Continued Payment of Wages in Case of Illness: Payroll Considerations and Reimbursement

At WW+KN, a Baker Tilly Company, we aim to clarify the intricate aspects of wage continuation in the event of employee illness. For any inquiries, please reach out to us at info@payrollgermany.de. Below, we provide a detailed guide on wage continuation during illness, payments beyond six weeks, follow-up illnesses, and the implications for payroll management.

1. Understanding Continued Payment of Wages in Case of Illness

In Germany, the continued payment of wages in the event of illness (Entgeltfortzahlung im Krankheitsfall) is regulated by the Continued Payment of Wages and Salaries Act (Entgeltfortzahlungsgesetz – EFZG). This legislation ensures that employees receive their regular wages during periods of short-term illness.

Key Provisions of the EFZG:

  • Entitlement to Continued Payment (§3 EFZG): Employees are entitled to their full salary for up to six weeks if they are unable to work due to illness. This applies provided they have been employed for at least four weeks.
  • Notification and Proof (§5 EFZG): Employees must notify their employer immediately about their inability to work and provide a medical certificate if the illness lasts longer than three calendar days.

2. Payroll Implications for Continued Payment

Managing payroll during periods of employee illness involves specific considerations to ensure compliance and accurate wage payments.

Payroll Considerations:

  • Calculation of Continued Payment: Employers must continue paying the employee’s full regular salary for up to six weeks. This includes all components of the salary such as bonuses and allowances.
  • Sick Pay Beyond Six Weeks: After the initial six weeks, the responsibility for wage payments shifts to the health insurance provider.

3. Payments Beyond Six Weeks and Follow-Up Illnesses

When an employee’s illness extends beyond six weeks, different rules and responsibilities apply.

Sick Pay from Health Insurance (§44 SGB V):

  • Statutory Health Insurance: Employees covered by statutory health insurance receive sickness benefits (Krankengeld) from their health insurance provider. This benefit is typically 70% of the regular gross wage but not exceeding 90% of the net wage.
  • Private Health Insurance: For privately insured employees, the specific terms of their insurance policy determine the sickness benefits. Employers should verify the details with the employee’s private insurer.

Follow-Up Illnesses (§3 EFZG):

  • Definition and Treatment: A follow-up illness is a new illness occurring after the initial six-week period, which prevents the employee from working. If the follow-up illness is unrelated to the initial illness, a new six-week period of continued payment may apply. If it is related, the employee continues to receive sickness benefits from the health insurance provider.

4. Employer Reimbursement and Contributions

Employers may be eligible for reimbursement of continued wage payments in certain cases.

Umlageverfahren (U1 and U2) (§1 AAG):

  • U1 Scheme: Small and medium-sized employers (typically with fewer than 30 employees) can participate in the U1 scheme, which reimburses a portion of the continued wage payments made to sick employees. The reimbursement rate varies by health insurance provider.
  • U2 Scheme: All employers are required to participate in the U2 scheme, which covers costs related to maternity leave and associated wage payments.

Social Security Contributions:

  • During Continued Payment: Employers must continue to pay social security contributions (health, pension, unemployment, and long-term care insurance) based on the full salary during the initial six-week period.
  • During Sickness Benefits: When the employee receives sickness benefits from the health insurance provider, social security contributions are based on the sickness benefit amount.

5. Employee Contributions

Employees also have responsibilities regarding their social security contributions during periods of illness.

Employee Contributions:

  • Continued Payment Period: Employees continue to pay their portion of social security contributions based on their full salary during the initial six-week period.
  • Sickness Benefit Period: Contributions are adjusted according to the sickness benefit received from the health insurance provider.

6. Legal Compliance and Support

Ensuring compliance with the EFZG and managing payroll accurately during employee illness requires attention to detail and adherence to legal standards.

Professional Guidance:

  • Consultation Services: WW+KN offers expert consultation services to assist employers in navigating the complexities of wage continuation during illness and related payroll management.
  • Contact Information: For personalized support, please contact us at info@payrollgermany.de.

By understanding and implementing the provisions of the Continued Payment of Wages and Salaries Act, employers can ensure fair treatment of employees during illness while maintaining compliance with legal requirements.

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