So your new one has arrived, and it is truly a moment of celebration and foresight. So has your time to apply for elterngeld or parental allowance in Germany!
As new parents, it is perfectly okay to feel overwhelmed and joyful about this entirely new addition to your family. While we are sure you have been saving up meticulously to offer the best care to your newborn, children are expensive.
Germany offers several schemes to allow working parents to take a step back from their careers and focus on spending quality time with their newborns. Here, we attempt to break down everything you need to know about the parental allowance in Germany, often referred to as Elterngeld.
What is Parental Allowance in Germany?
Parental allowance is a financial support program for new parents. It is a tax-funded payment that provides financial support to parents during the initial months after childbirth.
The parental allowance in Germany aims to replace a portion of income lost due to reduced work capacity or taking leave to care for a newborn child. Introduced in 2007, the parental allowance in Germany replaced the previous Erziehungsgehalt (parenting allowance).
The primary rationale behind the parental allowance in Germany is to ensure financial security for families during this very critical standpoint of parental involvement. It is mainly aimed at fathers, in particular, to encourage their fair participation in childcare.
Elterngeld comes in various forms, including basic Elterngeld, ElterngeldPlus (extending the payment period), and a partnership bonus (awarded to couples who share parental leave). The amount is based on the pre-tax income of the applying parent, with a minimum and maximum threshold.
By offering financial security, it allows both parents more flexibility to adjust their work schedules and take personal leaves without facing severe financial strain. Elterngeld can incentivize fathers to take a more active role in childcare, traditionally a responsibility assumed more by mothers. This helps bridge the gap towards a more equal distribution of childcare duties between parents.
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What are the Basic Eligibility Criteria to Qualify for Parental Allowance in Germany?
Parental allowance isn’t available to everyone. To be eligible, you must meet a few basic criteria, which includes:
- Must have a registered residence in Germany or a residence permit that allows you to work legally
- Must be the biological parent or legal guardian of the child and intend to personally care for them
- You cannot be working more than 30 hours per week
The good news is that if you are an expat, you can still apply for parental allowance in Germany, but there are still a few conditions associated with it. One, you need to hold a valid residential permit that allows you to work in Germany. Secondly, you must have been contributing to the German social security system for at least 6 months prior to the birth of your child.
It is possible that you might have a unique situation as an expat. If you have any doubts or issues regarding whether or not you qualify for a parental allowance in Germany, contact the Federal Office for Family Benefits and Child Rearing, where you can take a personalised eligibility test.
Please note: There is an income limit that can disqualify you from parental allowance altogether. This applies to combined income for parents applying together:
Before April 1, 2024: The limit was €250,000 per year.
From April 1, 2024: The combined income limit is lowered to €200,000.
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Types of Parental Allowance in Germany You Need to Know About
Parental allowance in Germany is rarely a one-size-fits-all program. There are several options to choose from to cater to different family needs.
#1 Elterngeld (Basic Parental Allowance)
- This is the standard parental allowance option that is open to all residents for providing financial support for 12 months after childbirth.
- The payment amount is typically 67% of your pre-tax income before the child’s birth, capped at a maximum of €1,800 per month.
- To qualify for the full amount, you would need to have been earning a relatively high income.
- There’s also a minimum benefit of €300 per month for those who weren’t employed before childbirth.
- It should be noted that both parents can apply for a parental allowance, but they cannot receive it simultaneously.
#2 ElterngeldPlus (Parental Allowance Plus)
- This scheme was introduced to provide more flexibility to new parents, ElterngeldPlus stretches the overall payment period but reduces the monthly amount.
- It allows you to receive half the basic parental allowance amount (minimum €150, maximum €900) for a maximum of 24 months.
- This type of payment is particularly beneficial for parents who want to return to part-time work after childbirth.
#3 Partnerschaftsbonus (Partnership Bonus)
- This bonus aims to incentivize couples to share parental leave responsibilities more equally.
- It provides an additional 4 months of parental allowance (Basic or Plus) if both parents reduce their work hours to a maximum of 24- 28 hours per week for at least 2 – 4 months each, depending on the chosen option.
- This bonus month amount is the same as the Elterngeld type (basic or Plus) the parent received.
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How to Calculate Parental Allowance in Germany?
When applying for parental allowance, the Elterngeld office considers your income from the past 12 months before the birth of your child. This includes employment income, parental leave pay, and self-employment earnings (after deducting business expenses).
The typical allowance is 65% of a parent’s pre-taxed income.
There is a minimum amount of €300 per month, regardless of your income level. This applies if you weren’t employed or had very low earnings before childbirth. The corresponding maximum amount is €1,800 per month.
For example, if you have a higher pre-taxed income, your parental allowance in Germany will be calculated as:
Pre-tax income: €8,000 per month
Calculation: €8,000 * 65% = €5,200 (capped at the maximum)
Elterngeld amount: €1,800 per month
Similarly, if you earn below the minimum threshold of income, then your parental allowance will be:
Pre-tax income: €1,200 per month
Calculation: €1,200 * 65% = €780 (but below the minimum threshold)
Elterngeld amount: €300 per month (minimum benefit)
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Application Process for Parental Allowance in Germany
- The first step to applying for parental allowance in Germant is to check the basic eligibility criteria, which we have already covered.
- Next, you need to find the Elterngeldstelle or a parental allowance office closest to you. They handle all parental allowance applications.
- There are several documents you need to gather before paying a visit to the official authorities. These include:
- Application form, which can be downloaded from the Elterngeldstelle website.
- Birth certificate of the newborn
- Valid identity proof of both parents
- Proof of income such as employment contracts, payslips, and tax returns
- Maternity pay statements from your health insurance provider (if applicable)
- Proof of residency permit (for expats)
- You can submit your application in person at the Elterngeldstelle or mail it to the office.
Parental Allowance in Germany and Taxation
Elterngeld isn’t directly taxed in Germany. However, an important concept called the progression clause affects how it impacts your overall tax liability.
Essentially, parental allowance in Germany is considered tax-free income, so you will not have to pay direct income tax on the amount you receive, but it is considered when calculating your overall tax rate.
Since the parental allowance increases your tax income, it might push you into a higher tax bracket, which further implies that you will be paying a slightly higher percentage of your overall income in taxes.
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Additional Child Support Benefits Besides Parental Allowance in Germany
Elterngeld is just one of the many child support systems set in place in Germany to support new parents. Child Benefit or Kindergeld is a monthly allowance paid to all parents with children under 18 (or 25 in certain situations) regardless of their employment status. It provides ongoing financial support for raising children.
German law also grants working parents the right to take unpaid parental leave for up to three years after childbirth (with certain limitations). This allows parents more flexibility in caring for their child during the initial years.
To receive maximum benefits, it is best to combine the three programs in a manner that works best for you and your child.
So, it’s time to step back and stop worrying about your careers. The government has got you covered while you enjoy a few precious moments with your family and newborn as you recover, make memories and celebrate the new addition to your life.
