2027 Social Security Contribution Thresholds: Significant Increases Planned

Who will be most affected?

• Employees earning above the current contribution assessment ceilings: A larger portion of their earnings will become subject to social security contributions. The additional financial burden will also depend on the applicable contribution rates and the individual additional contribution rate charged by their statutory health insurance fund.
• Employees earning close to the annual earnings threshold: At the turn of 2026/2027, their statutory health insurance status must be reviewed to determine whether they will be subject to or exempt from mandatory coverage in 2027.
• Employers and payroll professionals: Social security thresholds, assessments of employees’ insurance status, and payroll data must be updated at the turn of the year.
• Employees with private health insurance: If the higher annual earnings threshold results in mandatory statutory health insurance coverage, applicable grandfathering provisions and potential exemptions must be reviewed.
• Foreign employers with employees in Germany: Where German social security law applies, the new social security calculation parameters must be taken into account when determining contributions and insurance status.    

Employees with private health insurance: review mandatory coverage and exemption options in good time

If an employee’s regular annual earnings fall below the applicable annual earnings threshold, the employee may become subject to mandatory statutory health insurance coverage, even if they currently have private health insurance. Whether grandfathering provisions apply, particularly at the turn of 2026/2027, must be assessed on a case-by-case basis.

Employees who become subject to mandatory statutory health insurance solely because of a change in the annual earnings threshold may apply for an exemption under certain conditions (Section 8 of the German Social Code, Book V – SGB V). The application must be submitted within three months of the date on which mandatory coverage begins. In addition, applicants must provide evidence of alternative health insurance coverage (e.g., comprehensive private health insurance).

Furthermore, the exemption is irrevocable and remains effective as long as the circumstances giving rise to the exemption continue to apply. For example, irrevocability means that an employee cannot reverse their decision while the original grounds for exemption remain in place—in this case, the change in the annual earnings threshold—simply because private health insurance premiums have increased. By contrast, an exemption ceases to apply if a new set of circumstances triggers mandatory health insurance coverage, for example, following a change of employer or employment status or upon receipt of unemployment benefits. An individual assessment may therefore be necessary to determine whether an exemption from mandatory statutory health insurance coverage remains valid.

Foreign employers with employees in Germany

Foreign-based employers with employees working in Germany must comply with German social security calculation parameters if German social security law applies. These parameters affect social security contributions, employees’ insurance status, and consequently payroll processing. Payroll data, reporting obligations, and contribution requirements should therefore be reviewed in good time. In cross-border situations, such as employment involving activities in multiple European countries or international assignments, the applicable social security requirements depend on the specific employment arrangements and the relevant supranational or bilateral agreements.

What steps should you take now, and how can Baker Tilly help?

• Assessing employees’ social security insurance status as of January 1, 2027, and determining the applicable annual earnings threshold
• Reviewing mandatory health insurance coverage and potential exemptions for employees with private health insurance (including long-term care insurance)
• Assisting with exemption applications and coordinating with health insurance funds and payroll departments
• Reviewing compensation components to determine regular annual earnings
• Assisting foreign employers with payroll processing and compliance with German social security reporting and contribution obligations
   

Please contact us in good time so that we can review your options before the end of the year and ensure that all deadlines are met.

Note: The 2027 thresholds remain subject to approval by the Bundesrat and official promulgation.     
This article provides general information only. It does not constitute professional advice and does not replace individual consultation tailored to your specific circumstances