A key person is off for weeks or months, after an accident, an operation or mental exhaustion. On a human level it is a strain. In business terms it is a cost block that most companies have never calculated through. A sober assessment: what a long absence costs, what German law requires and how the risk can be insured for the business.
Illness has become more frequent and more expensive
Sickness absence in Germany was recently at record levels. Employees were off work far more often than in previous years, and every day of absence hits the employer first. During illness, the salary keeps running with nothing in return. In total, this has become one of the largest invisible cost blocks of the German economy.
was the average sickness absence per employee in 2024, an all-time high
euros paid by employers in continued salary payment in 2023, doubled in 14 years
of all days of absence come from absences lasting longer than six weeks
Sources: Scientific Institute of the AOK (WIdO), absence report 2025 (data for 2024, around 15.1 million employed insured persons); German Economic Institute (IW), IW short report no. 70, September 2024 (76.7 billion euros, 2023); for 2024 the IW estimates around 82 billion euros (IW, August 2025).
Six weeks paid by the business, restarting with every illness
The legal position is clear: in the case of incapacity for work through no fault of the employee, the employer continues to pay the salary for six weeks (Section 3 of the German Continued Remuneration Act, EFZG). Only after that does the health insurance fund take over for those with statutory insurance, paying sickness benefit directly to the employee. For the business, the sixth week is therefore the boundary. Within that boundary, however, the burden repeats itself with every single case of illness.
And the absences are often long. Almost 40 per cent of all days of absence come from incapacities for work lasting more than six weeks, and mental illnesses last 28.5 days per case on average. For the business that means two things: in such cases the six weeks of continued salary payment run their full course, and the working capacity is missing well beyond them.
An employee with a gross salary of 4,500 euros is off for six weeks. Continued salary payment alone adds up to around 6,300 euros of gross pay, and with the employer's share of social security contributions to around 7,500 euros. And that is for these six weeks, without a replacement and without the productivity loss in the team. The values are rounded assumptions.
The expensive part is not on the payslip
The continued salary is only the visible side. The real damage arises alongside it. The absent person's work is spread across the rest of the team, creating overtime and mistakes under pressure. Projects slip, customers wait, orders fall behind. If a stand-in is brought in, it costs extra, often more than the regular member of staff.
Small and mid-sized businesses are hit hardest. Where a function hangs on a single person, there is no redundancy. If that person is off, part of the business stands still. Exactly this double effect, ongoing costs combined with missing output, makes the long absence a genuine entrepreneurial risk and not a footnote in payroll accounting.
The problem is not the single sick day but the long absence of a key person. It burdens the business twice over: in the first six weeks the salary keeps running, and the working capacity is missing well beyond them.
How the cover closes the gap
The benefit becomes tangible when you walk through a case of illness step by step. In the first six weeks the business continues to pay the full salary (Section 3 EFZG). For businesses with up to 30 employees, the health insurance fund reimburses part of this through the statutory U1 levy scheme, between 40 and 80 per cent depending on the chosen rate. The business bears its own share itself.
In terms of timing, a case of illness runs like this:
from the fund
The coloured span is the period of statutory continued salary payment that the cover addresses.
After the sixth week, the business's obligation to pay ends. The health insurance fund then pays the sickness benefit, which goes directly to the employee. The cover therefore addresses exactly the period in which the business pays. Businesses with more than 30 employees receive no U1 reimbursement and carry these six weeks alone from the start. For them, the same solution insures the full continued salary payment, not just the own share.
As a rule, the contributions for the cover can be recognised as a business expense and reduce profit. Whether and how that applies in the individual case depends on the arrangement and belongs in the coordination with the tax advisor before signing.
For shareholder-managing directors the question is sharper still
For salaried employees, the statutory obligation ends after six weeks. For you as a shareholder-managing director, the service agreement often provides for considerably longer continued salary payment, sometimes over many months. That burden is then carried by the GmbH directly, and it arises at exactly the moment when you, as the person carrying the business, are off yourself. That is a topic of its own with its own tax subtleties. I will devote one of the next articles to it.
Frequently asked questions
How long does the employer have to keep paying the salary during illness?
In the case of incapacity for work through no fault of the employee, the employer continues to pay the salary for six weeks (Section 3 of the German Continued Remuneration Act). After that, those with statutory health insurance receive sickness benefit from their health insurance fund. A longer continued salary payment can be agreed contractually, for instance in managing director service agreements. That burden is then borne by the company itself.
Does the health insurance fund not reimburse the business for continued pay anyway?
Only in part and only for small businesses. Through the statutory U1 levy scheme (Expenditure Compensation Act), the health insurance funds reimburse businesses with up to 30 employees between 40 and 80 per cent of continued salary payment, depending on the chosen reimbursement rate. The business bears its own share itself. After the sixth week, continued salary payment ends and the fund pays sickness benefit directly to the employee. It is exactly these six weeks of own share that a company cover addresses.
From what company size is insuring continued salary payment worthwhile?
It is relevant even in a small business, because there the absence of a single key person can hardly be absorbed and immediately hits productivity and deadlines. As the workforce grows, the risk becomes easier to plan for, but it does not disappear. What matters is how critical individual people are to the running of the business.
Are the contributions for the cover tax-deductible?
As a rule the contributions can be recognised as a business expense and so reduce the company's profit. Whether and in what form that applies depends on the arrangement and belongs in the coordination with the tax advisor before signing.
Further reading
- Company health insurance: the benefit employees actually use
- Occupational pensions as a staff retention tool in mid-sized companies
What would a long absence cost your business? In an initial consultation we clarify where your key people sit and how continued salary payment can be insured. 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.