Net vs. Gross (Netto vs. Brutto) Salary in Germany [2024]

Germany is one of the most economically stable countries and is a great place for job hunters and for those who want to build their career in Germany. You will find a lot of famous companies and setups where the average salaries are very lucrative. According to Statistics, you can earn between 2500 Euros to 3000 Euros. Your salary depends on the qualification, experience, and position for which you are hired.

According to 2021, Average gross income earned by a single person is about 56,985 Euros, and after-tax deduction, gross income is 34,126 Euros. This monthly income is good to support a good living standard and cover the expenses related to accommodation, dine-ins, transportation, and much more.

Gross (Brutto) and Net (Netto) Salary Defined

Your gross salary is your raw salary before any tax deductions or social security contributions. Your net salary is the amount after statutory deductions and other funds from your gross salary. 

Taxable Employee in Germany

If you earn more than 9,974 Euros per year, you are liable to pay tax (taxable employee) in Germany. Tax amount as per your tax class will be automatically deducted every month from your gross salary and the remaining amount received is your net salary.

Domestic workers

Domestic workers (Haushaltshilfe) are those who are hired for activities such as laundry, washing, cooking, cleaning, doing the dishes, shopping for groceries, and looking after kids and pets.

Tax Class

Every employed person is associated with a tax class in germany that has a different tax rate and is classified according to the different life situation such as,

• If an employee is single or married
• If an employee has a child or children
• If he/she is eligible to pay church tax or not

German tax classes are; Tax Class 1: For single employees irrespective of their marital status (single, married,  widowed, or divorced. If your spouse does not live in Germany, you will be in class 1 until he/she gets registration. Tax Class 2: For single parent employees, or employees separate from their spouses. Tax Class 3: For a married employee with a child or children. Both spouses must be in Germany. Tax Class 4: For married employees with a spouse earning similar income. Tax Class 5: For a married employee who earns a lower income than his/her spouse. Both spouses must be in Germany. Tax Class 6: For all employees with double jobs and income from more than one source/employer.

Identification of Tax Class

Once you receive German registration and get your Tax ID from city registration (Anmeldung), the Tax Office (Finanzamt) in Germany will assign you a tax class based on your marital status you mentioned.

Your employer will also get to know about your Tax ID and Tax Class to calculate the tax deductions from your gross salary according to the specified tax rate. Tax Class is always mentioned on your pay slip under SKI (Steuerklasse).

Change in Tax Class

If there is any change in your life (change in marital status, childbirth, or any family or life situation), you must consult with the city registration office (Rathaus). They will communicate with the German Tax Office (Finanzamt) to proceed with your application to change your tax class.

Why Are Tax Payments Necessary?

There are certain benefits if you pay taxes in Germany such as;

• More stability and development in the country.
• Well organized and maintained systems for the benefit of citizens.
• Offer financial security to German citizens.
• Helps an employee during an illness, unemployment, and after retirement. 
• Make you eligible for different insurance plans.

Tax Deductions

Here are the tax deductions:

Income Tax (Lohensteuer )

Income tax (wage tax) depends upon the gross salary and tax class. If you are not self-employed, your income is subjected to income tax.

Solidarity surcharge (Solidaritätszuschlag)

West Germans pay for the stability of Germany. Solidarity surcharge is 5.5% and is deducted from the gross income of 73,000 Euros per year.

Church tax (Kirchensteuer)

Being a church member, you will pay 8-9% of your gross salary as church tax.

Social Security Contributions

Social security contributions by both employee and employee is 50% in Germany. The deduction varies but you receive the net (Netto) salary approximately 60% of your gross salary (Brutto). Here are the social security contributions:

Health Insurance (Krankenversicherung)

An employee contributes to health insurance up to 15%.

Pension Insurance (Rentenversicherung)

18.6% of your Brutto is subject to pension insurance. Judges, freelancers, and civil servants are excluded, but they can pay voluntarily for their security in their old age.

Long-Term Care Insurance (Pflegeversicherung)

Long-term care insurance is 3.05% of your gross salary. If you have no child, it will be 0.35%.

Unemployment Insurance (Arbeitslosenversicherung)

Unemployment insurance is 2.5% of your gross salary that is used to serve you during your unemployment.

Progressive Tax System in Germany

Germany’s tax collection system is a progressive tax system that means a person with higher income will pay higher tax.

For instance, the Income tax rate for a person with 58,597 Euros is 42%. A person earning more than 277,826 Euros will pay 45% income tax (Rich Tax Reichensteuer).

Maximum Tax-Free Income

You will be part of the German social security system, if you are earning 520 Euros per month. As of 2022, the tax-free income in Germany (Grundfreibetrag) is 9,984 Euros per year. If you are married, tax-free income is 19,488 Euros per year.

Life in Big German Cities

Your income will be comparatively high if you live in big cities, but consider the living expenses, transportation costs, and other expenses that can impact your savings badly. Live a balanced life to save more but you still can’t do anything with uncontrollable expenses.

Tax Deduction for Different Professionals

Here are the deductions and allowances that apply to different professions in Germany.

Trainees: A trainee earning more than 520 Euros must pay taxes and social security contributions. Freelancers: They do not need to pay certain taxes, other than income tax. Civil Servants: Civil servants do not have to pay social security contributions, but they must have private health insurance. Mini-Jobbers: You do not need to pay taxes and contributions if you are employed for a mini-job if your income is less than 520 Euros. Students Working Part-Time: A student working part-time does not have to pay taxes and contributions if they earn less than 520 Euros and/or work less than 20 hours per week.

Relationship Between Experience and a Good Salary

You will find a lot of job opportunities that need experience, skills, and qualifications. If you choose an entry level job after getting your education, you will get lower paying offers. The vocational training programs are a good way to facilitate yourself with a great job offer. Get training related to your degree, win an attractive job offer, and start earning high.

Conclusion

So, this article covered a lot about Gross and Net salaries in Germany. The social security system is well developed in Germany and serves as blessings to employees in different life situations. These deductions make you eligible for a pension during your old age. Long-term care plans include maternity leave, and child benefits, accident insurance, and unemployment benefits. Before you accept a job offer, do not forget to calculate your expenses and compare with your gross and net income to make an informed decision and to live a balanced life.