The goal of the grand coalition between 2005 and 2009 was right and proper: the overall financial burden for employers and employees from social security contributions should drop and stay below 40% in the long term. Starting in 2008, with a short interruption during the years after the financial crisis, this was achieved up to this year. Unemployment contributions and pension contributions have remained at a low level, those for nursing care insurance have been raised only slightly and several reforms have kept the health insurance contributions in check. However, the overall level might soon rise above the magic number of 40%. Already the average is 39.8%, and many employees are above 40% already.
The contributions for the health insurance have long stopped being equally shared between employees and employers. The so-called “additional fee” has been given a solid legal foundation in 2015. Since then, the contributions vary depending on the insurer. Employees without children and above 23 have been paying an additional quarter of a percent extra for about ten years.
In 2017, the contribution rate for the nursing care insurance will rise by 0.2 percent, as decided for the latest care reform. At the same time, dementia patients now finally receive proper care through the federal care system.
The healthcare system, too, is showing signs of rising contributions by 0.1 or 0.2 percent. A parallel reduction of retirement or unemployment contribution at the same time is unlikely this time, though. On the contrary, we should be grateful that the good situation at the labor market along with the fact that most baby boomers are still in their jobs, the contributions are unlikely to rise the next three years. The cost for health care are exploding, though, despite all attempts to curb the cost, despite closing hospitals and discount agreements with pharmaceutical companies. The financial buffer that had accumulated since the foundation of the national health fund has pretty much disappeared.
All in all this doesn’t looks to dramatic at first glance. After all, ten years ago the various social contributions added up to 42 percent. There have been some warnings from the employers association concerning the future, tough: “The current good situation should not blind us to the fact that the grand coalition pursued a number of costly, and in some cases backward-looking, social policies, the cost of which will only fully reveal themselves with some delay”, and article in the magazine “Soziale Selbstverwaltung” quotes. Examples for this are some flagship projects of the current government, like retirement at 63, or the Mütterrente. These might be socially just, but will lead to rising costs over a long period of time.
Although the government repeatedly announced their goal to be a strong and competitive German economy, the most recent changes to the social system lead to a very one-sided additional cost burden on the resource work. Except for the controversial care fund at the German Central Bank, the government has done little to prepare the social security system for the coming demographic change.
In fact, the calculations of the employers’ associations show that additional benefits add up to 87 billion euros. The long term financial feasibility has become less certain. In 2017 alone the new benefits will cost 19.7 billion Euros, roughly equally distributed between the health and employment sector.
It’s not just the direct increase of contribution rates that add to the burden, but also indirect effects caused by the rise of the income threshold, above which the contributions (for both employee and employer) rise no longer. Next will that will be EUR 55,000 annual salary for the health and nursing care insurance, and EUR 66,000 for unemployment insurance and retirement fund. Those with earnings close to that threshold are carrying the biggest burden among the currently 40 million employees. Unfortunately, Christmas bonus and holiday pay are fully calculated into the base income.
Not calculated are social services exclusively paid for by the employer, like contributions to the statutory accident insurance, contributions for continued pay in case of employee sickness or maternity leave, or insolvency insurance.