HR-Glossar
Krankengeldzuschuss (sick pay supplement)
What a German sick pay supplement is, what it rests on and what to watch for in tax, contributions and drafting.
1. What is Krankengeldzuschuss (sick pay supplement)?
A Krankengeldzuschuss is a payment by the employer which, after the six weeks of continued pay have expired, closes the gap between the sickness benefit paid by the health insurance fund and previous net pay, in whole or in part.
Sickness benefit is calculated under Section 47 SGB V and lies below previous net pay. For longer illnesses that means a noticeable loss of income – which is exactly where the supplement comes in.
There is no statutory entitlement. It rests on a collective agreement, a works agreement, the employment contract or established practice. In sectors covered by collective agreements – the public sector and parts of industry, for instance – it is widespread; outside them it is more the exception.
For tax it is taxable employment income. For social security it is free of contributions under Section 23c SGB IV, as long as together with the sickness benefit it does not exceed a defined comparison figure; above that it becomes subject to contributions. That boundary is the heart of the payroll treatment.
One of the four possible bases above has no equivalent in most jurisdictions and is worth reading twice: established practice. It arises from conduct, not from a document.
2. Origin and development
The gap between sickness benefit and net pay is inherent in the system: sickness benefit is a wage replacement and was never intended as full replacement. For short illnesses this is barely noticed, because the six weeks of continued pay apply. With longer illness it becomes a problem.
The parties to collective agreements responded early and agreed supplements – often graded by length of service. Outside collective coverage it remained a voluntary decision, and the landscape looks correspondingly uneven.
3. Core principles and how it works
No statutory entitlement
It arises only from a collective agreement, a works agreement, the employment contract or established practice. The last of these arises through repeated payment without reservation.
Following on from continued pay
The supplement regularly starts after the six weeks, for an agreed period.
Taxable, in principle free of contributions
The freedom from contributions ends where sickness benefit and supplement together exceed a comparison figure. The excess is then subject to contributions.
The amount and duration belong settled
Without a clear provision a dispute arises about both – and, in case of doubt, an established practice nobody intended.
Observe the reporting duties
The supplement affects the interruption report and the contribution treatment; it is not a pure payment transaction.
4. Who is Krankengeldzuschuss (sick pay supplement) relevant for?
- Businesses covered by collective agreements – the supplement is frequently prescribed there. - Employers wanting to offer commitment – it works particularly with long-serving staff. - Employees in longer illness – for them a noticeable part of their income is at stake. - Payroll teams – the contribution boundary is demanding.
5. How it differs from related terms
- Sick pay supplement and continued pay – continued pay is a statutory duty for six weeks; the supplement is voluntary and starts afterwards. - Sick pay supplement and sickness benefit – sickness benefit is paid by the health insurance fund, the supplement by the employer. - Sick pay supplement and the supplement to maternity allowance – the latter is statutorily prescribed and reimbursable through U2. - Sick pay supplement and injury benefit – after an accident at work, injury benefit takes the place of sickness benefit; a supplement provision should cover that too.
6. Variants and adaptations
- Collectively agreed supplement – frequently graded by length of service. - Works agreement – uniform for the business, relevant to co-determination. - Individual contractual commitment – for particular roles, often at management level. - Established practice – arises unintentionally through repeated payment without reservation. - Top-up to full net pay – the most far-reaching form; most likely to be borderline for contributions.
7. Advantages and challenges
Advantages
- Noticeably secures income during a longer illness
- A strong signal of care, particularly for long-serving staff
- In principle free of contributions and therefore cheaper than a pay rise of the same amount
- In sectors under collective agreements, it matches the market
Challenges
- A voluntary benefit with lasting binding effect where it is not cleanly settled
- Established practice arises quickly and is hard to remove again
- The contribution boundary is demanding to check in the individual case
- A cost risk where several long illnesses coincide
- Without a provision on duration, expectations arise that nobody promised
8. Best practices for implementation
Settle in writing what applies
Amount, duration, start, conditions and an express reservation of voluntariness so far as permissible. Without that, established practice arises.
Configure the contribution limit in the system
The split between the contribution-free and contributory part belongs in the payroll run, not in a side calculation.
Cover injury benefit as well
Otherwise a gap arises in precisely the case least attributable to the person.
Estimate the cost effect in advance
A top-up to full net pay over many months is a considerable amount where several cases coincide.
9. Tips for employers and employees
For employers
- **Document the voluntariness** – repeated payment without reservation creates established practice
- **Know the contribution limit** – above it the supplement becomes subject to contributions
- **Where a collective agreement applies, look there first** – it is often already settled
For employees
- **Check whether a supplement has been agreed** – collective agreement, works agreement or contract
- **Expect a drop in income after six weeks** – sickness benefit is below net pay
- **Account for the supplement in your tax return** – it is taxable employment income
10. Conclusion
The sick pay supplement closes a gap that many notice only when it affects them: after six weeks of continued pay, income falls noticeably. It is voluntary, in principle free of contributions and therefore a comparatively cheap instrument of care – but it binds. Two points decide practice: a written provision on amount and duration, so that no established practice arises, and the correct contribution treatment, which should be configured in the payroll system.
For an international group the binding effect is the part that deserves attention before the first payment. Established practice – a benefit becoming an entitlement because it was paid repeatedly without reservation – has no equivalent in most jurisdictions, and it does not require anyone to have decided anything. A discretionary top-up granted case by case, with no reservation stated, can become owed to the whole workforce; and removing it afterwards is considerably harder than never having created it.
A note on sources: SGB V has an official English version, cited below. SGB IV and the Continued Remuneration Act do not (checked on 2026-09-27); their German texts govern.
Sources
- Section 47 SGB V – Amount and calculation of sickness benefit (official English version) (opens in a new tab)
- Section 23c SGB IV – Other non-contributory income (German original; no official English version) (opens in a new tab)
- Section 3 EFZG – Entitlement to continued pay in case of illness (German original) (opens in a new tab)
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