Social Security Obligation

Social Security Obligation / Sozialversicherungspflicht

January 12, 2023

The majority of employees in Germany are subject to mandatory social insurance and are covered by it. Social insurance is a statutory obligatory insurance against risks of loss of income due to illness, unemployment, age or need for care.

Social insurance includes: Health insurance, accident insurance, pension insurance, long-term care insurance and unemployment insurance. The legal basis is the German Social Security Code (SGB). For each of the individual social insurances it is separately regulated for which groups of people there is an insurance obligation and which groups of people are exempt from this.

If social insurance is obligatory, the persons concerned must pay social insurance contributions from their monthly gross wages in order to be able to benefit from the corresponding insurance benefits. The contributions are always divided between the employer and the employee. Social security contributions are based on income.

When is social insurance obligatory?

According to the Social Security Code, social insurance is only obligatory if the person is employed for remuneration. Pursuant to § 7 (1) SGB IV, employment is understood to mean non-self-employed work, in particular in an employment relationship. The existence of employment essentially depends on whether the activity is carried out according to the instructions of a principal and whether the worker is integrated into the business of the principal. Furthermore, according to the established case law of the Federal Social Court, the "personal dependence" of the employee on the employer is decisive for the existence of employment. This is expressed by the fact that the employee is subject to the employer's right to issue instructions regarding the time, duration, place and manner of performance.

Another criterion in deciding whether a person is liable to social security is the amount of income. With regard to the obligation to pay social insurance, an income limit of 520 EUR has been set by the legislator. If this limit is exceeded, the income is subject to social insurance and the person concerned must pay corresponding contributions to the individual insurance branches.

If the necessary conditions for employment subject to social insurance are met, the insurance relationship is automatically established. Thus, neither an insurance contract nor the consent of the person concerned is required for the corresponding insurances to be concluded. If the social insurance status of individual persons cannot be clearly identified, § 7a SGB IV provides them with the right to have their status bindingly checked in a so-called status verification procedure.

Exemption from the obligation to pay social security

In addition to the legal regulation of who is subject to compulsory social insurance, the law also regulates who is exempt from social insurance. This means that these persons do not have to be insured under the statutory social insurance schemes.

Persons who are self-employed on a full-time basis are generally exempt from compulsory insurance, with the exception of artists, publicists and farmers. Civil servants, judges, soldiers and people in marginal employment (so-called "mini-jobbers") are also exempt from insurance up to an income of 520 euros.

Persons exempt from obligatory insurance can insure themselves individually for the risks covered by social insurance. Only in the case of health insurance and the associated long-term care insurance does compulsory insurance also apply to persons exempt from