How Does the Social Security System Work in Germany?

Modified on: Thu, 5 Feb, 2026 at 6:29 PM

Germany has a comprehensive social security system that protects employees in areas such as healthcare, retirement, unemployment, and long-term care.

Most employees are covered automatically through payroll contributions.

Below is a simple overview of how it works.

Statutory Health Insurance (GKV)

Most employees in Germany must join a statutory health insurance fund (Gesetzliche Krankenversicherung – GKV).

Membership is mandatory if your gross salary falls below the annual income threshold set by the government.

Key points:

Contributions are split between employee and employer.
Coverage includes:
- Doctor visits
- Hospital stays
- Prescription medication
- Preventive care
- Dental care
- Maternity care
Employees can choose their own public health insurance fund (“Krankenkasse”).
Benefits are standardized across funds.
Everyone has equal access to care, regardless of income or medical history.

Private Health Insurance (PKV)

Some employees (usually higher earners) can choose private health insurance (PKV) instead of GKV.

Private insurance may offer additional benefits, but it usually costs more.

Even with private insurance, employees must still contribute to Germany’s social security system (such as pension and unemployment insurance): Why Does Payslips Show a Statutory Health Insurance Fund If I Have Private Insurance (PKV)?

Long-Term Care Insurance (Pflegeversicherung)

All employees also contribute to long-term care insurance.

This covers support for people who need help with daily activities due to age, illness, or disability.

These contributions are separate from regular health insurance.

The Five Pillars of Germany’s Social Security System

Germany’s system is built on five core areas:

1. Health Insurance (Krankenversicherung)

Covers medical care through statutory (GKV) or private (PKV) insurance.

2. Pension Insurance (Rentenversicherung)

Provides income during retirement.

3. Accident Insurance (Unfallversicherung)

Covers workplace and commuting accidents.

4. Unemployment Insurance (Arbeitslosenversicherung)

Provides financial support during periods of unemployment.

5. Long-Term Care Insurance (Pflegeversicherung)

Supports employees who need ongoing care.

Umlage 1 and Umlage 2 (Employer Contributions)

Germany also uses two contribution systems to fund specific benefits:

Umlage 1 (U1)

Supports statutory sick pay
Funded by employer contributions

Umlage 2 (U2)

Covers maternity-related costs
Also funded by employer contributions

These systems help employers share the cost of employee absences and maternity leave.

In Summary

Most employees join statutory health insurance (GKV).
Some can opt for private insurance (PKV).
Everyone contributes to pension, unemployment, and long-term care.
Employers and employees share most costs.
The system ensures access to healthcare and income protection.

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