social security contributions

noun · Sozialversicherungsbeiträge

German social security runs on a single combined contribution, the Gesamtsozialversicherungsbeitrag, and the employer alone owes it to the collecting body, the employee’s share included. He may recover that share only by deducting it from pay, § 28g SGB IV, and a missed deduction is largely his loss, which is why payroll errors in Germany are expensive rather than merely embarrassing.

Which translation, when

Gesamtsozialversicherungsbeitragone payment, four branches: the contributions to health, long-term care, pension and unemployment insurance are collected as a single combined contribution, and § 28e Abs. 1 SGB IV puts the duty to pay it on the employer; payment of the part the employee has to bear counts as made out of the employee’s assets, so the employer pays the whole sum and settles internally afterwards.

Abzug als einziger Wegthe employee’s share: the employer has a claim against the employee for the part the employee must bear, but that claim can be asserted only by deduction from pay, § 28g SGB IV, and where a deduction was omitted it may as a rule be made up only in the three following payroll runs, later only where the deduction was missed through no fault of the employer, so a contribution discovered years later in an audit is economically the employer’s alone.

Haftung Dritterwho else can be called on: where workers are hired out under a valid contract, the hirer is liable for the employer’s payment duty as a guarantor waiving the defence of unexhausted remedies, § 28e Abs. 2 SGB IV, and where the hiring contract is invalid the agency and the hirer answer as joint debtors; the licensing regime behind those constellations is held by the temporary agency work entry.

Why

Social security contributions are the Sozialversicherungsbeiträge, and the German collection mechanism differs from the English one in a way that decides who bears the risk. The contributions to the four branches, health insurance, long-term care insurance, pension insurance and unemployment insurance, are not paid separately: they are combined into the Gesamtsozialversicherungsbeitrag and paid to a single collecting body. Section 28e Abs. 1 SGB IV places the duty to pay that combined contribution on the employer, and the same provision adds that payment of the part the employee has to bear counts as made out of the employee’s assets. The employee therefore never owes the collecting body anything; the employer owes everything and recovers half internally. How he recovers it is the second point, and it is the one foreign payroll departments discover too late. Under § 28g SGB IV the employer has a claim against the employee for the employee’s share, but that claim can be asserted only by deduction from pay, and where a deduction has been missed it can as a rule be caught up only in the three following payroll runs, and later only where the deduction was missed through no fault of the employer; the restriction falls away altogether where the employee culpably breached his own duties to inform, where he bears the whole contribution or while he receives payment in kind only. A contribution that surfaces years later, typically in an audit after a status finding, is therefore economically the employer’s alone, and the arrears are calculated on a grossed-up basis. Third parties can also be drawn in: under § 28e Abs. 2 SGB IV a hirer of agency workers is liable for the employer’s payment duty as a guarantor without the defence of unexhausted remedies, and where the hiring contract is invalid the agency and the hirer answer as joint debtors, the licensing background being held by the temporary agency work entry.

Typical mistakes

The employer owes the combined contribution in full including the employee’s share, § 28e Abs. 1 SGB IV, so treating the employee as a debtor of the collecting body misstates who is liable.
The employee’s share can be recovered only by deduction from pay and only for a limited number of runs, § 28g SGB IV, so arrears found later fall on the employer.
A hirer of agency workers is liable as a guarantor for the contributions, so a client buying in labour cannot treat them as purely the agency’s problem.

What matters

Setting up German payroll for a foreign group: the process should treat the employer as debtor of the whole combined contribution, build the deduction of the employee share into each run, and flag the guarantor liability where agency workers are used.

Authority

§ 28d SGB IV
§ 28e SGB IV
§ 28g SGB IV

What the machine misses

Machine output for social security contributions gives Sozialabgaben or Sozialbeiträge, everyday words that hide the mechanism, and German law collects a single Gesamtsozialversicherungsbeitrag owed by the employer alone under § 28e SGB IV with the employee’s share recoverable only by deduction from pay; the loose rendering also obscures that arrears discovered later stay with the employer.

See what the machine does with this clause →

Examples

social security contributions	Sozialversicherungsbeiträge
the combined social security contribution	der Gesamtsozialversicherungsbeitrag
the employee’s share	der Arbeitnehmeranteil
deduction from pay	der Abzug vom Arbeitsentgelt

More notes on these sections

statutory health insurance gesetzliche Krankenversicherung

pension entitlement Rentenanspruch