The competition for skilled staff is no longer decided by salary alone. A growing number of German companies are discovering company health insurance (betriebliche Krankenversicherung, bKV) as the one benefit employees actually experience, at every dental appointment, every new pair of glasses, every preventive check-up. An honest assessment: what it delivers, what it costs and for whom it pays off.
What an unfilled position really costs
Employee retention sounds like a soft topic, but it is hard business economics. Filling a vacant skilled position in Germany takes around 150 days on average, according to the vacancy statistics of the Federal Employment Agency. During that time, work lands on the remaining team, orders slip and customers wait. Based on the average German gross salary, roughly 270 euros per working day is at stake including employer contributions. Add downtime costs or more expensive temporary staff, and a single day of absence quickly passes the 450 euro mark. The daily figures are calculation assumptions based on the average statutory gross salary including employer contributions, rounded.
A company with 50 employees and 10 % staff turnover loses roughly 129,000 euros per year to churn, through refilling positions, onboarding and lost productivity. Cutting turnover in half creates headroom of more than 100 euros per employee per month that can be invested in retention before it is written off as a loss.
This is exactly where company health insurance comes in: it costs a fraction of that headroom and works on the issue that concerns employees most directly, their own health.
Why most benefits fizzle out
Job advertisements show how much the competition has shifted: according to industry analyses of job postings, the number of benefits advertised per position nearly tripled between 2019 and 2024, from around 4 to about 11. Yet many of these perks never reach the employees. Vouchers are forgotten, the subsidised gym is used by a minority. How strongly usage depends on the model is shown by independent portfolio data:
Sources: employer survey on company fitness (DKB, 2017); Funk Vorsorge bKV reporting guide, December 2025 (170 companies, around 70,000 insured employees; budget figure: small companies).
The difference lies in tangibility: company health insurance touches employees several times a year, at the dental cleaning, the new glasses, the preventive check-up. Every reimbursement visibly comes courtesy of the employer. No fruit basket achieves that effect.
How company health insurance works
The employer concludes a group contract and covers the workforce or defined parts of it. The decisive point: with employer-funded company schemes there are usually no health questions, employees with pre-existing conditions or ongoing treatments are included as well. For an initial quote, the average age of the workforce is typically all that is needed, without collecting individual health data.
The model that has prevailed in the market is the budget principle: each employee receives an annual health budget and decides individually what to use it for.
Within the budget there are no separate sub-limits per type of benefit under this principle. Whoever needs dentures one year and glasses the next uses the same budget flexibly. Claims are settled directly between employee and insurer; the employer sees neither health data nor invoices. Important for context: company health insurance complements German statutory health insurance, it does not replace it.
The retention effect of company health insurance comes from its visibility in everyday life: It is the rare benefit that the majority of the workforce actually uses and associates with their employer.
A market at the tipping point
For a long time, company health insurance was a niche topic in Germany. That has changed:
companies offer company health or long-term care insurance, up 16 % in a single year
employees already have company health insurance through their employer, five times as many as in 2015
of employees would welcome company health insurance as a benefit
Sources: German Private Health Insurance Association (PKV-Verband), portfolio figures as of 31 December 2025; Civey survey commissioned by the PKV-Verband, January 2026.
The uncomfortable reading for hesitant employers: right now, company health insurance is still a differentiator in the labour market. At this pace of growth it will become a standard expectation within a few years, just as bike leasing schemes and remote work did. The retention advantage belongs to those who move earlier than the competitors hiring the same people.
What it costs and how it is taxed
Depending on budget level and the age structure of the workforce, the premium is typically a low double-digit euro amount per employee per month. A simple comparison helps: Only part of a 20 euro gross pay rise actually reaches the employee after taxes and contributions, and it is forgotten after three months. A health budget of a comparable size finances a dental cleaning, glasses or a check-up every year and is experienced as the employer's contribution at every single use.
For tax purposes there are several structuring routes for employer-funded premiums, each with different consequences for payroll and social security. Which route fits depends on premium level and pay structure, and belongs in the coordination with the company's tax advisor before the contract is signed. How that collaboration works in practice is described in the article on working with tax advisors.
For which companies it pays off
Company health insurance is not an end in itself. It creates value where staffing is the bottleneck:
- Tangible skills shortage: Where open positions stay vacant for months, every resignation is expensive and every visible retention tool is worth real money.
- From about ten employees: Practical from smaller companies upwards; it comes into its own as a retention and recruiting argument from around 50 employees, when turnover and sickness levels become measurable cost items.
- Growing teams: Companies that hire compete in job advertisements directly with employers that already offer health benefits, from IT firms to manufacturing SMEs to growing service businesses.
- Complement to the company pension: While the company pension scheme builds loyalty over the long term, health insurance works immediately. Together they cover the two time horizons in which employees decide to stay or leave.
Implementation: simpler than expected
Many managing directors assume that introducing a company health scheme is a months-long project. In practice it is four manageable steps:
Clarify the basics. For a solid quote, headcount and average age are enough, no name lists and no health data.
Define model and budget. Which employee groups, which budget level, employer-funded as the base model. This is where the perceived value in everyday life is decided.
Set the legal framework. A formal benefit commitment or works agreement puts the benefit on a clean legal footing, coordinated with the tax advisor and, where present, the works council (Betriebsrat).
Inform the team. The underestimated step: only a clear introduction to the workforce turns the contract into a benefit people experience. Administration afterwards runs digitally, including joiners and leavers.
Frequently asked questions
Are employees with pre-existing conditions covered?
With employer-funded group contracts, health questions and waiting periods are usually waived. Employees with pre-existing conditions or ongoing treatments are then included as well. This is exactly what makes company health insurance more valuable to many employees than an individual supplementary policy, which they often would no longer be offered on their own.
What happens during parental leave or long-term illness?
Good group schemes provide for a premium waiver during unpaid periods such as parental leave, care leave or long illness, with cover remaining in place. The exact conditions are a contractual matter and belong on the checklist when selecting the plan.
What applies when an employee leaves the company?
A continuation right is customary: the employee can continue the cover privately at their own expense after leaving. For the employer, the premium obligation ends with the departure; administration runs through the ongoing joiner and leaver process.
Do all employees have to be included?
No, but the boundaries must be objective. Defined groups can be insured as well, for example all industrial staff or all employees above a certain length of service. What matters are objective criteria and equal treatment within the chosen group.
Does implementation require the works council?
Whether an employer introduces a voluntary benefit is the employer's own decision. An existing works council does have co-determination rights on structure and distribution. In practice the works council is rarely an obstacle and often an ally, since the benefit directly serves the workforce.
What about employees with private health insurance?
Company health insurance is aimed primarily at employees with statutory health insurance. Depending on the plan, individual components are open to privately insured employees, or an alternative solution is found. This can be resolved case by case and is no obstacle to implementation.
Further reading
- Company pension schemes as an employee retention tool for German SMEs
- Tax advisor and pension specialist: what makes collaboration on company pension schemes work
Could company health insurance fit your business? In an initial consultation we clarify workforce structure, budget level and the path to implementation. No obligation, in Berlin at Gendarmenmarkt or online.
This content is general information and no substitute for individual advice. Tax structuring is carried out in coordination with the client's tax advisor.