With salary sacrifice (Entgeltumwandlung), you give up part of your gross salary, and your employer pays that amount into occupational pension provision (betriebliche Altersvorsorge) on your behalf. The principle is simple, but its effect depends on two separate limits: the tax exemption and the social insurance exemption. This entry explains how they work.
Short answer: With salary sacrifice, part of your gross pay flows into an occupational pension scheme. In 2026, up to 8,112 euros a year are tax-free (8 percent of the contribution assessment ceiling of statutory pension insurance), and up to 4,056 euros a year are free of social insurance contributions (4 percent). The key rules are § 3 No. 63 EStG and § 1 SvEV. Last updated: October 2026.
The essentials at a glance
- You give up part of your gross salary, and your employer pays that amount into an occupational pension scheme.
- Tax-free up to 8 percent of the contribution assessment ceiling (Beitragsbemessungsgrenze) of statutory pension insurance (2026: 8,112 euros a year).
- Free of social insurance contributions up to 4 percent of that ceiling (2026: 4,056 euros a year).
- The two limits apply separately. They are not a shared upper limit.
- If the employer saves social insurance contributions, it must pay a subsidy of 15 percent of the social-insurance-free part (§ 1a BetrAVG).
Why there are two limits
The tax exemption and the social insurance exemption follow different rules. The table shows the 2026 values.
| Limit | Basis | Annual value 2026 | Monthly value 2026 |
|---|---|---|---|
| Tax-free (§ 3 No. 63 EStG) | 8 percent of the statutory pension insurance ceiling | 8,112 euros | 676 euros |
| Free of social insurance (§ 1 SvEV) | 4 percent of the statutory pension insurance ceiling | 4,056 euros | 338 euros |
The contribution assessment ceiling of statutory pension insurance is 8,450 euros a month in 2026, or 101,400 euros a year. Last updated: October 2026.
Worked example with assumptions
Assumption: You convert 400 euros a month, so 4,800 euros a year. The amount is then split as follows:
| Part | Amount per year | Tax | Social insurance |
|---|---|---|---|
| Up to 4,056 euros | 4,056 euros | Tax-free | Free of social insurance |
| Remainder up to 4,800 euros | 744 euros | Tax-free (under 8,112 euros) | Subject to social insurance |
Assumption: Your employer saves contributions on the social-insurance-free part. Then it must add 15 percent of 4,056 euros, which is 608.40 euros a year or about 50.70 euros a month (§ 1a para. 1a BetrAVG).
How to check an offer
- Ask which implementation route is used: direct insurance (Direktversicherung), pension fund (Pensionskasse), pension scheme (Pensionsfonds), support fund (Unterstützungskasse) or direct commitment (Direktzusage).
- Convert your monthly amounts to an annual figure and compare them with the limits in the table.
- Have the employer confirm in writing whether an employer subsidy is paid and how much it is.
- Clarify how benefits in old age are taxed. This depends on the specific contract.
Frequently asked questions
When does salary sacrifice make sense, and when does it not?
It can pay off if you save social insurance contributions and do not need the money in the long term. It is less suitable if you need the funds in the short term, because they are tied up. At low income, the tax advantage is also small. For a personal assessment of your situation, you can get advice through our page on personal consultation (in German).
Do I have a right to salary sacrifice?
You can ask that part of your pay be converted into occupational pension provision (§ 1a BetrAVG). The exact conditions depend on the implementation route and the company.
Are the limits monthly?
The limits are annual figures. Convert monthly amounts to twelve months. If your pay changes during the year or you start in the middle of the year, have the limit checked on a pro rata basis.
What happens when I change jobs?
What happens to the entitlements you have built up is governed by your contract and the Occupational Pensions Act (Betriebsrentengesetz). Clarify this with your former employer and the provider before you change jobs.
What to do now
- Ask your employer which implementation routes and conditions it offers.
- Set your monthly amounts and convert them to an annual figure.
- Check the 2026 limits: 4,056 euros free of social insurance, 8,112 euros tax-free.
- Have costs, payouts and administration explained in writing before you sign.
Related reading
- Glossary: Payroll Tax Class Explained
- Glossary: Benefit in Kind Explained
- Retirement provision for students: start early with small amounts (in German)
- Pension Insurance for Students in Germany: Rules
Sources: Income Tax Act (EStG) § 3 No. 63, occupational pensions, Social Security Remuneration Ordinance (SvEV) § 1, German Pension Insurance, calculation values (contribution assessment ceiling) (all accessed October 2026).
Last updated: October 2026. This guide provides general information, not individual advice.
