Your contract states gross pay. After income tax and four compulsory insurance contributions, the amount paid into your account is usually 20 – 40% lower. This article explains each line.
Gross and net
Brutto is gross pay — the figure in your contract. Netto is net pay — the figure that reaches your account. The difference is tax and social insurance, both deducted automatically before you are paid.
This money is not lost. Pension, health, unemployment and long-term care insurance protect you when you are ill, when you lose your job and in old age.
The four compulsory insurances
Your employer pays a similar share on top; that part does not appear in the net figure on your payslip.
- Rentenversicherung — pension insurance, around 9.3% employee share
- Krankenversicherung — health insurance, around 8.5% depending on the fund
- Pflegeversicherung — long-term care insurance, around 1.8%, plus a surcharge if you have no children
- Arbeitslosenversicherung — unemployment insurance, around 1.3%
Your tax class makes a big difference
Single people are placed in tax class I. Married people whose spouse earns less may be placed in class III and pay considerably less tax. This is worth asking about as soon as you arrive, because if you apply late you have to wait for the annual tax return to get the money back.
Note:Submit a tax return (Steuererklärung) at the end of each year. Many employees get a significant refund for commuting costs, training costs and the cost of supporting dependants.