German Salary slip explained
It’s time for monthly paycheck. Salary slip. Annual salary package. Net amount credited in to your bank account. We know it is a mess. Welcome to Germany!!You will find every possible tax cases in your salary receipt.
Let us assume you earn a monthly income of 3750 €, Tax class I (single) and more than 23 years old.
- Lohnsteuer (Income tax)
In Germany, more you earn, more you pay Income tax. Currently, it lies between 14 and 45 % of your annual income. Again, it depends upon your tax class. As such Income tax is the highest deduction from your paycheck.
Lohnsteuer (Income tax) = 603.50 €.
- Solidaritätszuschlag (Solidarity surcharge)
Since 1991, every employee should pay a solidarity surcharge (also called soli) as 5.5 % of the income tax. If you earn less than 1500 € per month, then you don’t have to pay Soli.
Solidaritätszuschlag(Solidarity surcharge) = 5.5 % 603.5=33.19 €
- Kirchensteuer (Church tax)
If you are member of a church, depending upon the income and Federal state, a church tax is incurred between 8- 9% of the Income tax.
for federal state Baden-Württemberg, Kirchensteuer (Church tax) = 8 % 603.5 = 48.28 €
net Steurrechtliche Abzüge(Tax deductions)=603.5+33.19+48.28= 684.97 €
- Krankenversicherung (Health Insurance)
In order to make sure a possible medical condition doesn’t ruin your financial situation, health Insurance is compulsory in Germany. A statutory health insurance costs an amount of 7.3 % of monthly salary. Besides, there is an additional contribution depending on the individual insurance company and your monthly income (around 0.5 %). So you pay around 7.8 % of monthly Income towards health insurance.Your employer also pays an equal amount towards your health Insurance.
Krankenversicherung (Health Insurance) = 7.8 % 3750 € = 292.50 €
- Rentenversicherung (Pension Insurance)
A statutory pension Insurance is also compulsory in Germany to take care of your situation as a pensioner. An amount of 9.3 % of monthly salary is paid towards your pension Insurance. Your employer also pays an equal amount towards it.
Rentenversicherung (Pension Insurance) = 9.3 % 3750 € = 348.75 €
- Pflegeversicherung (Nursing care Insurance)
Health insurance doesn’t take care if someone falls into nursing care situation. As such, one must pay an amount of 1.525 % of monthly Income towards Nursing care Insurance. If you are above the age of 23 and without children, then an additional amount of 0.25 % is added on top of it.
Pflegeversicherung (Nursing care Insurance)= 1.775 % 3750 € =66.56 €
- Arbeitslosenversicherung (Unemployment Insurance)
In order to protect during any possible scenario of unemployment, a monthly contribution of 1.2 % has to be made towards unemployment Insurance. Civil servants and soldiers are exempt from this, as well as mini-jobbers who earn less than 450 euros a month.
Arbeitslosenversicherung (Unemployment Insurance)=1.2% 3750 € =45 €
net SV-rechtliche Abzüge (net social security contributions) = 292.5+348.75+66.56+45=752.81 €
Net Monthly Income = 3750- 684.97-752.81 = 2312.22 €
- There is no legal regulation that you should store your salary slip. However, you may need it while applying for an apartment or for other financial institutions.
- A better practice would be to store the salary receipt until you get the tax return statement for that particular year from the tax office. Further, your employer is obliged to store the salary slips.
- An employee is obliged to get a Lohnsteuerbescheinigung (Income tax statement) every year from his/her employer.