- Everyday Life
How to read your German Salary Slip
23 Feb 2022
Do you have trouble understanding your German salary slip? In this article we'll explain how to read your German salary slip and understand all the abbreviations on it!
As we have outlined in our article on the German tax system, Germany has a fairly complicated system of generating revenue for the state. After giving you an overview on the different types of taxes, this article is focused on the income tax (Einkommensteuer) as well as all the other duties (Abgaben) that have to be paid on your monthly salary. An important distinction has to be made between a self-employed person (Selbstständige*r) and an employee (Arbeitnehmer*in) who is employed by an employer (Arbeitgeber*in), such as a company, the state or an NGO. In the first case, you are obliged to hand in an income tax declaration (Steuererklärung) each year. Due date is usually the 31st of July in the following year.
An employee, by contrast, receives a monthly salary slip (Lohnabrechnung). On this slip, the wage tax (Lohnsteuer) and other duties have already been declared and automatically deducted from the gross wage (Bruttolohn), so that only the net wage (Nettolohn) will be transferred to your bank account. Apart from the wage tax, other duties have to be paid which you will also find on your salary slip. These include contributions to the health insurance fund (KV-Beitrag), social security (AV-Beitrag) and pension insurance (RV-Beitrag).
In Germany, you are obliged to be a member of either the public health insurance system or of a private one. Whereas the private insurances calculate their fees based on individual health condition, age and the services included in the individual contract, fees for the public health insurance are calculated based on your gross wage. The general contribution rate in 2022 is 14.6 %, which applies to all of the public health insurance providers. These providers can demand an additional contribution which usually ranges between 0.5 and 2.5 %. The total rate (general contribution + additional contribution) is then split up in half and paid in equal shares by the employer and the employee. Hence, your contribution will probably range between 7.3 and 9 %, depending on your insurance. You can use the tool on this website to calculate your total contribution based on your gross wage and thus to find out whether it would be worth it to change your public health insurance provider. On top of the health insurance, a contribution to the public nursing care insurance (PV-Beitrag) is deducted from your gross salary which amounts to 3.05 % or 3.4 % if you are 23 or older and you don’t have children.
Other duties that are automatically levied on your gross wage are contributions to the German social security system (Arbeitslosenversicherung) as well the state pension fund (Rentenversicherung). Your contribution to the social security system amounts to 2.4 % of your salary. This system provides monetary support to people who have lost their job: If you have paid your contribution for at least 12 months out of the last 30 months, you are entitled to receiving unemployment benefits for 12 months or until you find a new job. These benefits amount to 60 % of your last net salary or 67 % if you have children.
Similar to the health insurance system, every employee in Germany has to be enrolled in the public pension fund. 18.6 % of the gross salary – split up in two times 9.3 % for employer and employee – are deducted each month for your pension. Over the years, you earn entitlements based on the amounts you pay into the fund. These entitlements will later translate into a monthly pension that you will receive as soon as you reach the pensionable age and stop working. The minimum age for receiving the full pension is currently 65 but it will be raised to 67 until 2029. You have the option to retire before reaching that age but depending on how much earlier you stop working the amount of your pension will be reduced.
At the end of this article, we want to briefly explain to you a unique feature of the German tax system which will also be reflected in your monthly salary slip: the church tax (Kirchensteuer). Same as the wage tax, this tax will be automatically transferred to the tax office. However, it is not calculated based on your gross income but on the amount of wage tax you have to pay. Depending on the state of Germany you are living in, a share of 8 or 9 % of this tax amount is deducted from your salary in addition to the tax you are anyhow obliged to pay. It is important to note that only members of the Christian churches or the Jewish community in Germany have to pay this tax. Other religious denominations such as the Muslim or Hindu communities can also demand contributions from its members but these will not be collected by the German state but through the structures of the religious associations themselves.
We hope this article will help you to understand your German salary slip and to find your way within Germany’s complex system of taxes and insurances. If there are any further questions, please comment below, connect with others in the New2 FORUM or write to us at [email protected]!
Last Update: 22 Feb 2022
Written by: Ferdinand Schlechta
Cover Photo: Unsplash – Markus Spiske
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