The monthly salary includes taxes
This is deducted from employees' wages
Career starter Markus will hold his wage slip in his hands for the first time in 2021. Thanks to wage tax, church tax and social security contributions, however, he only understands the train station. What did he really deserve?
Markus' parents always complain about taxes that are too high. His friends say there is nothing left of the salary. But it can't be that bad, thinks the young professional and curiously takes a closer look at his pay slip. Above is the salary he negotiated with his boss: 1,900 euros. But there is a much smaller amount below. This is the net salary that the 21-year-old gets credited to his account. In between there are a lot of abbreviations and incomprehensible terms.
Gross is not always net, his brother explained to him. Now Markus suspects what that is supposed to mean. Of the 1,900 euros gross, he gets almost 1,370 euros net because many deductions automatically reduce his wages every month.
1. Income tax
Markus earns 1,900 euros gross. As a single he is assigned to tax class I. Our tax ABC explains what that means. What tax classes are there and what do they mean? At around 144 euros per month, wage tax is the largest deduction that Markus' employer transfers directly to the tax office.
Who has to pay how much wage tax is regulated in Germany according to the following basic principle: Whoever earns more should also pay more tax. So the higher the income, the higher the tax percentage. This is currently between 14 and 45 percent of total income in one year.
2. Solidarity surcharge
Since 1991, German employees have been paying a solidarity surcharge, also known as solos. Currently, 5.5 percent of the wage tax goes to the tax office. However, the federal government has abolished the solidarity surcharge for almost 90 percent of all employees. This has been in effect since 2021. Markus no longer has to pay "solos" with his income. Only higher incomes are affected.
3. Church tax
Anyone who - like Markus - is a member of a church also pays church tax. The amount of the deduction depends on the one hand on the salary and on the other hand on the state in which you work. Markus is Protestant and works in Hesse.
9 % (Church tax) from 144.08 euros (Wage tax) = 12.96 euros
Anyone who works in Baden-Württemberg or Bavaria only pays eight percent of their wage tax.
With this money, the churches finance, among other things, the staff, the building of churches and charitable purposes such as care services. Other religious communities such as the Catholic Church, Jewish communities and other state-recognized religious communities also levy church tax.
4. Health insurance
Anyone who gets sick goes to the doctor, who makes a diagnosis and prescribes a drug. The health insurance pays for it. This type of health insurance is mandatory in Germany, regardless of whether you are with a statutory or private health insurance company. This is to ensure that illness does not mean financial ruin.
Those with statutory health insurance will pay a uniform health insurance contribution of 14.6 percent in 2021. Markus gets 7.3 percent deducted directly from his salary, his boss pays the remaining 7.3 percent of the health insurance. In addition, there is an individual, income-dependent additional contribution. Markus' health insurance charges an additional contribution of 1.1 percent.
Previously, employees like Markus had to pay the additional health insurance contribution alone. But that changed in 2019, the boss now also pays half of the additional contribution. In the case of Markus, this means in concrete terms: He pays 7.3 percent health insurance plus half of the additional contribution, i.e. 0.5 percent.
7,8 % (Health insurance contribution) from 1,900 euros (Salary) = 148.20 euros
By the way:
The social security contributions - including health, pension and long-term care insurance - are paid half by the employee and half by the employer.
How high the costs for private health insurance are cannot be said in general terms. The amount depends on the services you want to use.
5. Pension insurance
Markus has to take precautions. Even if he is just starting his job, the state is already thinking ahead and obliges him to pay into the statutory pension insurance. This means that he is entitled to a pension in old age.
9,3 % (Contribution to the pension insurance) from 1,900 euros (Salary) = 176.70 euros
Markus' employer also has to pay 176.70 euros for the pension insurance. They share the total of 18.6 percent pension contribution rate in equal parts. This rate applies uniformly to the whole of Germany.
6. Long-term care insurance
Health insurance has its limits. And so it does not pay when an employee needs care. In this case, long-term care insurance takes effect. In 2019 this was increased to a uniform 3.05 percent. The employer and employee split the contributions equally
1,525 % (Contribution to long-term care insurance) from 1,900 euros (Salary) = 28.98 euros
However, there is one thing to note with long-term care insurance: If you are over 23 years old and have no children, you pay a surcharge of 0.25 percent on top. But since Markus is only 21 years old, he doesn't have to pay a surcharge yet.
By the way:
Only in the federal state of Saxony is the distribution between employer and employee different - employees have to pay a higher share than the employer.
7. Unemployment Insurance
In order for an employee to be covered in the event of unemployment, a monthly unemployment insurance contribution is also due. Civil servants and soldiers are exempt, as are mini-jobbers who do not earn more than 450 euros a month. Markus does not belong to these professional groups and has to pay. He calculates:
1,2 % (Contribution to unemployment insurance) from 1,900 euros (Salary) = 22.80 euros
As a rule, the employer pays the other half of the 2.4 percent (as of 2021). In 2019 it was 2.5 percent.
By the way:
You can deduct all insurance premiums that appear on your pay slip. How this works and which conditions apply is explained in our article These insurance policies can be deducted.
Your individual payroll
How exactly does it all look with your salary? Do the math:
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Keep pay slip well
It makes sense to keep the pay slip. For example, Markus just had to present the first pay slip to his landlord for his new apartment to prove that he had a regular income. Lenders often require proof of this as well. However, there is no legal regulation for storage.
Markus will collect and keep his pay slips for each month just to be on the safe side. Only when he has made his tax return and receives the final result in writing from the tax office will he throw away the receipts. Incidentally, his employer is obliged to keep the pay slips.
Once a year, Markus' boss also has to give him an overview of what salary he received in the year and how much of it is deducted for health insurance or church tax, for example. This is called an income tax certificate. At the same time, his boss sends the data electronically directly to the financial administration.
As a high earner, Markus has his limits
A look into the future: Let's assume that Markus has been working for a number of years and has moved up to the executive floor. His contribution to health, pension, long-term care and unemployment insurance is still calculated on the basis of income - but only up to a certain income level. This is the income threshold. Markus no longer pays any social security contributions for the salary that is above the income threshold.
This is an editorial text from the VLH editorial team. There is no advice on topics that are outside the tax advisory powers of an income tax aid association. Consulting services in specific individual cases can only be provided within the framework of the establishment of a membership and exclusively within the advisory authority according to § 4 No. 11 StBerG.
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