Everything You Need to Know About Non-Wage Labor Costs for 2024

A significant component of personnel costs is non-wage labor costs (employer-paid social contributions). These include additional levies that employers must pay on top of their employees' gross wages. In this article, we explain which non-wage labor costs employers in Germany must bear in 2024 and how they are calculated.

What are Non-Wage Labor Costs?

Non-wage labor costs are additional expenses that go beyond the gross wage and arise from salary payments to employees. They can be divided into statutory, variable, and voluntary non-wage labor costs. Primarily, they include social security contributions that flow into pension, unemployment, and health insurance. While the salary is considered direct labor costs, non-wage labor costs are referred to as indirect labor costs.

Non-Wage Labor Costs for Employers in 2024

Every year, statutory social security contributions are redefined by the legislature. Most levies are split between the employer and the employee, with the employer generally covering half of the costs. One exception is accident insurance, which is borne entirely by the employer.

Which Non-Wage Labor Costs Must Employers Pay?

Social Security

Social security contributions consist of several components:

• Health Insurance: 7.3% + individual supplementary contribution rate

• Pension Insurance: General 9.3%, Miners' insurance (Knappschaft) 15.4%

• Long-term Care Insurance: 1.7% (Saxony: 1.2%)

• Unemployment Insurance: 1.3%

• Accident Insurance: Various contribution rates depending on the professional association (Berufsgenossenschaft)

When calculating contributions, contribution assessment ceilings (Bemessungsgrenzen) apply, which determine the maximum amount of taxable income. This means that once the ceiling is exceeded, no further contributions are due. Consequently, high gross salaries have lower non-wage labor costs in percentage terms.

For 2024, the assessment ceiling for health and long-term care insurance is a uniform €4,987.50 per month. Pension and unemployment insurance differentiate between the "old" federal states (West) and "new" federal states (East). For 2024, the ceiling is €7,300 in the West and €7,100 in the East.

Statutory Levies (Umlagen)

In addition to these contributions, employers must pay levies for specific cases:

• Levy 1 (U1): Between 1.1% and 4.9% depending on the health insurance fund. Used to secure sick pay for companies with fewer than 30 employees.

• Levy 2 (U2): Between 0.15% and 0.99% depending on the health insurance fund. Covers maternity pay and applies to all companies.

• Levy 3 (U3): 0.06%. Covers insolvency payments and is mandatory for all companies.

• Note: The assessment ceilings for pension insurance apply to these levies.

Calculating Non-Wage Labor Costs – An Example

To illustrate, let’s look at an employee in Munich with a gross salary of €3,200. The employee is 35 years old, married, and has two children. He is publicly insured with health insurance fund "Y". The levy rates are 1.0% for U1 and 0.24% for U2.

• Health Insurance (7.3%): €233.60

• Long-term Care Insurance (1.7%): €54.40

• Pension Insurance (9.3%): €297.60

• Unemployment Insurance (1.3%): €41.60

• Levy U1 (1.0%): €32.00

• Levy U2 (0.24%): €7.68

• Insolvency Levy (U3) (0.06%): €1.92

• Total: €668.80

The total employer gross cost is thus €3,863.20, which is approximately 21% above the employee's gross salary.

Other Statutory Non-Wage Labor Costs

Statutory Accident Insurance In Germany, this protects employees from the financial consequences of workplace accidents and occupational diseases. Employers are legally required to contribute. The amount depends on the company's risk class. On average, the rate is about 1.3% of the gross payroll, which amounts to roughly €120 to €150 per employee per year.

Compensatory Levy for Severely Disabled Persons Companies with at least 20 jobs are legally required to fill at least 5% of their positions with severely disabled people. If this quota is not met, a compensatory levy must be paid, which can be up to €410 per month for each unfilled mandatory position.

How Can I Properly Plan Non-Wage Labor Costs?

Precise planning is crucial for realistic budgeting. Unfortunately, many HR systems do not directly display total personnel costs (employer gross). Here are some approaches to master this challenge:

• Approximate calculation via formulas: You can calculate these costs yourself using current contribution rates and ceilings. This requires regular data updates.

• Using a factor: A typical factor in Germany lies between 1.21 and 1.23. Multiplying gross salaries by this factor provides a rough estimate of total employer costs.

• Planning software like HRCast: The most efficient method is using specialized software like HRCast. It automates the calculation of non-wage labor costs, considering all relevant factors and current rates. This provides a transparent view of total personnel costs for optimized headcount planning.

Conclusion

Non-wage labor costs are a vital part of personnel expenses. A thorough understanding is indispensable. Through precise planning and regular reviews, companies can avoid budget overruns and stay safe from unexpected payment obligations.