It is certain that in Germany an individual gets his net salary after deduction of various taxes from his gross salary. Taxes are separate from social security contributions.
Difference between the gross and net salary:
Gross salary
Gross income is the total of all incomes, salaries, profits, interest payments, rent, and other kinds of income for workers before any deduction or taxes. This is the salary from which tax has not yet been deducted and it is still in the owner’s hand.
Net salary
Net salary is the amount employees get after the deduction of various taxes. Let us understand this in more detail. Salary is a fixed regular payment usually made by an employer to an employee every month but often expressed as an annual amount. The tax deductions are shown on the salary slip. One can easily calculate this in online running tools as well.
Salary in Germany
Of course, the gross salary is different from the net. Let’s see the example of two different gross and net salaries with a table of qualified professional prospective specialists within with EU Blue Card the framework of the qualification measures.
| Gross earnings incl. bonuses in euros | 4886.67 | 2200 |
| Income tax (based on tax bracket I*) | -828.33 | -166.5 |
| Retirement insurance | -452.6 | -204.6 |
| Unemployment insurance | -63.27 | -28.6 |
| Health insurance | -386.9 | -174.9 |
| Social care insurance | -91.25 | -41.25 |
| Net earnings Euro | 3044.31 | 1584.15 |
Taxes (Steuern)
The income tax, or tax on your pay, is the most significant tax for workers in Germany. Your employer will submit your income tax as a “wage tax” to the tax office each month. Make sure to store all tax records in a secure location. Your income alone determines how much income tax you must pay. The tax rate increases as your income does. Additionally, your tax bracket depends on it. For instance, having children or getting married can affect your tax bracket. For example, If you belong to a church, your employer will also pay the church tax to the tax authority.
Social insurance (Renteversicherung)
In Germany, a well-designed system offers workers financial protection, for instance during times of illness or unemployment. In Germany, you must pay social security contributions if your income exceeds a specific threshold (part-time job minimum).
This implies that you have to contribute to specific insurance plans regularly and be a member of them. These include the subsequent insurance categories:
- Statutory health insurance: it covers medical visits, a variety of prescription medications, and therapeutic procedures;
- Statutory nursing care insurance: it offers basic income support if a patient becomes permanently ill and needs care. Most often, elderly persons are impacted;
- Statutory pension insurance: it enables employees to receive a pension following retirement. Your prior income and the length of time you have worked in Germany are the two key factors that affect the amount;
- Statutory accident insurance: it pays for the costs of medical care and re-entry into the workforce following a work-related injury or sickness;
- Statutory unemployment insurance: It provides income to unemployed people for a set amount of time if certain conditions are met. Generally speaking, you need to have had insurance for at least a year in the previous two years and be actively seeking employment once more.
A certain portion of your earnings is deducted from your membership fee for social security. Additionally, a set percentage is paid by your company.
You do not need to transfer any contributions; the money is sent to the insurance provider directly from your gross income. As an employee, you are enrolled in the long-term care, accident, and unemployment insurance plans automatically. Except for health insurance, there are no private providers.
Social Security Card
You will receive a social security card with a social security number as an employee. Please provide your employer with this number. Keep the social security card in a secure location because you will occasionally require the number; even if you change jobs, it won’t alter. If you misplace your social security card, you can ask the German Pension Insurance (Deutsche Rentenversicherung) for a replacement.
Tax return
You can ask the state to review your tax filing status after the end of the calendar year. To do this, you need to tell the tax office in your income tax return how much you made the previous year and how much tax your employer transferred to the tax office on your behalf.
In some circumstances, such as if you work for many employers, a tax return is required. However, it usually occurs voluntarily. Even though it is not required, submitting a tax return is often worthwhile because the majority of people receive money back from the government.
You could prepare your tax return. Use the ELSTER program’s or the tax office’s prescribed forms to accomplish this. You can also get assistance from computer software and smartphone apps. A tax professional or an income tax aid association are other options.