Understanding the Total Cost of Employment in Germany: 2026 Guide

Pension Insurance (Rentenversicherung)

What it covers: Provides retirement pensions, disability benefits, and survivor benefits.

Rates (2026): 18.6% total (split equally: 9.3% employer, 9.3% employee)
Contribution cap: €101,400 annually (€8,450/month)

What this means for employers:

• For salaries below €8,450/month, you pay 9.3% of gross salary
• For salaries above €8,450/month, you pay a fixed maximum (9.3% × €8,450 = €784.85/month)
• Pension contributions are not sensitive to how “high” an employee’s salary is; the cap flattens costs for senior staff

Statutory Health Insurance (GKV / Gesetzliche Krankenversicherung)

What it covers: Doctor visits, hospital care, medications, preventive care, and maternity benefits.

Rates (2026):

• General contribution rate: 14.6% (split equally: 7.3% employer, 7.3% employee)
• Supplementary contribution: Average 2.9% for 2026 (varies by health insurance fund)
• Total average: ~17.2% (employer and employee combined)

Contribution cap: €69,750 annually (€5,812.50/month)

What this means for employers:

• Health insurance is more sensitive to salary increases than pension insurance
• Above the cap, you pay a fixed maximum (7.3% + 2.9% = 10.2% of the cap)
• Different health insurance funds charge different supplementary rates; employees can shop for lower-cost plans

Private Health Insurance (PKV / Private Krankenversicherung) and Employer Obligations

Some employees may be eligible to switch to private health insurance (PKV) if they meet certain requirements. As an employer, you still have contribution obligations, but the mechanics differ from statutory insurance.

Eligibility for private insurance:

• Employees earning above €77,400 annually (€6,450/month) in 2026 can opt out of statutory insurance
• Self-employed individuals, civil servants, and certain other groups may also qualify

Your employer obligation for privately insured employees:

You must pay a subsidy (Arbeitgeberzuschuss) to employees with private health insurance, calculated as:

• 50% of the employee’s actual private insurance premium, OR
• The maximum statutory contribution (whichever is lower)

2026 Maximum Employer Subsidy Caps:

• Health insurance: €508.59/month (10.2% of €5,812.50, the contribution cap ÷ 12 × 10.2%)
• Long-term care insurance: €104.63/month (1.8% of €5,812.50)
• Total maximum subsidy: €613.22/month

How this works in practice:

Key differences from statutory insurance:

• You pay the subsidy directly to the employee (not to the insurance company)
• Employee must provide proof of insurance (Arbeitgeberbescheinigung) from their insurer
• Subsidy applies to the employee’s health and long-term care premiums only; supplementary insurance or deductibles are not subsidized
• If you voluntarily pay more than the capped subsidy, the excess is treated as taxable income for the employee

Administrative requirements:

• Employee must submit an employer certificate from their private insurer showing premium amount and coverage details
• This certificate is valid for 3 years unless the premium or coverage changes
• You must update the subsidy if the employee notifies you of premium changes

What this means for employers:

• Private insurance will not increase your cost, as the subsidy is capped in line with statutory rates at €613.22/month
• You have no control over which private insurer the employee chooses or the premium amount (though you’re only liable up to the cap)
• The subsidy is tax-free for both you and the employee (within legal limits)
• If an employee switches from statutory to private insurance mid-year, adjust payroll accordingly from the effective date

Long-term Care Insurance (Pflegeversicherung)

What it covers: Basic support for nursing care due to chronic illness or old age.

Rates (2026):

• Base contribution: 3.6% (employer 1.8%, employee 1.8%)
• For childless employees aged 23+: 4.2% (employer 1.8%, employee 2.4%)
• Reduction for employees with children: −0.25% per child from the second child onward

Contribution cap: €69,750 annually (€5,812.50/month)

What this means for employers:

• The employer share is fixed at 1.8% regardless of children
• Employees with multiple children pay less; this affects their take-home salary but not your employer cost
• This is one of the few contributions where family status affects costs

Unemployment Insurance (Arbeitslosenversicherun)

What it covers: Income support for unemployed workers (typically up to 12 months, depending on eligibility).

Rates (2026): 2.6% total (split equally: 1.3% employer, 1.3% employee)
Contribution cap: €101,400 annually (€8,450/month)

What this means for employers:

• One of the smallest mandatory contributions
• Relatively stable, with low administrative burden

Accident Insurance (Berufsgenossenschaft)

What it covers: Medical treatment, reintegration support, and compensation for workplace accidents or occupational illnesses.

Rates (2026): 1.2–3.0% (employer pays 100%; employee pays 0%)
Varies by: Industry and historical accident rates
No contribution cap

What this means for employers:

• Fully borne by employers; no employee deduction
• Varies significantly by sector (e.g., construction: ~3%; office work: ~1.2%)
• Check the specific rate for your industry with your industry association (Berufsgenossenschaft)