Photo by Mark König on Unsplash
Decoding your German payslip, or Lohnabrechnung, is essential for expats managing finances in Germany. This guide breaks down Brutto vs Netto, key deductions like Lohnsteuer and Solidaritätszuschlag, and benefits such as company pensions. You’ll learn to calculate take-home pay and spot why your first payslip differs.
Why Your German Payslip Looks So Different from Home
Your German payslip lists gross salary, taxes, and social contributions in detail. Expats often see 40% deductions from gross pay, leaving net salary for your bank account[2][7]. This stems from Germany’s strong social security system.
Brutto is total earnings before deductions. Netto is what you receive after taxes and insurance. For example, a €4,000 Brutto might yield €2,400 Netto in tax class 1[2].
Payslips include employer details, your tax class, and payroll period. Check these first to verify accuracy[3]. Common mistake: Ignoring tax class, which affects deductions greatly.
Brutto vs Netto: The Core of Your German Payslip
Brutto means gross salary, including base pay, overtime, and bonuses. It forms the base for all calculations on your German payslip[1][3]. Netto is Brutto minus taxes and contributions.
Expect 35-45% deductions overall. Factors include income level, tax class, and location[2]. For instance, singles in tax class 1 face higher Lohnsteuer than married couples in class 3.
To calculate roughly: Netto ≈ Brutto × (1 – 0.40). Use official tools for precision, like the BMF Steuerrechner. Expats often overlook Gehaltsumwandlung, tax-free benefits reducing taxable Brutto[2].
Breaking Down Tax Deductions on Your Payslip
Taxes dominate your German payslip deductions. Lohnsteuer (income tax) is progressive, based on tax class and earnings[1][3]. It’s the largest cut for most.
Solidaritätszuschlag (Soli) is 5.5% of Lohnsteuer, funding reunification. Phased out for low earners since 2021, but appears for higher incomes[3][5]. Kirchensteuer (church tax) applies if registered with a church, at 8-9% of Lohnsteuer[1].
Example: €3,000 Brutto in class 1 might deduct €500 Lohnsteuer, €28 Soli, €40 Kirchensteuer. Opt out of church tax via Kirchensteuer.de if applicable. Mistake: Not updating tax class after marriage, leading to overpayment.
Social Security Contributions: What You’re Really Paying For
Social security splits roughly 40% of Brutto between employee and employer. Key lines on your German payslip: health (KV), pension (RV), unemployment (AV), and care (PV)[1][4].
Health insurance: 14.6% total (7.3% employee share) plus Zusatzbeitrag (0.3-1.7%)[1][5]. Pension: 18.6% (9.3% employee). Unemployment: 2.5% (1.25% employee). Care: 3.4% (1.7% employee, childless pay extra 0.6%).
Public vs private matters. Private insurers bill separately; employer subsidizes 50% via AG-Zuschuss[5]. Check AN-Anteil (your share) vs AG-Anteil (employer’s).
How Health Insurance is Calculated on Your German Payslip
Health insurance deduction varies by provider on your German payslip. Public: 14.6% + variable Zusatzbeitrag, capped at income threshold €5,362/month (2024)[5]. Employee pays half.
Privately insured expats see no direct deduction. Instead, employer adds AG-Zuschuss to Brutto, then you pay full premium separately[5]. This boosts taxable income slightly.
Step-by-step check: 1) Find KV-Beitrag. 2) Note AN/AG split. 3) Compare to provider statement. Use GKV-Spitzenverband for rates. Edge case: Freelancers pay full, no split.
Company Pension (bAV) and Vermögenswirksame Leistungen Explained
bAV (betriebliche Altersvorsorge) is employer-sponsored pension on your German payslip. Deducted pre-tax via Gehaltsumwandlung, saving on Lohnsteuer[1].
Vermögenswirksame Leistungen (VL) are employer allowances like €40/month VWL, plus employee contributions. Builds savings tax-free up to limits[1]. Common: 3-5% of Brutto deferred.
Benefits: Locked until retirement, state-matched sometimes. Check RV-Beitrag separately from bAV. Expats mistake: Withdrawing early incurs penalties and taxes.
Why Your First Payslip Looks Completely Different
First German payslip shocks with high deductions due to no prior contributions. Pro-rated salary, setup fees, or provisional tax class cause variances[2].
Expect adjustments in month 2 via Lohnsteuerjahresausgleich. Travel costs (Reisekosten) or perks (Sachbezüge) might appear first time[1][4]. Example: €4,500 Brutto first month nets €2,200, stabilizes at €2,500 later.
Fix errors: Contact HR within 3 months. Update Anmeldung at Bürgeramt for correct tax class. Common expat issue: Missing Steuer-ID delays processing.
13th and 14th Month Salary: Bonuses on Your Payslip
Many contracts include 13th/14th month pay, listed as Prämien or Weihnachtsgeld. Taxed at marginal rate, often in December[3]. Not mandatory, but common in metalworking sectors.
On payslip: Added to Gesamtbrutto, boosts deductions temporarily. Example: €3,000 monthly + €3,000 13th = higher Lohnsteuer that month. Negotiate in Job Offer Negotiation Guide.
Edge case: Expats leaving mid-year lose pro-rated bonus. Check contract; claim via court if withheld illegally.
Step-by-Step: How to Calculate Your Take-Home Pay
Estimate Netto from German payslip data. Step 1: Sum Brutto + Zulagen – ST-frei. Step 2: Subtract Lohnsteuer + Soli + KiSt. Step 3: Deduct employee social shares (KV, RV, etc.)[2].
Formula: Netto = Steuer-Brutto – taxes – SV-Anteil. Tools: Lohnsteuer-Kompakt or Excel. Example table:
| Item | Amount (€3,000 Brutto) |
|---|---|
| Lohnsteuer | 450 |
| Soli | 25 |
| Social (employee) | 600 |
| Netto | 1,925 |
Adjust for bAV or private insurance. Annual reconciliation refunds overpayments.
Common Mistakes Expats Make with German Payslips
Overlook tax class changes post-marriage, paying excess Lohnsteuer. Solution: Submit Lohnsteuererklärung via Elster by July 31[internal tax link].
Ignore Sachbezüge like company car, adding to taxable income[4]. Private health? Verify AG-Zuschuss matches premium. Call Finanzamt at 0800 423 4040 for queries.
Track VL buildup for future claims. See [INTERNAL: Taxes in Germany Guide] for filings. Mistakes cost refunds; file yearly to recover €500+ typically.
