For a business to comply with all German legal regulations concerning an obligation to contribute to social security, it is important to understand how social security works, including its various issues and exceptions. In this article, you will find out what social security and employment subject to social security mean in practice, how much the contributions are, and what types of employment are subject to social security obligations. We will also explain the legal situation regarding short-term employment, and mini- and midi-jobs.

What’s in this article?

• What is social security?
  
• What is employment subject to social security contributions?
  
• How much are the contributions for social security?
  
• Which jobs are not subject to social security contributions?
  
• Are short-term jobs subject to social security contributions?
  
• Are mini-jobs subject to social security contributions?
  
• Are midi-jobs subject to social security contributions?
  
• Who may be exempt from social security contributions?
  

What is social security?

Social security is an insurance system where employees and employers pay contributions. In emergencies, individuals can receive financial support from this large, solidarity-driven pool of funds. Social security is a key cornerstone of the German social safety net. It helps people in emergencies, or when they become ill or unemployed, have an accident, or require care in old age. Therefore, social security offers protection for citizens against financial risks and creates a community of solidarity in which everyone’s contributions help to support individuals in emergency situations.

Germany has one of the most efficient social systems in the world. It has been developed over many years and has been subject to repeated reforms. The first social security schemes were launched at the end of the 19th century: health insurance in 1883, accident insurance in 1884, and disability and old-age insurance in 1889.

Today, more than 90% of people in Germany are currently covered by social security. The legal basis is the Fourth Book of the Social Code (SGB IV). The following five pillars are at the core of the insurance:

• Statutory pension insurance
  
• Statutory health insurance
  
• Nursing care insurance
  
• Unemployment insurance
  
• Statutory accident insurance
  

What is employment subject to social security contributions?

Any form of employment relationship under which social security contributions are paid is designated as employment subject to social security contributions. Whether there is an insurance policy or not depends on the respective gainful employment of each employee. If there is “employment,” insurance is usually mandatory. However, this also means that employees can use and benefit from it, if necessary. According to Section 7 of the SGB IV, employment is nonindependent work, especially in an employment relationship. However, it is not always easy to determine whether a given form of work counts as employment or self-employment. To do this, an overall view of work performance must be taken. The main question is: in practice, which characteristics of the respective employment statuses prevail?
To confidently determine a person’s employment status, individuals and businesses can apply for a status determination procedure at the clearing house of the German Pension Insurance Association in accordance with Section 7a of the SGB IV. Further information can be found on the Federal Ministry of Labor and Social Affairs website. In individual cases, the relevant social security provider is responsible for determining a person’s employment status. In the event of a dispute, responsibility falls to the social court.

Employees with an obligation to contribute to social security usually include all employees who are subject to health, pension, and nursing care insurance. Employees who are subject to contributions under the law of employment promotion (SGB III) must also be covered by social security. The same applies to those obliged to contribute to statutory pension insurance—or for whom contributions under the law of employment promotion must be paid.

Dependent employment or salaried relationships are, generally, jobs where an obligation to contribute to social security exists. This includes employment relationships, vocational training, studies, and internships. In addition, there are certain self-employed activities for which insurance obligation is prescribed by law. These include artists, craftspeople, and farmers. Due to the volume of exceptions and special regulations set out by the legislature, it is important to closely examine each individual case to determine whether an employment comes with an obligation to contribute to social security. In 2022, around 34.4 million people were employed with an obligation to contribute to social security.

How much are the contributions for social security?

In part, social security contributions are paid by employees. These are deducted directly from their gross salary. The employers cover the other part. The amount payable depends on the individual gross salary of the employee.

• Pension insurance: The contribution level for pension insurance amounts to 18.6% of gross salary—up to the contribution assessment ceiling of 7,450 euros per month in the new federal states of Germany and 7,550 euros per month in the old federal states. The contributions are covered in equal parts by employers and employees (i.e., 9.3% each).

• Health insurance: Employers and employees also share the costs equally. The level of health insurance contribution incorporates both a basic and an additional amount. The basic amount is the same for all health insurance providers and is 14.6% of gross salary—up to the contribution assessment ceiling of 5,175 euros per month or 62,100 euros per year. Employers and employees each pay 7.3% of gross income. The additional amount, which is split equally between the employee and employer, is determined on an individual basis by each health insurance provider. The average is currently 1.7%.

• Nursing care insurance: At the same time, all those with statutory health insurance are automatically covered by long-term nursing care insurance. The contribution rate is 3.4% of gross salary—this means 1.7% for employer and employee each. The type of care in old age depends, among other things, on whether the individuals concerned have children who could provide care. For this reason, those without children must contribute an additional 0.6% surcharge on long-term care insurance, and families with more than one child under 25 can expect deductions in their contribution rate.

• Unemployment insurance: Unemployment insurance accounts for a total of 2.6% of gross income—1.3% for employer and employee each. The contribution assessment ceiling is based on the figures associated with pension insurance.

• Accident insurance: Accident insurance covers employees for work-related accidents and accidents suffered during commuting. However, employees are not required to pay any costs themselves. These are fully covered by employers, who take out and pay for an accident insurance policy via the employers’ liability insurance association. Contributions for accident insurance are determined on an individual basis for employees or businesses. The calculations not only take into account the salary paid, but also, for example, the hazard class, which reflects the risk level of the respective job. In Germany, the average contribution rate is 1.14% of gross salary.

Which jobs are not subject to social security contributions?

In addition to the large number of jobs where an obligation to contribute to social security exists, there are also some jobs that are exempt from social security contributions. The persons concerned are not required to pay social security, but they do have to take care of their own retirement plans. This primarily applies to full-time self-employed activities. However, there are some exceptions.

In addition to those who are self-employed, civil servants, judges, soldiers, and private school teachers are also exempt from social security obligations. Students are exempt from health, nursing care, and unemployment insurance contributions if their weekly working hours during their term amount to less than 20 hours. However, they are obliged to contribute to pension insurance if they earn more than 520 euros per month. It is important to carefully examine whether social security contributions are required, especially when it comes to short-term and marginal employment.

Are short-term jobs subject to social security contributions?

A short-term job is employment limited to a maximum of three months, or 70 business days, in a calendar year. Furthermore, if the pay exceeds 520 euros per month, it may not be performed professionally. A classic example is seasonal workers. For short-term jobs, neither employers nor employees have to pay contributions to pension, health, nursing care, and unemployment insurance. However, employers are obliged to pay accident insurance contributions.

Are mini-jobs subject to social security contributions?

Mini-jobs are marginal jobs that pay a maximum of 520 euros per month. They are only partially subject to social security contributions. On the one hand, businesses that employ mini-jobbers must pay accident insurance for them. On the other hand, there is an obligation to pay pension and health insurance. The businesses must pay these contributions in lump sums. The mini-jobbers themselves can be exempted from the obligation to contribute to pension insurance, but not from flat-rate health insurance contributions. The latter only applies if, for example, they hold private health insurance or are already insured elsewhere. Social security contributions for nursing care and unemployment insurance are waived for mini-jobs—for both employers and employees. Note: businesses must register mini-jobs for social security via the mini-job center.

If an employee holds several mini-jobs at different businesses, the total of 520 euros may not be exceeded. If the total income does exceed this, an obligation to have insurance arises automatically. In addition, should two activities be subject to social security contributions, and one of these activities is work subject to social security contributions due to being considered a main job, only the mini-job can be exempt from insurance. For unemployment insurance, main jobs (subject to insurance) and low-paid jobs are not totaled together. This means that mini-jobs in this scenario are insurance-free.

Are midi-jobs subject to social security contributions?

Midi-jobs are jobs that are remunerated with a monthly salary between 520.01 euros and 1,600 euros. Unlike a mini-job, a midi-job is always subject to social security contributions. However, the contributions are below those of normal earners. They are also based on the sliding social security contribution scale salary. Detailed information and a calculator for assessing an individual’s sliding social security contribution scale salary can be found on the German Pension Insurance website. Essentially, as with mini-jobs, the income amount is key when carrying out several midi-jobs.

Who may be exempt from social security contributions?

Some groups have the option to be partially exempted from insurance obligations if they are employed in a role that is subject to social security contributions. In addition to mini-jobbers, this also includes members of certain professional groups. For example, employees in the medical, pharmaceutical, or architectural professions can apply for exemption from pension insurance contributions. If certain requirements are met, other groups can also be considered for exemption from social security obligations. Among others, these include:

• Managing directors
  
• Family workers and descendants of an employer
  
• External directors
  
• Employee shareholders
  
• Executive directors of stock corporations
  

Employees whose regular annual salary exceeds the general or special annual salary limit of 69,300 euros or 62,100 euros are exempt from statutory health insurance contributions. However, they can take out voluntary health insurance. If this limit is exceeded during a calendar year, health insurance obligations stop at the end of the calendar year—provided that the limit is also expected to be exceeded in the following year. When submitting an application, it is important to comply with the relevant timelines. You must apply with the health insurance provider for the exemption from the obligation to contribute to health insurance within three months of the compulsory insurance contributions commencing. You must also prove that you have health insurance elsewhere. This could, for example, be private health insurance.

To learn more about the several exceptions and special regulations relating to social security, and to keep up to date with the latest news, businesses should conduct a detailed examination of the topic. To learn more about tax and accounting solutions from Stripe, get in touch with our sales team.