Non-wage labour costs are all costs that employers bear for an employee beyond the agreed gross salary – in Germany, these consist primarily of the employer's share of social security contributions (health, pension, unemployment and long-term care insurance) as well as statutory levies and accident insurance. Depending on the applicable contribution rates and industry, they amount to approximately 20–22% of gross salary, making the true cost of employment significantly higher than the gross wage alone.
What Are Non-Wage Labour Costs?
Non-wage labour costs encompass all company expenditures for a position that exceed the agreed gross salary. In the German social security system, the majority of these costs are financed on a parity basis: employer and employee each bear roughly half of the total contributions.
An important distinction: total labour costs refer to the full cost of a position (gross salary + all ancillary costs). Non-wage labour costs refer exclusively to the portion that goes beyond the gross salary. In everyday HR practice, non-wage labour costs play a central role in workforce planning: employers who calculate only the gross salary will systematically underestimate the true cost of a hire.
Breakdown of Non-Wage Labour Costs
Non-wage labour costs in Germany consist of several mandatory contributions governed by the Fourth Book of the Social Code (Sozialgesetzbuch Viertes Buch, SGB IV).
Health Insurance
The general contribution rate for statutory health insurance (gesetzliche Krankenversicherung) is 14.6% of gross salary, split equally between employer and employee (7.3% each). In addition, each statutory health insurer charges an individual supplementary contribution (Zusatzbeitrag) that varies by fund. Since 2019, this supplementary contribution is also split equally between both parties.
Pension Insurance
According to Deutsche Rentenversicherung Bund, the contribution rate for statutory pension insurance is 18.6% – employer and employee each contribute 9.3%. Contributions are only levied up to the contribution assessment ceiling (Beitragsbemessungsgrenze), which stands at €8,050 per month in 2026 (both West and East Germany). Income above this threshold is contribution-free.
Unemployment Insurance
The contribution rate is 2.6%, shared equally at 1.3% per side. These contributions flow into the budget of the Federal Employment Agency (Bundesagentur für Arbeit) and fund, among other things, short-term unemployment benefits (Arbeitslosengeld I).
Long-Term Care Insurance
The general contribution rate for statutory long-term care insurance is 3.4% (as of 2026), split equally at 1.7% per side. Childless employees aged 23 and over pay a surcharge of 0.6 percentage points (bringing their rate to 2.3%), which they bear entirely themselves. The state of Saxony applies a special rule under which employees contribute a higher share.
Accident Insurance and Statutory Levies
Statutory accident insurance (gesetzliche Unfallversicherung) is paid entirely by the employer. The contribution rate is not uniform; it is set by the relevant professional association (Berufsgenossenschaft) according to industry and occupational risk level.
In addition, the following levies apply:
- Levy U1 (continued pay during illness): Companies with up to 30 employees receive a partial reimbursement of sick-pay continuation costs; the contribution is borne entirely by the employer.
- Levy U2 (maternity pay): All employers contribute and receive reimbursement for maternity-related expenditures.
- Insolvency benefit levy (Insolvenzgeldumlage): A small contribution to fund insolvency benefits in the event of company bankruptcy, also paid solely by the employer.
2026 Contribution Rates at a Glance
The table below shows the key contribution rates. The supplementary health insurance contribution varies by fund; the figure shown is a reference value (average estimate by the GKV-Schätzerkreis).
Note: Accident insurance and statutory levies (U1, U2, insolvency benefit levy) are added on top of the employer share. Always verify current figures with Deutsche Rentenversicherung Bund and the GKV-Spitzenverband.
Calculating Non-Wage Labour Costs – Step by Step
In practice, calculating non-wage labour costs is more straightforward than it may initially appear. As a rule of thumb, the employer's share amounts to approximately 20–22% of gross salary (excluding accident insurance and levies, which vary individually).
Calculation example – Monthly gross salary: €3,000
A gross salary of €3,000 therefore costs employers approximately €3,650–3,700 per month. Annualised, that amounts to a surcharge of roughly €8,000–8,400 attributable solely to non-wage labour costs.
Reducing Non-Wage Labour Costs – Legal Strategies for Employers
There are several legal ways to optimise non-wage labour costs. It is essential that all measures comply with social security law. Bogus self-employment and avoidance schemes must be strictly avoided.
Using Mini-Job and Midi-Job Arrangements
With mini-jobs (up to €556 per month as of 2026), employers pay flat-rate contributions rather than full social security contributions. This can be more cost-efficient for marginal employment arrangements.
Midi-jobs (€556.01 to €2,000 per month) benefit from a sliding contribution relief for employees in the so-called transition zone (Übergangsbereich). The employer's share remains at the standard rate, but the overall burden is lower.
Tax-Free Benefits Instead of Salary Increases
Certain non-cash benefits are exempt from both social security contributions and tax – up to the legally defined limits. These include, among others:
- Non-cash benefits up to €50 per month (§ 8 (2) EStG)
- Subsidies for public transport passes / the Deutschlandticket
- Company pension schemes (betriebliche Altersvorsorge, bAV) via salary conversion
- Health promotion measures up to €600 per year (§ 3 No. 34 EStG)
These employee benefits increase the total value of the compensation package without triggering proportionally higher non-wage costs – and they simultaneously strengthen employer branding.
Frequently Asked Questions about Non-Wage Labour Costs
How high are non-wage labour costs in Germany in 2026?
The employer's share is generally approximately 20–22% of gross salary. This includes health, pension, unemployment and long-term care insurance contributions as well as estimated accident insurance and levies. The precise amount varies depending on the health insurer (supplementary contribution) and the industry (accident insurance). Current figures are available on the websites of Deutsche Rentenversicherung Bund and the GKV-Spitzenverband.
What is included in non-wage labour costs?
Non-wage labour costs include: the employer's share of health insurance (including half of the supplementary contribution), pension insurance, unemployment insurance and long-term care insurance. They also include the statutory accident insurance contributions and levies U1 (continued pay during illness), U2 (maternity pay) and the insolvency benefit levy – all of which are borne entirely by the employer. In a broader business economics definition, costs for holidays, sick days and training can also be included.
What is the difference between labour costs and non-wage labour costs?
Labour costs refer to the total cost of a position – gross salary plus all ancillary costs combined. Non-wage labour costs are only the portion that exceeds the gross salary. If a gross salary is €3,000 and the total cost is €3,670, the non-wage labour costs are the difference of €670.
How do I calculate non-wage labour costs?
For a quick estimate, multiply the gross salary by 0.20 to 0.22. For a precise calculation, apply each contribution rate individually to the assessable income (taking contribution assessment ceilings into account). Most payroll software and online calculators handle this calculation automatically.
Do employees also pay non-wage labour costs?
Yes – employees also bear social security contributions of a similar magnitude (approximately 20% of gross salary). The principle of parity financing ensures that both sides each cover roughly half of the health, pension, unemployment and long-term care insurance contributions. Only accident insurance and levies U1, U2 and the insolvency benefit levy are borne exclusively by the employer.
Can employers legally reduce non-wage labour costs?
Yes, there are several options: using mini-job or midi-job models can reduce the overall burden in certain situations. Tax-free non-cash benefits (e.g. public transport subsidies, company pension schemes, non-cash benefits up to €50/month) increase the compensation package without triggering proportional non-wage costs. It is always important to verify social security law compliance – bogus self-employment must be rigorously avoided.
Conclusion
Non-wage labour costs are a central element of personnel cost planning: employers who focus only on gross salary underestimate the true cost of a position by approximately 20–22%. Contribution rates are adjusted annually and should therefore always be checked against the latest publications from Deutsche Rentenversicherung Bund and the GKV-Spitzenverband. Legal optimisation strategies such as tax-free benefits or the targeted use of mini-job and midi-job rules can reduce the overall burden – but always within the bounds of applicable social security law.
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Sources
- Deutsche Rentenversicherung Bund (2026): Contribution rates and reference figures in social security 2026. https://www.deutsche-rentenversicherung.de/DRV/DE/Experten/Arbeitgeber-und-Steuerberater/Rechengroessen/rechengroessen_node.html
- GKV-Spitzenverband (2026): Social security contributions – current contribution rates. https://www.gkv-spitzenverband.de
- Federal Ministry of Health (2026): Long-term care insurance – contribution rates. https://www.bundesgesundheitsministerium.de/themen/pflege/pflegeversicherung-zahlen-und-fakten.html
- Federal Ministry of Justice (2024): Fourth Book of the Social Code (SGB IV) – General provisions for social security. https://www.gesetze-im-internet.de/sgb_4/
- Federal Employment Agency (2026): Insolvency benefit levy and levies U1/U2. https://www.arbeitsagentur.de/unternehmen/finanzielles/insolvenzgeld
- Institut der deutschen Wirtschaft Köln (2025): Labour costs in international comparison. https://www.iwkoeln.de
- Eurostat (2023): Labour Cost Survey – European Statistics. https://ec.europa.eu/eurostat/statistics-explained/index.php/Labour_cost_statistics
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