Reading a payslip: From gross to net

In short: The payslip shows how the agreed gross wage becomes, after taxes and social contributions, the amount that actually arrives in your account.

In more detail: Every month employees, including apprentices, receive a statement (payslip). It is proof of earnings and deductions and is important for flat applications, loans, the tax return and pension entitlements. It is worth understanding and keeping.

In Depth

Structure

• Gross: the agreed earnings (plus allowances, benefits in kind).
• Tax deductions: income tax withheld (Lohnsteuer), solidarity surcharge (only at high incomes), church tax (if a member of a church).
• Social insurance contributions: health, long-term care, pension and unemployment insurance, each borne roughly half by the employee.
• Net: gross minus deductions, which is the payout.
• Possibly a payout amount after capital-forming benefits or garnishments.

Tax class and income tax withheld

The tax withheld is an advance payment on income tax. It depends on earnings and the tax class (I to VI). Apprentices and most singles have class I. With a low annual income below the basic allowance, tax paid in excess is refunded through the tax return.

Social insurance

About one fifth of the gross wage goes as the employee’s share to social insurance. The employer pays about as much again on top without it appearing in the net (employer’s share, “non-wage labour costs”). The exact percentages change almost every year, especially the health insurer’s additional contribution.

Checking and keeping

Check: are name, tax ID, tax class, hours or salary, agreed allowances and leave days correct? Report deviations to the employer immediately. Keep them permanently, ideally digitally, at least evidence relevant for the pension. The annual report to pension insurance and the tax certificate come in addition. Whoever has a mini-job and an apprenticeship at the same time should compare both payslips.

See also: Taxes for pupils and apprentices, Basic allowance, Training contract