Many expats living and working in Germany think they will earn 5.000€ Salary every month when they sign their employment contract with 5.000€ salary every month. Leaving them surprised that they only get 3.000€ out of their 5.000€ salary Transferred to their Bank Account. What happened in between that almost half of your salary is gone? 🤔
The answer can be found in your German payslip. A pretty confusing piece of paper with a lot of additions, deductions (like Taxes & Social Security), and abbreviations that you probably never even looked at in detail. There’s usually no reason to examine your German payslip as the German government and your employer are taking care of almost everything.
But there might be some things on your payslip that you might want to take off, or even have to take care of yourself (e.g. Private Pensions or Disability Income Insurance). Let us see how you can read and Understand your German payslip in this article. All payslips in Germany look more or less the same, so grab your German payslip to follow along.
Personal Data on Top of Your German Payslip
First things first. The top of your German payslip shows some important personal data and some not so important data about yourself. The data with lesser importance include your birthday, vacation days, Tax ID, the date you started working for your company, your Social Security Number, address, etc. Just check and see if these numbers are correct.
The important information on top of your German payslip include:
Health Insurance Information: Health insurance provider, percentage of your Salary you are paying for health insurance, BGRS code (0xxx or 9xxx: You can switch to private health insurance, 1xxx: Forced member of public health insurance)
(Forced) members of German Public Health Insurance pay 14,6% of their Gross Salary in health insurance contributions as well as 3,xx% for long-term care insurance (3,05% if you have kids, 3,3% if you don’t have kids). On top of that, ALL public health insurances charge an additional contribution that ranges from 0,2% to 2,7% depending on their efficiency.
So members of the German Public Health Insurance System are paying a maximum of 10.042€ for health insurance + 1.915€ for long-term care insurance in 2021 (contributions rise every year). Switching to a more efficient public health insurance or switching to the private health insurance system can Save You a Lot Of Money every month.
The one number that is probably most important for everyone Working In Germany is their salary. Some employees in Germany earn a “Gehalt” as salary and some employees earn a “Lohn” each month as salary. But what is the difference between those 2 types of getting paid from your employer? 🤔
Gehalt: Every month the same, not dependant on some form of measurement
Lohn: Varies every month depending on the measurement (e.g. hours worked, units sold, etc)
Some employees in Germany also have a company car that they may be allowed to use also for private trips. If so, 1% of the new car price will be added as fictional value to your Gross Salary so you can be Taxed on that amount later on. Our example employee in our YouTube Payslip Video gets 287€ added to his gross salary every month, so his company car is worth 28.700€ when it is brand new (1% company car rule).
Last but not least your employer can also pay you for your journeys between your home and your place of work in 2 different ways. Journeys to your place of work can be accounted with a “P” meaning you have to “pay” Taxes and social security on that amount. Or with an “F” which means the payment is “free” of Social Security (the government still wants taxes 😉).
Based on Your Gross Salary (4.902€ in our example) you are now taxed accordingly with your Income Tax Class 1 to 6. Your income tax class is determined by your family status and will influence how much Taxes you have to pay each month from your payslip. In general: The Higher Your Income, the more income tax you have to pay in Germany.
2nd Big Deduction From Your German Payslip: Social Security
The second deduction from your German payslip is by far the largest deduction: Social security. Good news for all Employees in Germany: Social security for all 4 (actually 5) pillars of the German Social Security System are capped with a maximum threshold. No matter how much you earn, you have to contribute maximum the threshold.
83€ in long-term care insurance (because the salary is above threshold & no kids)
All these Social Security Contributions amount to a total of 980€ for a Gross Salary of 4.902€. And your employed is paying the same amount on top because social security is split 50:50 with the company you work for. Your employer also pays for the 5th pillar of German social security alone (that’s why it is not on your payslip): Accident insurance.
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But before your net salary is Transferred to your Bank Account, further deductions are happening: The 1% for your company car as well as your journeys to work. Remember: Both were added as fictional values to your gross salary earlier so you have to pay Taxes & Social Security on these employer benefits.
So employees in Germany with a Monthly Gross Salary of 4.902€ are actually left with a net payout of 2.868€ each month. In order to increase our net payout you can talk to your boss or HR department about Capital-forming Benefits (Vermögenswirksame Leistungen or VWL in German).