What is social security and who can receive social benefits?
What makes Germany a great country to live in for expats and immigrants alike is the well-developed social security system. If you’ve just moved to Germany to work and are getting acquainted with the way of life in the new country, one of the main things you need to know is, how much you will be contributing to social security and what benefits you will gain?
What is social security?
The social security system known as Die Sozialversicherung in German, is a contribution that is made by both citizens, immigrants and expats of the country. If you are employed in Germany, you as well as your employer will be contributing to your social security. Self-employed individuals must also contribute to these insurance funds.
A little titbit from history tells us that retirement benefits were first proposed in Germany by German Chancellor Otto Von Bismarck in 1881 and adopted by the country in 1889. This makes Germany the first country to have old age insurance. Bismarck was instrumental in having spearheaded the social insurance programs in Germany to ensure that senior citizens and work population were taken care and also to promote maximum economic output in the country. Membership into in the social security system
Every jobholder in Germany – employed by a company, organisation or self-employed is required to pay a certain amount from of his gross salary to the social security system. This assures the job holder is protected against any risk or illness, accidents in their jobs, unemployment, or financial security after retirement. In other words, being employed in Germany allows you a membership into the country’sies social security benefits.
What are the social security contributions made up of?
Before we proceed any further, it is important to note that the German social security and German tax systems are two separate entities. Payments to social security are collected by public health insurance companies, while taxes in Germany are collected by tax offices.
The social security in Germany is based on what is known as a principle of solidarity, i.e. the one who is insured contributes towards their own individual social security based on their salary or income. Irrespective of your financial ability, every job holder in Germany will gain the same benefits from their insurances.
As a foreigner working in Germany, you as well as your employer are required to contribute to the social security system. If you’re working in Germany as an HYPERLINK “https://newlandchase.com/immigration-insights/latest-news/germany-new-intra-company-transfer-permits-introduced/” intra – company assignee or you’re on an assigned diplomatic service, you are exempt from making your contribution to the social security.
If you are an In the case of employees who relocate to another country of back home after working for 5 years or more in Germany, it is essential to check with an authority from your pension insurance on how you can claim your pension later.
5 pillars of the social security system
It is mandatory for any job holder to contribute to health insurance, unemployment insurance, nursing care insurance, pension insurance and accident insurance. Contributions to these 5 insurances are made from your gross income. As an employee, your employer will register you with an insurance agency that will take care of your contributions.
Contributions to social security benefits in Germany are made both by employee and employer. Your employer will pay roughly about the same percentage (20%), if not more towards your social security. The amount of social security paid by an employee is calculated on their gross total income and is automatically deducted from their monthly income. Most jobholders pay 20% of their gross income to social security, while their employers also contribute roughly the same amount as well. How much an individual pays towards their social security depends on their earnings.
Please refer to the table chart below for the exact employee and employer percentage contribution towards social security.
*Health insurance or KrankenversicherungIt is mandatory to be pay health insurance in Germany as this covers your doctor visits, hospital costs, medical therapy, dental care, medication, prescription eyeglasses, x-rays and other procedures that are crucial for one’s health and wellbeing. One can also claim the benefits of health insurance in events like an accident or serious illnesses.
Most employers usually pay six weeks of sick pay and post this the employee’s health insurance steps in to cover for sick pay.
Nursing care insurance or PflegeversicherungThe nursing care insurance covers costs for those who require long- term nursing care as a result of an illness or old age.
*Unemployment insurance or ArbeitslosenversicherungThe unemployment insurance provides those who are unemployed with a living allowance, assistance to find work and maybe at times additional training required to find a new job. To receive unemployment benefits, it is necessary for an individual to have contributed a year before loss of their job.
* Pension insurance or RentenversicherungThe retirement age limit of Germany is currently 65 years and this will be extended to the age of 67 very soon. On retirement, a pensioner is entitled to receive a pension based on the total years of employment in Germany. The amount also depends on the salary of the individual. Expats or immigrants returning to their home land can also avail their pension in their home country.
One great service to use for easy remittance of money abroad, especially to India is Rewire’s money remittance service. It is simple and easy, and you can transfer your pension to your home country within 1 business day. Rewire is a secured platform for any inter-country fund transfer and also charges low fees and has great rates.
*Accident insurance or UnfallversicherungThis is usually paid for by the employer and covers the medical treatment from any accidents or illnesses that happened at work, on the way or from work. In the case of the event where the employer is physically or mentally unable to resume working, a pension will be paid. This insurance covers funeral costs in the case of death.
A mini job in Germany is a low income or part time job where an individual gets 450 Euros or less. This is the employee does not have to pay for social security but is required to register for health insurance.
Obtaining your social security number and card.
Every jobholder in Germany who has health insurance (which is mandatory) will receive a social security number Sozialversicherungsnummer along with a card. Your employer will ask for this number as this is proof that you are a part of the German social security system.