Employees in Germany care most about their pension plan because the state pension alone is insufficient. In addition, Germany is facing a serious demographic crisis, which is why the German “pay as you go” pension system needs to be supplemented. Hence the reason why company pension benefits are the most popular supplemental benefit in the country.
When in Germany make sure to order a good Bavarian beer!
According to Profion’s recent employee benefit benchmarking survey, in which Profion analyzed benefit plans in the German IT industry, supplemental benefits continue to be a significant part of reward and remuneration packages. This is especially true in industries where a war is raging to attract talent, such as in the IT industry. In this area, almost 100% of companies offer supplemental benefits to all their employees with unlimited employment.
When asked to rank five common benefits in order of importance, the average German employee will respond with: Retirement, Disability, Death.
Even though company pension plans are already the number one benefit for employees, their significance is increasing even more. New developments include:
- Shortening of the legal vesting limit to 3 years starting January 2018
- From January 2018, the minimum age for starting the vesting of pension rights, may not exceed 21 years
- Government continues to pass legislation encouraging employers and employees to grow private pension plans via salary sacrifice schemes.
These incentives along with the fact that the state pension is expected to continue to decrease benefits and to increase the pension eligible age due to the low worker/pensioner ratio, leads to a very pension-focused benefits market.
Average Cost For Employer Sponsored Benefits
An employee’s supplemental benefit package will cost approximately 4% of salary.
Advice To Employers
Employment law in Germany has far reaching impact. It is important to be aware of this when you start to hire people in Germany.
Secondly, there are differences in the design and prevalence of supplemental benefits based on the region the company settles in and their industry sector. In order to offer a competitive benefit package, it is essential to bear these two variables in mind and take a close look at the relevant benchmarks.
There is no need to implement supplemental company healthcare plans because the mandatory health care system in Germany is excellent. Another surprising fact is that there are long periods of paid sick leave and maternity/parental leave that employers are legally obliged to grant to their employees.