German social security and pensions explained

German social insurance is built on five branches. Pension insurance, Rentenversicherung, funds the state pension. Health insurance, Krankenversicherung, funds medical care. Long-term care insurance, Pflegeversicherung, covers care in old age or illness. Unemployment insurance, Arbeitslosenversicherung, funds benefits between jobs.

The fifth branch, accident insurance, is different. It is paid entirely by the employer through a sector body, the Berufsgenossenschaft, and it covers workplace accidents and occupational illness. The first four are shared between employer and employee, the fifth is the employer’s alone.

The state pension is run by the Deutsche Rentenversicherung on a pay-as-you-go basis, so today’s contributions fund today’s pensioners. An employee builds an entitlement over their working life, measured in pension points that reflect their earnings relative to the average each year.

The standard retirement age is being raised in steps towards 67. The state pension is the foundation, and many employees add to it through a company or private pension, which is where the next sections come in.

For 2026 the contribution rates are pension at 18.6 percent, unemployment at 2.6 percent, health at 14.6 percent plus a supplementary rate, and long-term care at 3.6 percent, with a surcharge on childless employees aged 23 and over. Each is split between employer and employee, except that care surcharge, which the employee bears alone.

Contributions are only charged up to fixed ceilings. In 2026 pension and unemployment contributions stop at a salary of 8,450 euro a month, and health and care at 5,812.50 euro a month. Above those ceilings no further contributions are due, which is why the employer’s effective percentage falls on higher salaries.

On top of the state pension, Germany has a well-established system of company pensions, the betriebliche Altersvorsorge or bAV. Employees have a right to convert part of their salary into a company pension, a process called Entgeltumwandlung, and employers usually have to add a contribution where they save on social costs.

A company pension is a real draw in a competitive market, and many candidates ask about it. It is not compulsory to offer more than the statutory salary-conversion right, but a genuine employer contribution stands out.

For an employer, social security is the bulk of the on-cost above salary, at roughly 21 percent of gross, and it has to be calculated and remitted correctly every month to the right bodies. Errors are costly, because underpaid contributions can be reclaimed with surcharges.

As an employer of record, we handle all of this: the monthly contributions across the five branches, the reporting, and the setup of a company pension where you want to offer one. You get the compliance without building the payroll expertise in-house.

Sources: Deutsche Rentenversicherung and GKV-Spitzenverband publications of the 2026 rates and contribution ceilings. Figures reviewed July 2026.