This Asinta insight report gives you basic information on benchmarking employee benefits in Germany. The general topics include the typical German benefits landscape, mandatory employee benefit requirements and employment laws, and typical German benefit designs and costs.
An example of what’s inside
Employee benefits are a critical differentiator in Germany, especially in the highly skilled sectors where there is a war for talent and in which sectors salaries already tend to be high. These include the IT/high-tech, biotech & life sciences, engineering, consulting and financial services. Therefore, it is critical for employers to have a strong benefits package to further separate themselves from their competition.
When benchmarking employee benefits in Germany, know that retirement matters most.
- Retirement financing is the biggest concern for employees. This is for two reasons. The state pension amounts continue to decrease, and the retirement age increases. For example, early retirement is possible from age 62, albeit with reductions of 0.3% per month.
- Every employer must, by law, transfer minimum contributions into the state pension system for both the employer and employee. Contributions to the state pension do not accumulate into a cash-backed fund on behalf of the employee. Instead they receive payment from current income from pension insurance. This is by means of an allocation process (pay-as-you-go system).
- Due to the funding crisis, the normal monthly gross retirement pension amount is approximately €1,154 based on 45 years of contribution and an average income. The maximum normal gross monthly retirement pension amounts to approximately €3,000. This is however a theoretical figure since it is almost unachievable.
- Due to changes in the pension law, pension payments are now subject to tax. This applies over a gradual time frame for pensions already being paid to avoid undue hardship for the pensioners.