‘Merkel bonus’ fails to save German women from pay gap

Telecommunications group Deutsche Telekom this month unveiled a quota for female senior executives, but even with more women managers, Germany as a whole still trails far behind in pay equality between the sexes.

'Merkel bonus' fails to save German women from pay gap
Photo: DPA

The move by the telecoms giant raised eyebrows in Europe’s biggest economy, which is led by Forbes magazine’s “most powerful woman in the world” Angela Merkel, but marred by a thick ‘glass ceiling’ in the workplace.

German women earned 23.2 percent less per hour than their male colleagues in 2008, according to the Federal Statistics Office (Destatis), meaning each would need to toil about three months longer per year to get equal pay.

In the European Union, the average rate is 18 percent. Only Estonia, the Czech Republic, Austria and the Netherlands are doing worse on fair compensation for women.

Italy has the smallest gap in pay for men and women in the 27-nation bloc at 4.9 percent, versus 8.5 percent in Slovenia, 9.0 percent in Belgium and Romania and 9.2 percent in Malta. Britain showed a 21.4-percent gap.

Beyond anti-discriminatory measures introduced at the EU level, the then centre-left government of Germany in 2001 adopted a handful of cooperative steps with industry to address the problem.

“But only on a voluntary basis” and with little impact, said Katharina Pühl, a gender studies researcher at Berlin’s Free University.

“Since 2001, pay differences for men and women have not fallen significantly, neither for executive positions nor in general,” added Anne Busch of the DIW economic institute.

Four years later, Germany elected its first female chancellor, but German women have seen little sign of a “Merkel bonus” in the workplace.

A DIW study published this month found the gulf in compensation even wider – 28 percent – when examined for senior positions in the private sector alone.

“The problem is cultural – the stereotypes are very deep-rooted, such as the idea that women must raise the children and men should put food on the table,” Pühl said. “It’s different in France or Scandinavia.”

As a result of family expectations, women in Germany frequently avoid fast-track careers in favour of more child-friendly vocations. But that phenomenon only explains part of the problem, economists say.

Even in comparable jobs and careers, women earn less.

European Justice Commissioner Viviane Reding said this month that the German situation was “unacceptable” as the country is “one of the most developed in the world on the economic level and should provide a good example.”

The debate about equal pay and the introduction of Frauenquoten (quotas for women) grew more fervent in the 1990s following national reunification because women had enjoyed more equality in communist East Germany than in the West.

But concrete measures like those of Deutsche Telekom remain a rarity.

The company said March 15 that women would fill 30 percent of its senior positions by the end of 2015, reasoning that the group would operate better with more diversity among its managers.

It was the first company listed on Germany’s DAX index of blue-chip stocks to take such a stand.

Industrial giant Siemens is the only DAX company to have a woman on its senior board.

In the face of corporate reticence, many women have called for a law to bring discriminators to heel.

“Real progress will only come if the law books are modernised with punitive measures,” said Heide Pfarr of the Düsseldorf-based Economic and Social Science Institute (WSI).

Norway has already passed a law to ensure more women have access to senior positions, and France and the Netherlands are mulling similar legislation.

Since 2006, Germany has had a general anti-discrimination law.

“But it is hard to prove that a pay gap is only linked to gender – other factors often come into play,” said the spokesman of the federal bureau charged with fighting discrimination, Jens Büttner.

Perhaps as a result, the law did not set off a “wave of lawsuits” by women over pay disputes as critics of the measure had warned, he said.

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7 tips for how to survive as a freelancer in Germany

Taking the decision to go it alone and freelance in Germany can be a daunting prospect. But, if you do it right, it can be an exciting and liberating path. Here are some of our top tips on how to survive.

7 tips for how to survive as a freelancer in Germany

1. Get a tax advisor

The German tax system is complicated, even for Germans. All the associated paperwork uses the Amtsprache (authority language) which is more like legalese than ‘normal’ German, and mistakes when filling out tax forms can cause you, at best, a massive headache and, at worst, a costly fine. So it’s best that you employ someone who knows what they’re doing to help you out.

That person is called a Steuerberater (tax advisor) in Germany. They will help you register with the tax office, correspond with them and submit your tax declarations.

Be aware that, in Germany, different deadlines apply for tax returns depending on whether you employ an official tax advisor or not. If you are doing the tax return on your own, the deadline for submitting your annual tax return is earlier than if you use a tax advisor’s services. 

READ ALSO: What NOT to do when you’re freelancing in Germany

When looking for a tax advisor, a top tip is to use your network to get recommendations. Ideally, you want someone who will do more than just fill in the forms for you, but who will actually advise you on how best to manage your business finances so that you can make tax savings.

2. Keep your accounting in order

The better you keep your own accounts in order, the easier it will be for your tax advisor to compile your tax declarations and therefore the cheaper their services will be.

As a freelancer, there are a lot of costs you can deduct from your taxes – from train tickets, working materials, to meals out – so it’s best to keep hold of all your receipts and to keep them in good order.

2 euros and 50 cents lie on a receipt in a beer garden. Photo: picture alliance/dpa | Peter Kneffel

In Germany, you’re obliged to keep hold of receipts for two years, in case of a tax inspection, so it’s a good idea to photocopy the type of machine-printed receipts you get from restaurants so that they stay legible for a long time.

There are also a few things to be aware of when writing your own invoices. Firstly, make sure that you include your tax number. This isn’t the 11-digit Steueridentifikationsnummer that everyone gets when registering in Germany, but the 10-digit Steuernummer you get from the Finanzamt after registering yourself as a freelancer. 

Most companies won’t pay you if you don’t have this on your invoices so make sure you include it.

You should also make sure that you number your invoices properly – ideally in ascending order so that you can easily keep track of them. You are not allowed to issue two invoices with the same number and if you do so and the finance office notices, you could face an inspection of your whole accounting system.

There are numerous great accounting software programmes you can use to help you, such as Lexoffice and Sevdesk and, even if you have to pay for them, the costs will be tax deductible!

3. Find out if you’re eligible for financial support

In Germany, there are several opportunities for freelancers to gain financial support and to cut their outgoings, and its worth finding out if you’re eligible for them.

If you’re claiming unemployment benefits under ALG 1 and are thinking about becoming a freelancer, the employment office offers a special type of financial support to help you to get your freelance business off the ground.

Called the Grundungszuschuss (“foundation grant”) the payment is a six-month grant equalling your monthly entitlement under ALG 1 plus €300 towards your insurance costs can be applied for those in receipt of this unemployment benefit.

READ ALSO: Will freelancers benefit from Germany’s €300 energy allowance?

If you are engaged in some form of artistic profession in Germany – which can include journalism to pottery – you may be entitled to membership to the Kunstlersozialkasse (artists’ social insurance).

Being a member of the KSK means you only have to pay half of your health insurance and pension contributions, and the KSK will pay the rest.

4. Work out how much you think you will earn

As with starting any business, you need to have some idea of your expected earnings from the outset.

If you’re just starting out as a freelancer, or have some freelance gigs on the side of an employment position, then it might be worth considering registering yourself as a Kleinunternehmer (“small business”).

As a Kleinunternehmer, you can currently earn up to €22.000 per year without having to charge VAT and having to submit only yearly tax declarations. 

An income tax declaration form lies on a table. Photo: picture alliance/dpa/dpa-Zentralbild | Hans-Jürgen Wiedl

Be aware that if you are registered as this kind of freelancer, you must include the following sentence in your invoices: ‘Gemäß § 19 UStG wird keine Umsatzsteuer berechnet’ which means ‘In accordance with Paragrah19 of the German VAT law, no VAT has been added to this invoice.’

READ ALSO: Everything you need to know about your German tax return in 2022

If you think you will earn more than €22.000 per year, you will need to pay Umsatzsteuer (VAT) and will have to submit tax declarations in advance and more often. Depending on how much you earn, this could be every month or every quarter. 

5. Get your insurance in order

In Germany, it’s a legal requirement to have health insurance.

If you’ve just made the move from employment to being a freelancer and want to keep the same health insurer, you should get in contact with your health insurance provider straight away to tell them about your change of circumstances. They will ask you to re-register and to tell them your projected freelance earnings for the year, so they can amend your monthly fees.

If you don’t keep your health insurer provider updated, you could continue to be charged the higher rate that you had from your previous salary.

The insurance cards of the health insurance companies DAK, AOK, Barmer and Techniker-Krankenkasse TK lie with euro notes under a stethoscope. Photo: picture alliance / dpa | Daniel Karmann

It’s not just health insurance you need to think about as a freelancer. It’s also wise to think about protecting yourself from any sort of claims that could arise as a result of any working mishaps. 

If, for example, you lose your laptop which contains confidential client information, you need to be protected against claims.

That’s why it’s good to have both Betriebshaftversicherung (business liability insurance) and Rechtschutzversicherung (legal protection insurance).

6. Plan your time wisely

All of these bureaucratic obligations take time. So it’s really important that you take account of that when planning your time. For example, planning half a day a week to deal with your invoices, filing, emails to clients, and conversations with authorities can be really beneficial when scheduling your working time. 

7. Grow your network

As a freelancer, networking is absolutely crucial to success. 

Keep an up-to-date profile on websites like LinkedIn and German equivalent XING and keep in contact with anyone you’ve ever worked with, no matter how brief the contact was. 

Having a network is not only about getting more clients, but also about building a support network in your field to exchange advice, tips and generally for your own enrichment. 

Participating in workshops related to your field, going to seminars, and meet-ups, can be great ways of broadening your network.