Handling Employee Sickness in Germany: Legal Provisions, Costs, and Payroll Implications

For international companies operating in Germany, understanding how to handle employee sickness is crucial for compliance with local labor laws and effective payroll management. This guide provides a detailed overview of the legal provisions under the German law, the costs involved, and the payroll implications. It also highlights how the legal team at Baker Tilly and the payroll specialists and tax advisors at WW+KN, a Baker Tilly Company, can assist in navigating these complexities.

Legal Provisions for Employee Sickness

The handling of employee sickness in Germany is governed by several key regulations, primarily the Entgeltfortzahlungsgesetz (EFZG), which outlines the continued payment of wages during illness.

Continued Payment of Wages (§ 3 EFZG)

  • Duration: Employers are required to continue paying an employee’s full salary for up to six weeks if the employee is unable to work due to illness.
  • Eligibility: This entitlement applies only if the employment relationship has lasted for at least four weeks prior to the illness.

Health Insurance Contributions (§ 5 EFZG)

  • Notification: Employees must notify their employer immediately if they are unable to work due to illness. For absences longer than three days, a medical certificate is required.
  • Reporting Obligations: Employers must continue to report contributions to health insurance during the period of continued wage payment.

Sick Pay (Krankengeld) (§ 44 SGB V)

  • After Six Weeks: After the initial six-week period of continued wage payment by the employer, statutory health insurance (gesetzliche Krankenversicherung) takes over and pays sick pay (Krankengeld) to the employee.
  • Amount: Sick pay is typically seventy percent of the employee’s regular gross earnings, up to a maximum of ninety percent of their net earnings, and cannot exceed a daily cap of 112.88 euros as of 2023.

Costs Involved in Employee Sickness

Handling employee sickness involves several costs for the employer, including continued payment of wages and health insurance contributions.

Continued Payment of Wages

  • Example Calculation: If an employee earns 3,000 euros gross per month and falls ill, the employer must continue to pay this amount for up to six weeks. For a full six-week period, this equates to 4,500 euros (3,000 euros monthly salary × 1.5 months).

Health Insurance Contributions

  • Employer’s Share: Employers must continue to pay their share of health insurance contributions during the six-week period of continued wage payment. For an employee earning 3,000 euros gross per month, the employer’s share of health insurance contributions (usually 7.3 percent) would be approximately 219 euros per month.

Payroll Implications

Managing payroll during periods of employee sickness involves several important steps to ensure compliance and accuracy.

Accurate Record-Keeping

  • Documentation: Employers must keep detailed records of sickness absences and the corresponding wage payments.
  • Payroll Adjustments: Payroll systems must be adjusted to reflect the continued payment of wages during the six-week period and the transition to sick pay by statutory health insurance thereafter.

Coordination with Health Insurance

  • Notification: Employers must notify the statutory health insurance provider when the six-week period of continued wage payment is approaching its end, so that the transition to sick pay can be managed smoothly.
  • Reimbursements: In some cases, employers can apply for reimbursement of wage payments from statutory health insurance under the U1 scheme, which applies to small and medium-sized enterprises (SMEs).

Assistance from Experts

Navigating the legal and payroll complexities of handling employee sickness can be challenging. Professional assistance can ensure compliance and efficient management.

  • Legal Support: The legal team at Baker Tilly can provide expert advice on compliance with the Entgeltfortzahlungsgesetz and other relevant regulations, as well as handle disputes related to sickness and wage payments.
  • Payroll and Tax Advice: The payroll specialists and tax advisors at WW+KN, a Baker Tilly Company, can assist with accurate record-keeping, payroll adjustments, and coordination with health insurance providers.

Conclusion

Understanding and managing employee sickness in compliance with German labor laws is essential for international companies operating in Germany. This involves adhering to regulations on continued wage payment, health insurance contributions, and accurate payroll management.

For detailed guidance and assistance, international companies can rely on the expertise of the legal team at Baker Tilly and the payroll specialists and tax advisors at WW+KN, a Baker Tilly Company. For any questions or further assistance, please contact us at info@payrollgermany.de.

By ensuring compliance with legal provisions and effectively managing the costs and payroll implications of employee sickness, companies can maintain a positive work environment and avoid legal issues.