What are wage replacement benefits?
Wage replacement benefits (Entgeltersatzleistungen) replace lost pay once there is no longer any entitlement to wages or continued pay. They are themselves tax-free but subject to the progression clause (Progressionsvorbehalt) — the employee must declare them in their income tax return, which often makes filing a return compulsory.
The most important benefits
| Benefit | Provider | Amount (guideline) |
|---|---|---|
| Sickness benefit (Krankengeld) | Health insurance fund | 70% of gross pay, capped at 90% of net pay |
| Child sickness benefit | Health insurance fund | approx. 90% of lost net pay |
| Maternity pay | Health insurance fund + employer top-up | €13 per day plus a top-up to net pay |
| Short-time work allowance (Kurzarbeitergeld) | Federal Employment Agency | 60% or 67% of the net pay shortfall |
| Injury benefit (Verletztengeld) | Employers' liability insurance association | 80% of standard pay, capped at net pay |
| Transitional allowance (Übergangsgeld) | Pension insurance | 68% or 75% of standard pay |
Employer obligations
- Pay certificate submitted electronically to the health insurance fund via the pay certification procedure.
- Interruption notification via the DEÜV reporting procedure, as soon as pay is lost for at least one full calendar month.
- Contribution payment from the contribution-liable portion, insofar as pay continues to be paid.
- Maternity protection: top-up to maternity pay under § 20 MuSchG, reimbursable via the U2 levy — regardless of company size.
Short-time work allowance in practice
The employer notifies the Federal Employment Agency of the loss of work, calculates the short-time work allowance and initially pays it out; reimbursement follows afterwards. Requirements include a significant loss of work with loss of pay, operational and personal prerequisites, and an agreement with the works council or the employees.
Employer top-ups
Voluntary top-ups to sickness benefit remain free of social insurance contributions as long as, together with the social benefit, they do not exceed net pay by more than €50 per month. Amounts beyond that are contribution-liable pay.
Holiday and length of service
The employment relationship continues while wage replacement benefits are received. Holiday entitlements continue to accrue; in the case of long-term illness they only lapse 15 months after the end of the holiday year. During short-time work at zero hours, holiday entitlements may be reduced pro rata.
Clear written information
Employees rarely understand straight away why their account suddenly looks different. A short letter explaining the type of benefit, the provider, the period and the effects on pay and tax prevents misunderstandings and, at the same time, documents that you provided the information.