Germany – Payroll and Social Security Tax Changes

The German Federal Cabinet approved several changes for the 2025 tax year, which will take effect on January 1, 2025 unless stated otherwise. These changes include:

Abolition of the Legal District Distinction

A unified contribution ceiling for pension and unemployment insurance will apply nationwide, abolishing the East/West legal district distinction.

Impact on Payroll

• From reporting periods starting January 1, 2025, the legal district indicator is no longer required in social security reports.
• For the 2024 annual report, the legal district indicator must still be included.
• Contribution statements must continue to be submitted separately by the legal district, even after December 31, 2024.

New Minimum Wage and Mini-Job Thresholds

• Statutory Minimum Wage: Increase from €12.41 to €12.82 per hour.
• Earnings Threshold for Mini-Jobs: Increased from €538 to €556 per month.

Enhancements in the eAU Process

Extensive updates to the electronic certificate of incapacity for work (eAU) process by health insurance providers, including:

• Additional feedback reasons.
• Expanded protocols.
• New query scenarios.
  

Contribution Ceiling Updates

• Health and Long-Term Care Insurance: €66,150 per year (€5,512.50 per month).
• Unemployment and Pension Insurance: €96,600 per year (€8,050 per month).
• Employers must only calculate contributions on gross wages up to these ceilings.

Annual Income Limit Updates for Health Insurance

The annual income limit for assessing statutory health insurance obligations will increase from €69,300 in 2024 to €73,800 in 2025.

Social Security Contribution Rates (2025)

Health Insurance:

• General rate: 14.6% (unchanged).
• Reduced rate: 14.0% (unchanged).
• Average additional contribution: 2.5% (up from 1.7% in 2024).

Long-Term Care Insurance

• 3.6% (up from 3.4%).

Pension Insurance

• 18.6% (unchanged).

Unemployment Insurance

• 2.6% (unchanged).

Non-Cash Benefit Updates

New taxable non-cash benefit values for 2025:

Meals

• Breakfast: €2.30/day, €69/month.
• Lunch/Dinner: €4.40/day, €132/month.
• Total daily value: €11.10.
• Accommodation: €282/month.

Changes to the Mini-Job and Temporary Employment Wage Floors

Mini-job earnings limit: €556/month (linked to the minimum wage).

Temporary employment minimum wage:

• €14/hour from November 1, 2024.
• €14.53/hour from March 1, 2025.

Company Data Reporting for 2025

• Second submission period: January 1, 2025 – May 31, 2025.
• Applicable for clients who missed the May 31, 2024 deadline or need to correct previously submitted data.

Termination of the Fifth Rule for Severance Payments

• From January 1, 2025, the “fifth rule” for tax advantages on extraordinary payments is abolished in payroll.
• Employees can still apply the rule in their income tax returns.

Insolvency Levy 2025

• Statutory Levy Rate: 0.15% of wages, applicable to all employers in Germany.

Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above change.

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Germany – Payroll and Social Security Tax Changes

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