Unemployment benefits in Germany: who gets how much and how long | Analysis of events in political life and society in Germany | DW

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In recent years, unemployment in Germany has been steadily declining amid economic recovery and a growing shortage of personnel, at the end of 2019 its level fell to a record low of 4.8%, and the number of unemployed fell to about 2.2 million people. For comparison: in the mid-2000s, unemployment in the Federal Republic of Germany was at the level of 11-13%, and about 4.5 million people lived on benefits, and at some point even about 5 million people.

Unemployment insurance in Germany: 2.4% of gross salary

However, this year the coronavirus pandemic has plunged many countries of the world, including Germany, into deep recession, which has caused a significant, although not yet precipitous, rise in unemployment. In June, its level in Germany reached 6.2%, and the number of unemployed exceeded 2.85 million. These are the latest data from the Federal Labor Agency (Bundesagentur für Arbeit, BA), which is headquartered in Nuremberg. It is it that registers the unemployed in Germany, pays them benefits (Arbeitslosengeld) and helps in finding a job.

Federal Labor Agency logo

BA’s budget is formed, first of all, thanks to the unemployment insurance in Germany. It is compulsory for all employees, except for those who do one-off work or receive less than 450 euros per month. The insurance premium is from 2020 2.4% of the salary before taxes and deductions (gross salary), the employer automatically transfers it to the labor agency. For comparison: in 2006, employees were charged 6.5%, but the steady recovery of the labor market that began later allowed the rate to be gradually reduced to the current record low. This, of course, contributed to the growth of wages received at hand (net wages) and the purchasing power of the employed.

So, unemployment benefits are paid in Germany not from the state budget, they are financed from the fund, which is formed from the contributions of all employees. Accordingly, the first key condition for obtaining it: only those who have at least minimally participated in filling the “common pot” can apply for money from BA.

Contributions to the “common boiler” must be paid at least a year

Namely: the allowance is due to someone who has paid contributions for at least 12 months in the last 30 months before applying, and it does not matter whether he worked all the time in one place or changed employers. This is the basic rule, although there are a number of exceptions to it, concerning, for example, those who raised a child under the age of three, voluntarily served in the army, and were ill for a long time. They may be eligible for the appropriate periods.

A factor such as citizenship does not affect the receipt of benefits in Germany. It is valid for any foreigner who legally worked in the Federal Republic of Germany, being a citizen of one of the EU countries or holder of a residence permit.

Karstadt and Kaufhof Department Store Workers Protest Staff Cuts

Karstadt and Kaufhof department store workers protest staff cuts: they don’t want to live on welfare

In turn, the time during which you can receive unemployment benefits depends on how long the employee has been replenishing the “common pot” with his contributions. But here comes the second factor: age.

If an employee under 50 applies for benefits, he will receive it for a whole year – 12 months, provided that he has paid contributions for at least 24 months in the last 5 years. Anyone who replenished the “common pot” for a shorter period, but more than 12 months, will receive an allowance for six months – 6 months.

If the applicant is over 50 years old, then the duration of receiving the allowance is gradually increased to 24 months. A maximum of two years is available to everyone over the age of 58, provided that they have paid contributions for a total of at least 48 months during their working life.

Benefit amount: 60 or 67 percent of net salary

But neither age, nor how long the employee paid contributions, no longer affects the amount of the benefit. Here the third factor comes into force: the presence of children of the applicant for benefits or the one with whom he lives in a formal or unregistered marriage. A childless applicant is entitled to 60% of the previous net salary, and if there is at least one child – 67%.

Silhouettes of mothers with strollers

Benefits for the unemployed with children are higher than those for the childless

The counting mechanism is as follows. The gross salary of the last 12 months is taken, summed up and divided by 365 days. From the gross daily salary received, the income tax and the contribution of solidarity with the eastern lands, as well as social contributions in the amount of 20 percent, are deducted, and a net income is received per day. And already from this net salary 60% or 67% are charged.

How much does it actually turn out per month? Let’s say 1200 or 1340 euros, based on a rather typical net salary in Germany of about 2000 euros, although the variation is very large depending on professions and regions.

This whole system may seem overly complicated and bureaucratic, especially when you take into account the considerable number of exceptions. But this is the result of a long legislative process aimed at improving the mechanism for supporting the unemployed and designed to maximally take into account the various life situations in which they may find themselves.

Hartz IV transition to a qualitatively different category of recipients

Well, what happens after a young or middle-aged unemployed person received benefits for a whole year, and a representative of pre-retirement age – even two years, but could not find a suitable job that he, such is the requirement of the Federal Labor Agency, is obliged to look for?

To receive the Hartz IV allowance, a young family will have to fill out about so many forms

To receive the Hartz IV allowance, a young family will have to fill out about so many forms

In Germany, even in this case, the unemployed is not without support, but receives it not from the “general insurance boiler”, but from the state social assistance system, officially called “unemployment benefit 2” (Arbeitslosengeld II). In Germany, it is most often called Hartz IV, after its developer, manager Peter Hartz. This system is even more complex and therefore needs a separate article.

We will only point out a few fundamental differences. If a non-family employee who has fallen under the reduction receives 60% of his previous salary until the age of 50, then after a year he will be paid money based on the subsistence minimum. The standard rate for this benefit is now 432 euros. At the same time, however, the real needs of the recipient are taken into account, so that he can be paid, for example, for housing.

However, in order to calculate these real needs, the applicant is required to submit to the labor agency a full account of his financial situation, and the BA has the right to cut certain payments and require, for example, to first spend the existing savings. The recipient of the “regular” unemployment benefit is paid regardless of how much savings, cars or, say, securities.

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