registration of the insurances and the payment of the contributions goes off by the sick benefit fund of the employee. You have to make the registration in an interval of two weeks at maximum after the starting date of the employee.

The employee has the right to select the sick benefit fund he wants. You have to submit the health insurance registration sheet to this fund. You will receive the registration sheet at every sick benefit fund or you may download the sheet from the Internet (cf. downloads). After the registration, the sick benefit fund informs you on the firm number (“Betriebsnummer”) which is valid for the social insurance matters of your enterprise.

In addition, you have to register the occupied employees at the job center (cf. authority). From there, you will also receive a firm number which you have to register in the insurance sheet of the employees.

Legal Accident Insurance

The legal accident insurance, the fifth column of the social insurance, represents a special case. This kind of insurance is solely borne by the employer. The social insurance institutions are the German Employer's Liability Insurance Associations (“Berufsgenossenschaften”). The Employer's Liability Insurance Association is competent depending on the branch of your enterprise.

Normally, the Employer's Liability Insurance Association contacts you automatically, because they receive a notification about the registration of your business. But this may take some time. If you want to employ someone and you have not yet contacted an Employer's Liability Insurance Association, you should get in contact with them from your side. You can ask about the competent Employer's Liability Insurance Association at their general association in Germany (“Hauptverband der gewerblichen Berufsgenossenschaften”) (cf. authority). Depending on the fact if you really occupy employees or not you have to contribute payments to the accident insurance.

The amount of the contribution to this insurance is not standardized and is dependent on the accident branch (“Gefahrenklasse”) of your enterprise. This means that the contribution is higher when the risk of accident for the employees in your enterprise is (statistically) higher.

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Last modified: 19.08.2005 | © Wirtschaftsförderung Dortmund | Email: go-to-do@stadtdo.de