Taxes here, social security there - do you know what reduces your salary and how there is more net from the same gross?

Especially for young professionals, the difference between gross and net salary is sometimes a closed book. Clever advice such as "net salary equals gross salary divided by two" does not explain what deductions there are from the gross salary and falls far short due to its generalization.

However, even some old hands have problems understanding the complex of topics "gross vs. net" in detail. Or do you already know why your place of residence determines at least a little bit the amount of your net salary and what the many different allowances are all about? If not, this article can help you as an employee subject to social insurance to gain a better overview.

Social security deductions for employees

The introductory remark that the difference between gross and net salary is sometimes a closed book can be taken literally. In fact, for many employees, seven items reduce their salary. Four of these items are related to social security. Employer and employee share the general contribution rates (not always half!).

      Health insurance (general contribution rate: 15.5%),
      Long-term care insurance (general contribution rate: 2.05 %, surcharge for childless persons of 0.25 %),
      unemployment insurance (general contribution rate: 3 %) and
      pension insurance (general contribution rate: 18.9 %).

To put it simply, the higher your salary, the higher your social security deductions. Only if you earn very well and exceed the so-called contribution assessment limits while trading in exness login, no further social security contributions are levied on the excess amount.

Tax deductions for employees

Social security contributions fulfill an important protective function for you. Not only you want to be covered, but also the state, which can only fulfill its many important tasks through tax revenues in exness login. Now the last three seals come into play, which justify the difference between gross and net. These are:

    the wage tax,
    the church tax, if applicable, and
    the solidarity surcharge as a supplementary tax.

The wage tax represents an advance payment on your income tax. The latter may be higher than the wage tax withheld by your employer, for example, if you earn additional income in  that is subject to income tax. The amount of the wage tax depends, among other things, on the amount of your salary and your tax bracket. 

Difference between gross and net salary

By explaining the individual deductions, it should now also be clear what the difference between gross and net is:

    Gross salary is the salary before social security and tax deductions.
    The net salary is the salary that is paid out. It may fluctuate if life circumstances change (e.g., if the tax bracket changes), although the gross salary does not change.

The difference between gross and net is also relevant in salary negotiations and negotiations for salary increases. Always make sure that both parties are talking about the same figure. In subsequent negotiations for salary increases, the difference between gross and net becomes noticeable again: Salary increases are sometimes lower than expected due to deductions. Keep this in mind when planning your negotiations.

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