If you are looking for a job or have worked in Germany, you will definitely have questions about how the German payroll works, how to calculate your salary and taxes, and how to understand your payroll? Let’s find out all of the above with My Career through this article!

Vocational study in Germany and things you must know

Gross wages and net income in Germany

The difference between gross and net salary in Germany can be surprising to many expats, as the tax system in Germany can be different from the tax system in your home country.

total salary

Your gross salary ( Bruttogehalt ) is your monthly or annual salary before any deductions. The amount will usually be detailed in your employment contract .

Net salary

Your net salary ( Nettogehalt ) is the amount of money you will receive each month into your bank account , after all taxes, social security contributions and other expenses have been deducted.

If you are discussing salary with your employer, it will always be about gross salary. Make sure you take into account the large difference between gross and net income in any salary negotiation.

Calculate your net salary in Germany

In general, income tax and social security contributions will account for around 35% of your gross salary. For example, if your gross monthly salary is €3,000, you can expect to take home around €1,950 per month after deductions. To get a better idea of ​​your net income, you can use a salary calculator .

Bonus and compensation packages

Some employers in Germany also offer additional compensation in the form of a “13th month pay”, summer or Christmas pay, commissions and performance-based bonuses. Benefits may also include a company car, computer or mobile phone. Note that these “benefits in kind” ( geldwerter Vorteil ) are also subject to income tax.

If you are recruited from abroad (for example by an international company), you may be offered an even more generous remuneration package: some expats are offered money to cover relocation costs, private health insurance, short-term accommodation or school fees for their children.

All of your net salary, bonuses, and in-kind benefits add up to your total net income.

Understanding Your German Payroll

Employees in Germany will usually receive a monthly payslip ( Gehaltsabrechnung, Lohnabrechnung or Verdienstabrechnung ) from their employer, detailing their salary, social security contributions and taxes. For anyone unfamiliar with them, these breakdowns can be confusing.

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Top of the German Salary Table: Personal Information

The personal information section defines various parameters used to calculate taxes and social security contributions:

• Date of birth  Ngày sinh
• Arbeitnehmer Nr.  Number of employees
• St. John’s Day (Steuertage) Tax Day (i.e. the relevant period of time. For a full month, it is usually the 30th)
• StKl. (Steuerklasse)  Tax class 
• Ki.Frbtr. (Kinderfreibeträge) or ZKF (Zahl der Kinderfreibeträge) Number of tax exemptions for children (1 child)
• Rel. (Religion) or Konfession  Religion ( RK = Roman Catholic; EV = Protestant; ? = No religion)
• Tax-free withdrawal (tax-free withdrawal) high allowance  Tax free withdrawal
• Eintrittsdatum  Rental date
• Sv. Tg. (Sozialverischerungstage)  Social security day (i.e. the relevant period. For a full month, usually 30 days)
• SV Schlüssel (KV / RV / AV / PV)  Social security code, indicating your contribution level (1 = full contribution)
• Income tax identification number (ID no.) Tax  ID number
• Insurance number hoặc SV number (Social Security Number)  ID an sinh xã hội
• KK (Krankenkasse)  Sickness fund (i.e. the company responsible for your health insurance)

Middle part of the German Salary Table: Salary structure and deductions ( Abrechnung )

You will also be provided with a detailed breakdown of your base salary, benefits, bonuses, taxes and insurance contributions. Details of these various deductions can be found on our Income Tax and Social Security Contributions pages:

• Bezeichnung  Description
• Gehalt  Basic Monthly Salary
• Geldwerter Vorteil or Sachbezug  Benefits in kind
• E. (Einmalbezug)  One-time payment (e.g. Christmas or holiday bonus)
• Urlaubsgeld  Holiday pay
• GB. (Gesamtbrutto)  or St.Btto (Steuer-Brutto)  Gross salary (taxable amount)
• LSt. (Lohnsteuer)  Income tax
• KiSt. (Kirchensteuer)  Church tax
• Solidarity Surcharge  Solidarity Surcharge
• SV (Social Insurance  )
• KV (Krankenversicherung) Beitrag  Contribution to statutory health insurance
• PV (Pflegeversicherung) Beitrag  Contribution to long-term care insurance
• RV (Rentenversicherung) Beitrag  Contributions to pension insurance
• AV (Arbeitlosenverischerung) Beitrag  Contributions to unemployment insurance
• Zusatzbeitrag  Additional contributions
• Nettoverdienst  or Auszahlung  Net salary paid

Bottom of the German Salary Table: Additional Information

The bottom of your paycheck typically provides a summary of your monthly and annual totals, insurance contributions, and employer contributions. You may see some of the following:

• Income Statement  Income Statement
• Monthly Value  or Monthly  Value
• Annual Value or Annual  Value
• KV / PV / RV / AV Beitrag-AG or AG-Anteil  Employer’s contribution to health insurance / long-term care / pension / unemployment

Average income in Germany

According to the German Federal Statistical Office, in 2020, the average gross annual salary was €47,700, or €3,975 per month. Individual salaries can vary greatly from this figure, as they are affected by factors such as age, seniority, industry, experience, working hours and geographical location. The tables below give an idea of ​​how these factors might affect your pay.

Salaries in Germany by Industry

Stepstone.de’s 2021 salary report lists average salaries by industry for people working in professional or managerial jobs in Germany:

Source: stepstone.de

Salaries in Germany by federal state ( Bundesland )

The salary you can expect is also affected by where you live in Germany. Generally, larger cities will offer higher salaries to compensate for the higher cost of living. Jobs in eastern Germany also tend to pay lower salaries. The following table shows how the average annual salary in different federal states compares to the average salary in Germany as a whole:

Source: Gehalt.de

Minimum wage in Germany for fresh graduates by federal state and degree

How much you earn depends on the type of degree you have. In general, Germany is a country that favors highly skilled workers, as shown by the difference in annual gross entry salaries for vocational and educational qualifications:

Source: Gehalt.de

Minimum wage in Germany

The minimum wage was only introduced in Germany in January 2015. It applies to all workers over the age of 18 and is reviewed every two years. During 2021 and 2022, it will increase in four steps:

Thus, Germany has clear regulations on salary tables, the national minimum wage and employers must comply with these regulations if they do not want to be fined for unclear salary and bonus. Hopefully, through this article, My Career has brought useful information to readers.