The ancillary wage costs are indirect labor costs incurred through a salary payment or wage payment to the employee. In the tax return, the expenses for salaries and incidental wage costs are otherwise deducted!
The employer incurs non-wage labor costs through the employment of employees and these are indirect labor costs as opposed to paying salaries or wages, which are referred to as direct labor costs.
The pay slip that the employee receives does not contain a list of the ancillary wage costs; the employer makes this record internally in his bookkeeping.
The composition of the non-wage costs
The non-wage costs include four items in Germany:
- The employer’s contributions to social security
- Health insurance (KV): This is a compulsory insurance for all persons – it serves to cover in the event of illness.
- Long-term care insurance (PV): It is also compulsory insurance for everyone. In the event of permanent need for care, she steps in.
- Unemployment insurance (AV): Only employees are compulsorily insured here. They secure the income of unemployed people while they are looking for work. People who are exempt from compulsory insurance can take out voluntary insurance.
- Accident insurance (UV): Only the employee is insured here. This supports the insured person in the event of an accident at work or an occupational disease. Here, too, a self-employed person can take out voluntary insurance.
- Pension insurance (RV): It is one of the compulsory insurances for employees, just like the AV and the UV. The benefits of this insurance include the payment of the old-age pension and financial support in the event of reduced earning capacity and the payment of the survivor’s pension. The self-employed can also take out voluntary insurance here.
- The costs for job-related education and training
- other expenditures
- working clothes
- Moving costs
- Recruitment costs
- Taxes on wage or salary payments or the number of employees
While contributions for training costs, other expenses and taxes can be added to the wage bill, the employer incurs monthly fixed costs due to the social security contributions .
The non-wage costs: the amount and the calculation
The social security contributions for employers are currently around 21%. In addition, there is the U1 and U2 levy, which is very different according to the statutes of the health insurance company, as well as the accident insurance, which depends on the hazard class that applies to the company.
The contributions are calculated as a percentage of the gross income, but they cannot increase as much as you want: for 2016, the contribution assessment ceiling is an annual salary of 74,400 euros (west) and 64,800 euros (east).
Apart from accident insurance, the social security contributions are split 50:50 between the employer and the employee.
- Health insurance: 14.6% (7.3% AG and AN)
- Long-term care insurance: 2.35% (1.175% AG and AN)
- Pension insurance: 18.70% (9.35% AG and AN)
- Unemployment insurance: 3% (1.50% AG and AN)
- Insolvency levy: 0.12% only AG
- Accident insurance: Depending on the accident risk and the contributions are only borne by the client
However, the current amount of the contributions changes frequently, because the rates are adapted to the development of costs and the labor market.
Non-wage labor costs and their effects
According to wholevehicles.com, it is the non-wage labor costs that play a decisive factor, because they make it more expensive for employers to employ workers. Excessive non-wage labor costs can prevent a company from hiring new employees or creating new jobs.
It is precisely for this reason that the employers’ share of social security contributions has fallen from 29.1% in 1991 to successively 21% of gross wages. For the employee, the progressive effect of non-wage labor costs is significant. Because unlike income tax, where higher salaries are charged with a higher tax rate (regressive), the same tax rate is always used when determining non-wage labor costs. Conversely, this means that a low wage is more heavily burdened by non-wage labor costs than a high wage.
The non-wage costs for a mini job
If the company employs employees in so-called mini-jobs – i.e. marginal part-time employees – then these are also subject to compulsory social insurance. This means that the ancillary wage costs must also be calculated and submitted for an employee on a basis of 400 euros. Here, however, the employee does not pay health, pension and long-term care insurance contributions from his wages, but these are completely borne by the employer.
But these costs are manageable, because 13% of the wages are paid to the health insurance, 15% to the statutory pension insurance and 2% as a so-called flat tax.