Social security on the national level

The welfare state is based on the principles of solidarity and individual responsibility. Germany's social safety is based on a network of laws in all of the states designed to provide security for individuals in case of sickness, disability and old age as well as policies that provide allowances for dependent children and housing.

The health and retirement benefits granted by state-run programs fulfill a responsibility conferred on the German state by its constitution, the Basic Law (Grundgesetz).

The activities of unions and their cooperation with employers' associations result in partnerships that promote productive coexistence.

The social market economy

A social market economy is based on the principle that allowing the forces of the market to work freely promotes consumption, motivates producers to innovate and make technical advancements, and distributes income and profit according to an individual's contribution.

Key characteristics of a social market economy

  • Protection from hardships resulting from unemployment, disability, accidents, illness, age and other social conditions;
  • Cooperation between employers and employees in the form of equal contributions for pension, health, disability and unemployment insurance;
  • Article 9 of the Basic Law (Grundgesetz) guarantees the right of employees and employers to bear the responsibility themselves for deciding on working conditions in contracts agreed in a collective bargaining procedure.
  • The situation at the workplace is defined primarily through the laws governing collective bargaining for wages and the code of industrial relations, created by both employees and employer.

Germany is reforming its labor laws, especially of the protections against dismissal, as well as its social insurance system in order to reduce employers' non-compensation labor costs while stimulating growth.

(Source: Facts About Germany, Federal Foreign Office (Auswärtiges Amt))

Social partnership in Germany

Germany balances free-market competition with social protections.  The moderate wage growth that unions and employers have agreed to in recent years show that both parties bring a market-oriented approach to the bargaining table. 

Trade unions

  • Trade unions are independent and non-partisan.
  • Unions represent workers across entire sectors.
  • The share of workers that are unionized varies widely among industries; average union membership rate is under 50%.
  • The Confederation of German Trade Unions (Deutscher Gewerkschaftsbund - DGB) is the largest union organization in Germany with around 6 million members (2014) in eight individual unions.

Employers' associations

  • Employers have united in regional associations that - as with DGB's unions – were formed separately for the respective industry sector.
  • The umbrella organization for employers is the Confederation of German Employer Organizations (Bundesvereinigung der deutschen Arbeitgeberverbände - BDA).
  • The BDA encompasses all branches of the economy, from industry to commerce, trades, banks, insurance, agriculture and transportation.
  • However, the BDA only represents businesses in their capacity as employers, i.e., as a negotiating partner for the unions.

(Source: Facts about Germany, Press and Information Office of the Federal Government (Presse- und Informationsamt der Bundesregierung))

Works constitutions and co-determination (jointly determining employment policy)

Employee involvement in the management of the workplace is one of the basic pillars of the German economic order.  The Works Council Constitution Act, reformed in 2001, governs the cooperation between employers, staff, the works council, the unions and the employers' associations.

Important provisions of the Works Council Constitution Act

  • The law's fundamental concern is to ensure the involvement of the works council and, by extension, the company workforce in decisions about the workplace.
  • The core issues subject to the employees' right of co-determination are issues related to the hours to be worked and the organization of work, which can also include the design and layout of workspaces.
  • The works council's responsibilities include ensuring that the laws applicable to the workforce as well as the regulations and safety procedures in place are complied with, and that the collective wage agreements and operating agreements are upheld.
  • The principle of co-determination allows for employees to influence management through representatives elected to the supervisory board.  The right of co-determination on the supervisory board ensures that employees have a say in the major entrepreneurial plans and decisions.
  • This right is based on the conviction that democratic principles cannot be confined to matters of state, but must be applied to all areas of social life.

(Source: Facts About Germany, Federal Foreign Office (Auswärtiges Amt))

Social security in Germany

Guaranteeing the welfare of individuals is a primary focus for the German political system.  Social security is fundamental for a high quality of life.

A network of laws ensuring social security in Germany:

  • The statutory pension insurance is at the core of Germany's social welfare system and is also the social program entailing the largest volume of public and private contributions and benefits.
  • Nearly all residents of Germany have health insurance. Approximately 89 percent are covered by statutory insurance, while about 9 percent have private insurance.  Everyone covered by statutory insurance has the same right to necessary medical care regardless of age, income, or gender.
  • Everyone who is protected from the risk of illness by the required insurance coverage also automatically belongs to the nursing insurance program.
  • The statutory accident insurance program provides financial assistance in case of workplace accidents. Contributions are paid exclusively by the employer.
  • Unemployment insurance: virtually all workers are qualified to receive unemployment benefits if they have paid into the statutory unemployment insurance for at least twelve months in the last two years. Employers and employees each pay half of the unemployment benefits, which is between 60- and 67 percent of the employee’s last net wage. The maximum period of eligibility is between 6 and 24 months. Thereafter, a basic provision for job seekers ("unemployment benefits II") may be requested.
  • In Germany, parents receive a monthly child allowance of at least 190 euros (as of 01/2016). The amount is determined based on the number of children.
  • Those who experience an emergency that they cannot overcome on their own or through benefits such as social insurance are eligible for social welfare assistance.
  • Shelter is a basic human need. Therefore, everyone in Germany who cannot afford an appropriate home can claim housing assistance.
  • Basic pension and disability benefits​: benefits for covering the necessary living expenses for people requiring assistance were introduced on January 1, 2005.

(Source: Facts About Germany, Federal Foreign Office (Auswärtiges Amt))

Healthcare in Germany

Germany has one of the best healthcare systems on earth. A broad range of hospitals, doctor’s offices and medical institutions ensures that all people in Germany have access to healthcare.

  • Germany's medical device industry is a global leader;
  • Prices of medication sold at pharmacies are regulated according to uniform standards nationwide;
  • Germany is a member of the World Health Organization;
  • Germany is represented on several important leadership committees at the WHO.

(Source: Healthcare as an Economic Driver (Wirtschaftsfaktor Gesundheitswesen) Press and Information Office of the Federal Government (Presse- und Informationsamt der Bundesregierung))

Collective wage agreements

There are two basic types of collective wage agreements that unions can negotiate with the employers' associations or with individual employers.

  • Wage and salary agreements regulate the compensation paid to workers and salaried employees. They are typically negotiated for a brief term.
  • General issues including (without limitation) working hours, vacation entitlements, notice required for termination and overtime pay are regulated by general collective agreements known as Manteltarifverträge, which typically apply for a term of several years.
  • Additional specialized collective wage agreements may provide for such matters as vocational education, supplemental pension insurance or protection in the event rationalization measures are taken.

The parties to a collective wage agreement are generally free to define the terms as they see fit.  However, such collective wage agreements must comply with the law.

(Source: Facts About Germany, Federal Foreign Office (Auswärtiges Amt))