This payslip in Germany goes by several names: Mainly Gehaltsabrechnung but also Entgeltabrechnung and Lohnabrechnung. As the name suggests, this document clearly shows the gross and net values of an employee’s remuneration and proves the employee’s financial entitlements. Once a month, the employer must provide the employee with a written payslip.
Remember that Lohn (wage) and Gehalt (salary) are not the same. Lohn depends on hours worked and can fluctuate, while a Gehalt is fixed. Despite this difference, accounting for both is basically the same.
|When someone loses their job, their boss might pay them extra money called severance pay. However, not everyone automatically gets this money. Only in certain situations required by the law, an employer has to give it.
|Many workplaces have a practice of employees contributing 3% of their salary towards unemployment insurance. Employers are required to pay half of this to provide a safety net for employees who may lose their jobs. This helps ensure that employees have access to income if they lose their job, in addition to severance pay which is not always guaranteed.
(Employee contribution to the maritime insurance fund)
|The Seekasse provides retirement insurance for workers in the maritime, industrial, and commercial industries. This is for companies that are covered by the See-Berufsgenossenschaft for accident insurance. The employee’s contribution should be included in their gross pay.
(Contribution group key)
|All social insurance declarations have a numerical key named the Beitragsgruppenschlüssel. This key is made up of digits that represent different social insurance types in a specific sequence: health insurance, pension insurance, unemployment insurance, and long-term care insurance. Its objective is to accurately identify and allocate the appropriate contributions.
|Irregular payments, such as Christmas or holiday bonuses, are referred to as Einmalbezügen (one-off payments) or Bezüge (other payments). These payments are separate and aren’t based on work done during a single payroll period.
|If the Steuer-Bruttos (gross tax amount) on your pay slip doesn’t match the Gesamtbrutto (total gross amount), you’ll see the letter F. On the other hand, if you’re subject to flat-rate taxation (Pauschalversteuerung), you’ll see the letter P.
|The Gesamtbrutto includes gross salary/wages, capital-forming benefits, supplements and allowances, lump-sum taxed wage components and non-cash benefits. However, it may not match the gross tax amount.
|Having multiple jobs can result in a higher tax burden for employees. However, there is a way to lower this burden through the use of the Hinzurechnungsbetrag. This option is especially beneficial for those with a lower income. To make use of this, employees must register with the tax office using the Lohnsteuer-Ermäßigungsverfahren (wage tax reduction procedure).
|Bestandteil des Gesamtbruttos
(Component of total gross)
|On a payslip, the letter J labels the financial parts that make up the total gross.
|The Kinderfreibetrag reduces the income tax you owe. It’s available if you have dependent kids up to age 18. If they’re studying, it can continue until they’re 25. If they have a severe disability and can’t live alone, it can continue beyond age 25.
|If your religious community is recognised as a corporation under public law (KöR), you must pay Kirchensteuer. The tax rate depends on which federal state you live in, ranging from 8% to 9%.
(Health insurance fund)
|The abbreviation KK refers to the employer’s health insurance fund.
|Maßgeblicher Beitragssatz zur KV inkl. Zusatzbeitrag
(Relevant contribution rate to KV incl. additional contribution)
|The abbreviation KK % represents the total contribution rate for health insurance, which includes the additional contribution based on your specific health insurance fund.
|The contribution to statutory health insurance is 14.6%, with the employer covering half of the payment.
|Laufender Bezug refers to all regular payments from the employer, including salary. However, payments need not be constant. For example, fluctuating payments, such as commissions, are also counted as regular payments.
|Anyone who is not self-employed must pay Lohnsteuer. The rate of this income tax depends on the tax bracket you belong to. If you earn enough to have to pay the Solidaritätszuschlag (solidarity surcharge), this is deducted from this type of tax.
|Mehrjährige Versteuerung is applied to remuneration for several years of work if taxation in the form of sonstiger Bezug (other remuneration) would be more expensive.
|Recalculations happen if the previous month’s payslip had errors on it.
|Multiple employment means that an employee is employed by several employers at the same time.
|See the description explanation for the abbreviation F.
(Person group key)
|The Personengruppenschlüssel is a declaration of the special features of an employment relationship. These characteristics include membership of a certain group of insured persons, the type of employment (permanent employment, traineeship, apprenticeship, etc.) and any time limits.
(Nursing care insurance)
|The statutory nursing care contribution is 2.55%, half of which is usually paid by the employer.
|The Rentenversicherung contribution is currently 18.6%, half of which is paid by the employer.
|See the explanation for the term Einmalbezug (one-off payments).
(Gross taxable income)
|Steuer-Brutto includes actual wages and salaries, one-off payments and benefits in kind.
(Personal tax identification number)
|The Steuer-ID is permanently assigned to each resident of Germany by the relevant tax office. It consists of eleven digits.
|The tax class determines the amount of income tax payable by the employee.
|Sozialversicherung includes health insurance, pension insurance, unemployment insurance and long-term care insurance.
|Umlageverfahren are used to finance social security schemes. The social security contributions that have been paid in are paid out again directly to the insured person after they have been collected. Employers can set up special reserves for this purpose.
|The Vorjahr is the previous year of employment. The employee’s first day of work is defined as the start date.
|In payroll accounting, a Verarbeitungskennzeichen is used to assign processing histories. They’re alphanumeric and have 3 digits.
|Wertguthaben (also called: Zeitwertkonto, Langzeitarbeitskonto or Langzeitkonto) is like a savings account for a longer leave of absence (e.g. parental leave or early retirement) that an employer manages. The contributions to the credit balance are financed entirely by the employee. An employee can only get one of these if the employer agrees to it (cf. § 7b ff. SGB IV).
|Einschlägiger Beitragszuschlag zur Pflegeversicherung für Kinderlose
(Relevant contribution premium for long-term care insurance for childless persons)
|Childless employees have to pay for Pflegeversicherung für Kinderlose (long-term care social insurance for childless persons) in addition to the regular Pflegeversicherung (long-term care social insurance) contributions.
In addition to the various abbreviations used in a payslip, there are other things you should bear in mind when preparing it:
- Be aware of the legal retention period for payslips. Your old payslips are considered proof in the event of audits by the tax office. If you are unable to provide proof of the payslips, or if they are incomplete, you will be subject to penalties.
- The pension insurance number is not listed on the payslip but on the annual social security notification. Furthermore, the pension insurance number should not be confused with the national insurance number, which must be listed on the payslip.
The leave days charged are listed with the gross remuneration.
- If you lack the expertise to do the payroll accounting and create accurate payslips for your employees don’t attempt it. The taxation code in Germany is complicated, so you’ll likely make mistakes and burn through a lot of time wrangling with your business’s payroll. Be smart about it instead. Bring a professional into the fold who knows the in and outs.
- If your business has a lot of employees then hiring a full-time accountant might be worth it. Otherwise, stay nimble and outsource it to an accounting firm. But be warned: Most accountants are over capacity and many don’t offer their services in English. It can be difficult to find a firm that will take you on as a client and be responsive.