Working in Munich?
Social Security in Germany
When you begin to work in Munich, you will usually become part of Germany’s social security system. Here we give an overview of the other kinds of social insurance that are standard for most employees in Germany, both locals and expatriates. You can find out more about medical insurance in Germany in our guide to health insurance in Germany.
Should Bad Luck Befall You: Accident Insurance
First of all, every employee is automatically insured against accidents in the workplace and occupational diseases. Before you start your new job, your employer will enroll you in the company’s accident insurance plan and pay for your contributions. Unless you are self-employed, you don’t have to do anything — except file a detailed insurance report in case that something does happen to you at work.
Preparing for the Future: National Pensions
Apart from public healthcare, the most important part of Germany’s welfare state is the national pension plan. As of 2016, contributions totaled 18.9% for old-age pension. Half of these contributions are paid for by the company while the other 50% are withheld directly from the income. There is, however, a contribution ceiling of 69,600 EUR, meaning that any annual income over this will not be subject to the payments.
Selected groups among the self-employed, e.g. tradespeople and freelance artists, are also required to contribute to national insurance, which is mandatory for employees. Other self-employed persons can sign up on a voluntary basis, rely solely on private pension policies, or join a pension plan offered by their professional association (e.g. for self-employed doctors in Germany).
Once you reach the official retirement age of 65 or 67 — for those born in or after 1964, the age is 67 apart from some exceptions — you will draw an old-age pension from a government fund, depending on the amount of time you have been contributing to the system. The exact sum you’ll receive is calculated according to a complicated formula, which depends, among other things, on the years you’ve paid into the pension funds and the amount of your income. As mentioned above, only certain self-employed people are covered. So if you are considering self-employment, please do additional research and consult our guide regarding self-employment in Germany.
Since the national pension is, however, often not enough, many Germans pay into government-supported private pension schemes to top up their benefits in old age (so-called Riesterrente or Rürup-Rente). Company pension plans (betriebliche Altersvorsorge) are also becoming increasingly popular among employees. The contributions can be deducted directly from your gross salary, and many employers also sponsor such plans with a small monthly sum.
What You Need to Know: Social Security for Expats
For foreign residents working in Germany, there may be certain exceptions to compulsory participation in the national pension scheme, e.g. for assignees on intra-company transfers and people in the diplomatic service. If such exceptions don’t apply to you and Germany does not have a social security agreement with your home country, you have to pay into Germany’s government pension funds during your time in Munich. If your country of origin does not have a social security agreement with Germany and you haven’t been contributing to the German system for more than five years, you may ask to get your contributions back. You can apply for a refund, at the earliest, 24 months after returning to your home country.
Nationals of EU/EFTA member states and of those countries who do have a social security agreement with Germany should contact their pension office back home or the Deutsche Rentenversicherung. They will be able to explain how exactly your time spent working in Germany may affect your old-age pension. Of course, private pension plans are a completely different matter. Whether you contribute to Germany’s pension funds usually has no influence on them.
In 2016, Germany held social security agreements with 18 different countries, as well as special agreements with China and India. To see if Germany has a social security agreement with your home country, visit the German pension insurance website. Here you will also find details on how to contact them if you have any further questions.
For the Worst Case Scenario: Unemployment Benefits
Last but certainly not least, a part of your gross salary is used to pay for unemployment insurance. This amounts to 3% of your earnings, paid half by yourself and half by your employer. If you have paid these contributions for at least 360 days within the last two years, you are entitled to unemployment benefits. You will receive 60% of your net income (67% for people with dependent family members) for 12 months.
Usually, renewing the residence permit is dependent on your ability to pay for your living. Thus, if you should lose your job, but want to stay on in Munich while you’re looking for a new one, make sure to get legal advice. If you are entitled to get unemployment benefits or if you have a savings account to fall back on, chances are probably good that your residence status won’t be affected for a while.
More in-depth information on these topics can also be found in our extended article on Social Security in Germany.
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