HR-Glossar
AAG-Verfahren (employer expense reimbursement scheme)
How the German employer expense reimbursement scheme works, who takes part in U1 and U2 and how the reimbursement is claimed.
1. What is AAG-Verfahren (employer expense reimbursement scheme)?
The AAG scheme reimburses employers for expenses of continued pay. It rests on the Expense Reimbursement Act (AAG) and consists of two separate levies; Section 1 AAG governs the reimbursement claims, Section 7 AAG how the funds are raised.
The U1 levy covers continued pay in case of illness. Only small businesses take part in it – what governs is a headcount of, as a rule, no more than thirty, with part-time staff counting proportionately and trainees left out. The business pays a levy and, in case of illness, is reimbursed part of the pay it continued.
The U2 levy covers expenses in connection with maternity – the supplement to the maternity allowance and continued pay during work bans. All employers take part in it, regardless of company size. Here reimbursement is in full.
Both run under Section 2 AAG through the health insurance funds as collection agencies, together with the social security contributions. Levy and reimbursement rates are specific to each fund and are set annually in its articles.
Two points carry over directly into a group's cost model: the U2 makes maternity costs reimbursable in full for every employer, and neither levy reimburses anything without an application.
2. Origin and development
Six weeks of continued pay is an incalculable risk for a business with few employees: a single longer absence can consume a month's liquidity. The reimbursement scheme spreads that risk across the whole body of small businesses – an individual risk becomes a plannable contribution.
For maternity the reasoning was different and weighs more heavily: as long as the costs lay with the hiring business alone, employing women of childbearing age was economically disadvantageous. The U2 removes that incentive by having all employers carry it together – which is why it applies without a size limit.
3. Core principles and how it works
Two separate levies
U1 and U2 have different groups of participants, different triggers and different rates. They are calculated separately and reimbursed separately.
U1 for small businesses only
Participation depends on headcount and is redetermined at the start of each calendar year. A growing business drops out – and then carries the risk itself.
U2 for everyone
Without a size limit and without a choice. Reimbursement is in full for the reimbursable expenses.
Reimbursement on application
Neither U1 nor U2 reimburses anything by itself. The application runs electronically through the same certified procedure as the social security reports.
Optional rates for U1
Many funds offer different reimbursement rates with correspondingly different levy rates. The choice generally applies for a year.
4. Who is AAG-Verfahren (employer expense reimbursement scheme) relevant for?
- Small businesses – for them U1 is the decisive buffer against absences through illness.
- All employers – U2 applies without exception.
- Payroll teams – calculating, applying and reconciling the reimbursement is ongoing work.
- Founders – the levies are a cost factor frequently missing from the planning.
- Employees – indirectly, because the scheme takes pressure off the hiring decision.
5. How it differs from related terms
- AAG scheme and social security contributions – the levies run alongside through the same collection agency but are not insurance contributions and create no entitlements for employees. - U1 and U2 – illness against maternity, small businesses against all, partial reimbursement against full reimbursement. - AAG scheme and the insolvency pay levy – the insolvency pay levy secures pay claims in an insolvency and is a third, separate scheme. - AAG scheme and occupational integration management – integration management is a duty on longer absences, not a question of reimbursement.
6. Variants and adaptations
- U1 with different reimbursement rates – depending on the fund's optional rate; a higher reimbursement rate means a higher levy. - U2 with no choice – uniform for all employers with the respective fund. - Reimbursement for work bans – through U2, including outside the protection periods. - Reimbursement of the employer supplement to the maternity allowance – likewise through U2.
7. Advantages and challenges
Advantages
- An incalculable individual risk becomes a plannable monthly contribution
- U2 removes the economic disadvantage of employing women
- Handled through the existing collection agency, with no additional counterparty
- For U1 the reimbursement rate can be matched to the business's own risk profile
Challenges
- The levy is payable in years without any claim as well
- U1 reimburses only part, not the full expenses
- The reimbursement arrives only on application and is therefore regularly forgotten
- U1 participation is redetermined annually – growing businesses drop out
- Fund-specific rates make comparison and planning harder
8. Best practices for implementation
Build reimbursement applications into the monthly close
Not into a collecting folder. The levy is paid anyway; the reimbursement is the return on it and belongs claimed.
Check participation status at year end
The determination is made annually. A business crossing the threshold loses U1 and should know that before the first case of illness arrives.
Choose the optional rate deliberately
A higher reimbursement rate costs more levy. Which combination fits depends on the actual sickness record – which can be derived from the business's own history.
Reconcile reimbursements against the expenses
A reimbursement lower than expected has a reason. Clarifying it is easier during the year than at an audit.
9. Tips for employers and employees
For employers
- **Apply, do not merely pay** – reimbursement is made exclusively on application
- **Keep an eye on growth** – above the threshold U1 falls away and the risk sits with the business again
- **U2 concerns you too** – it applies without a size limit, even with a single employee
- **Do not forget work bans** – they are reimbursable through U2 as well, not only the protection periods
For employees
- **The scheme does not concern you directly** – your entitlement to continued pay exists regardless
- **Ask about maternity** – the supplement and continued pay during a work ban run through the employer, which is reimbursed for them
10. Conclusion
The AAG scheme is one of the few arrangements giving small businesses genuine predictability: an absence through illness that could blow a month apart becomes a levy contribution. The U2 goes further – it removes a disadvantage in hiring and therefore applies to everyone. The most common error in practice is banal and expensive at the same time: the levy is paid but the reimbursement is not claimed. Levy and reimbursement rates are set annually by the funds in their articles and belong looked up there.
For an international group the U2 is the point worth carrying into the cost model. Maternity expenses are reimbursed in full to every employer, without a size limit – so what the German entity bears is the cover for the absence, not the money. And because nothing is reimbursed without an application, that claim belongs in the monthly payroll close rather than in somebody's intention.
A note on sources: there is no official English version of the AAG (checked on 2026-09-28); the German text is cited below and its wording governs.
Sources
- Section 1 AAG – Reimbursement claim (German original; no official English version) (opens in a new tab)
- Section 2 AAG – Reimbursement (German original) (opens in a new tab)
- Section 7 AAG – Raising the funds (German original) (opens in a new tab)
- Section 9 AAG – Articles of the fund (German original) (opens in a new tab)
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