Social Security Payments 2023
German social security payments in 2023 will increase in two different ways: everyone will have to pay a higher percentage of their salary for social security, and high-earners will have to give away a higher nominal amount. Find out how much you will have to pay with your salary for German social security in 2023.
- Four pillars of German social security payments in 2023 will increase (Public health, care, pension, and unemployment insurance)
- Public health insurance will change: increasing assessment threshold and additional contribution, and reduction in coverage
- with Public pension the assessment threshold will rise, while unemployment insurance will increase the proportional contribution
- the only possibility to oppose rising social security payments 2023 is a change from public to private health insurance
Introduction: New Social Security payments in 2023
In Germany, it is often assumed that German social security is free. Unfortunately, this is not the case. Both the employee and the employer finance the German social security system with monthly contributions. Social security expenditures continue to increase year after year due to higher health insurance and pension expenditures, among other aspects. To give concrete figures, the public health insurance system will generate a deficit of 17 billion euros in 2022. Moreover, the public pension system will make a deficit of 111,9 billion euros in 2022. Therefore, the German government will increase the monthly contributions for 2023. The following services will be affected:
This means, if you thought the contributions were already pretty high, you won’t be pleased with the additional costs you’ll be facing in 2023. In this article, we explain what exactly will change in costs compared to 2022 and whether you can do anything about it.
Difference between Social Security & Taxes
Before we turn to the cost increases in the German social security system, it is important to understand the difference between taxes and social security contributions. Even though both are deducted from the payslip, they are calculated differently.
- Taxes: Taxes in Germany are determined based on two factors. One factor is your income and the other one your tax bracket (read more in Income Tax in Germany explained). Taxes are always deducted from your total income, starting from an annual income of 10,633€ (in 2023). Hence, any income below that amount is tax-free. This starts at a tax rate of 14% and increases with rising income up to a maximum tax rate of 45%.
- Social security: Every employee is obligated to pay social security contributions. Only self-employed, freelancers and business owners are free to choose whether or not to pay into the system (under certain conditions). However, social security contributions do not accrue as always, as taxes do, but are always subject to a certain threshold. Anything above this amount is exempt from social security. Only taxes are then due on the subsequent income.
For example, if you earn 1,000,000€ per year, you would have to pay up to 45% tax on this salary. However, you do not have to pay social security contributions on the entire 1,000,000€ salary. In this case, the stated threshold indicates the end of these payments. Exactly this threshold, as well as the general contribution rate, will increase for the year 2023.
Increasing Costs of Public Health Insurance & Care insurance in 2023
In the public health insurance system, there are several levers that the government uses to increase the premium. There are four main changes in 2023, which will affect you in different ways as described below.
- Increase in the assessment threshold: The assessment threshold indicates the maximum amount of salary that is used to calculate public health insurance contributions. This was 58,050€/year or 4,837.50€/month in 2022. As of 2023, this limit will increase to 59,850€/year or 4,977.50€/month. Based on these salaries you would have to pay 14.6% more in social security contributions which ultimately means about 300€/year more premium for you.
- Increase of the additional contribution: The second increase is the additional contribution, which you pay on top of your public health insurance. On average the additional contribution was at 1.3% in 2022. However, for the year 2023 the average will lie at 1.6%. Hence, if your salary will be more than 59,850€/year in 2023, the additional contribution will increase by about 200€.
- Reduction in insurance coverage: The increases in contributions will not be sufficient to combat the deficit of the public health insurance funds. Therefore, insurance coverages and service will be additionally reduced. As a result, doctors will receive less money for patients with public health insurance. This will very likely lead in even longer waiting times for doctor appointments.
- Increase in care insurance: In Germany, you also pay for care insurance as part of your health insurance. For this, 3.4% of your gross salary is deducted. Although, the care insurance will not increase in percentage terms, it is still part of the health insurance. Since the maximum contribution to public health insurance rises, the maximum contribution in the care insurance will increase as well (to 59,850€/year in 2023). The increase is about 60€, which you will have to pay additionally per year.
Not everyone is affected equally by the contribution increases, and it must be said that the contribution is also split 50/50 between you and your employer. Nevertheless, you will have to pay significantly more for your public health and care insurance in 2023 than you did in 2022. Overall, the actual cost of public health insurance in Germany will rise from an average of 11,204€ in 2022 to 11,731€ in 2023. Importantly, this only applies to the health insurance part. Unfortunately, there are also two other social insurance prices which will increase. These are going to be discussed in the next section. A summary of all contribution changes can be found in the picture at the end of this article.
How much money can you save by switching from public health insurance to private health insurance? Let’s find out together.
Increasing Costs of Public Pension & Unemployment Insurance in 2023
In addition to public health and public care insurance contributions, also those for pension and unemployment insurance will rise in 2023. The following will change:
- Increase in public pension: Only certain insurance holders will be affected by increasing public pension contributions. Namely, the maximum threshold will rise and not the percentage rate, which will remain at 18.6%. The maximum threshold will increase in Western Germany from 84,400€ to 87,600€. In Eastern Germany, it will increase from 81,000€ to 85,200€. Thus, if you have to pay the maximum rate in 2023, that’s about 600€/year more than you had to pay in 2022.
- Increase in unemployment insurance: The same maximum thresholds of the German public pension apply to unemployment insurance. This means that the thresholds will also rise to 87,600€ in western Germany and 85,200€ in eastern Germany in 2023. However, in addition to the increase in maximum contributions, the percentage share of unemployment insurance will also increase. Concretely, the percentage will increase from 2.4% in 2022 to 2.6% in 2023. Thus, the costs here will also rise by another approximately 300€.
Not everyone is affected equally by these two increases in contributions. Similarly to health insurance, contributions to pension and unemployment insurance are split 50/50 between employees and employers. However, if both parts are added together, the contribution increases can lead to an annual cost increase of about 850€ per year.
Conclusion: How to escape the increases in 2023
All in all, the social security contributions will change from 40.3% in 2022 to 40.8% in 2023. The nominal contribution will also increase, as the 40.8% is also payable on a higher maximum threshold. You will have your insurance coverage reduced and, in addition, you will have to wait even longer for medical appointments. But is there anything you can do about it?
Fortunately, there is a way to do something about it. With this option, you will avoid some of the premium increases (e.g. with a deductible). At the same time, you will not be affected by the reduction in insurance coverage. And will no longer have problems finding a doctor’s appointment in the future. The possibility is to switch from public health insurance to private health insurance. This is only possible from a gross annual income of 66,600€ (in 2023) but brings you precisely the advantages mentioned. You can read more about private health insurance here. If you need help switching to private health insurance, you can book a free consultation with us here.
For all other people who do not earn over 66,600€ gross in 2023, there is no other option. Unfortunately, you have no choice but to accept the contribution increases, benefit cuts, and longer waiting times at the doctor’s office. You can only hope that the German health and pension insurance will at one day be more efficient than it currently is.