Social welfare and security in Germany


Social welfare and security in Germany

Historical Development

The history of the german social security begans in the Nineteenth century. After Germany was united in 1871 under the direction of Otto von Bismarck, the nation developed a common government structure and social policy.

The beginning of the national German social welfare system occurred in the 1880s while Bismarck was in power. A primary motivation for social legislation was the government's desire to erode support for socialism among workers and to establish the superiority of the Prussian state over the churches.

The following three laws laid the foundations of the German social welfare system:

-        the Health Insurance of Workers Law of 1883, which provided protection against the temporary loss of income as a result of illness

-        the Accident Insurance Law of 1884, which aided workers injured on the job

-        and the Old Age and Invalidity Insurance Law of 1889.

The second phase of the German social welfare system spanned the period from 1890, the year of Bismarck's resignation, to 1918. During this period, improvements were made in the initial programs.The National Insurance-Code of 1911 integrated the three separate insurance programs into a unified social security system.

In 1916 survivors' benefits were increased, and the retirement age for workers was reduced from seventy to sixty-five.

Most efforts were completed by the mid-1920s.

The Weimar Republic (1918-33) saw a further expansion of social welfare programs. In 1920 war victims' benefits were added to the social welfare system.

Unemployment relief was consolidated in 1923 into a regular assistance program, financed by employees and employers. The same year, the 1913 agreement between doctors and sickness funds about who could treat sickness-funds patients was integrated into the National Insurance Code.

1925 the accident insurance program was reformed, allowing occupational diseases to become insurable risks. In 1927 a national unemployment insurance program was also established.

In 1938 artisans came to be covered under compulsory social insurance, and in 1941 public health insurance coverage was extended to pensioners. In 1942 all wage-earners regardless of occupation were covered by accident insurance, health care became unlimited, and maternity leave was extended to twelve fully paid weeks with job protection.

Two separate German states evolved after World War II, each with its own social welfare programs.

After the reunification of the both states the Eastern German Countrys took over the social

system of the German Republic.

Thus, Germany has implemented a national social policy through an extensive decentralized and pluralistic network of voluntary agencies.

The principle behind social insurance is that people earn benefits by contributions, paid while they are at work.

The advantages of an insurance scheme are:

People should feel they are entitled to benefits.

Contributions are a way of raising money for benefits.

Because people have paid for their benefits, it is supposed to be difficult to abolish the benefits.

The disadvantages are:

People must work to qualify. This leaves out large numbers of people - unemployed school leavers, women who have been looking after children, chronically sick and disabled people. The insurance system may also distinguish the 'deserving' and the 'undeserving' poor.

If contributions are set too high people cannot pay them. This may mean benefits are set too low. Poor people are less able to afford contributions.


Contributions to pension insurance, unemployment insurance, health insurance and care insurance are paid half by the employer and half by the employee, the companies accident insurance is paid only by the employer.

For calculation of the monthly contribution to pension insurance, unemployment insurance, health insurance and care insurance special ceiling amounts apply. This means that contributions are only calculated up to a maximum amount, exceeding earnings will remain free of social security contribution.

1. Unemployment insurance

6.5 %

2. Care insurance

1.7 %

3. Old age pension insurance

19.5 %

4. Health insurance

about 14.5 %

The amount of health insurance contribution is depending on the chosen health insurance company. Also, if the ceiling amounts are met, employees have the possibility of either being insured with a governmental health insurance company on a voluntary basis or being insured with a private health insurance company or being not health insured at all. The contribution while being voluntarily insured are calculated as shown above. If you are insured with a private company, the amount of contribution is depending on your age, actual health and your family situation

Contribution assessment limits in the year 2003:

Old age pension insurance and
Unemployment insurance

5,100.00 EUR in the month
(4,250.00 EUR in eastern Germany)

Health insurance
and nursing care insurance

3,450.00 EUR in the month
or 41,400.00 EUR in the year

If the gross wage is higher than the contribution assessment limit, the insurance premium is calculated 'only' by the limit.

The German social security system can be divided into 5 parts of insurances:

1. Pension insurance

Principally all employee and trainee are insured. Only the self-employed people aren’t in the pension insurance. This system is financed by the payments of employee, employer and taxes of the state.

It has provided people with the financial security they need in old age. Only an insured person can claim an old-age pension.

2. Unemployment insurance

Unemployment insurance is the branch of statutory social security that insures employees against the risk of unemployment .

Every unemployment person can get unemployment benefit, if they worked at least twelve month in the last three years. These people have to report to the employment office, when they lost their job. The unemployment benefit amount to sixty per cent of the last net income.

3. Health insurance

The statutory health insurance schemes (Krankenversicherung) safeguard you and your family in case of illness:

ð    They pay for necessary medical treatment. The only exceptions are items that you claim after an occupational accident or because of an occupational illness. In these cases you are covered by statutory accident insurance.

ð    They pay sickness benefit if your employer does not continue to pay your wage or salary while you are unable to work.

When people earn more than 3.825 € per month, they can choose if they want to legal insured or private insured. The contribution height is dependent on income. Parents with children are freebie insured up to an age-limit, in Germany it calls family insurance.

4. Care insurance

All people in Germany are in the nursing care insurance since 1995. These insurance helps needy persons and their dependant with financial resources or payment in kind.  The levels of the benefits are dependent on the kind of the indigence.

5. Accident insurance

The Federal Republic has both a social system of statutory accident insurance and private-law accident insurance.

Its primary function is to provide benefits for claimants in the event of an accident at work or occupational illness .

In addition to social assistance, Germany's social welfare system provides many other tax-funded benefits. The most widely paid benefit is that of the child allowance.

Child allowance

Children are a wonderful gift, but they do cost money. Food, clothes, education and toys all have to be paid for. Child benefit (Kindergeld) helps parents afford them.

Anyone with children who lives in Germany can claim child benefit.

The ‘age limit’is 27 and is paid regardless of the parents’ income.

It is paid monthly:

-        EUR 154 for each of the first three childrens


-        EUR 179 for each additional child

Social assistance (Sozialhilfe) is there to ensure that anyone in need in the Federal Republic can still live a decent life. It is not some kind of charity. People who find themselves in situations such that they cannot manage without help are eligible under German law for social assistance payments.

Social assistance is also a means of helping regain their independence.

You can claim social assistance if you are in need, or in danger of becoming destitute, and are

unable to overcome your difficulties on your own or with the help of other people.

Assistance towards living expenses primarily covers these items:

-        Food

-        Housing

-        Clothing

-        Toiletries

-        Household goods

-        Heating

-        Everyday personal necessities

Educational assistance – in German you say „Bafög“

Educational assistance is intended to provide you with enough to live on and to cover the cost of your education. Your financial needs will depend on what kind of education you are receiving, and on where you are living. There are different rates of BAföG for people attending school and for university students.

Your personal income and wealth, and also those of your parents and spouse, will be offset

against your basic entitlement if they exceed a certain exemption limit. How high the exemption limit will be depends on your marital status, whether or not you have children, and how large your family is.

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