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WORKING IN GERMANY

Germany’s minimum wage to raise twice in 2019, yet poverty persists

Many people in Germany don’t have enough money for even the most essential things and millions are still threatened by poverty. The minimum wage is going to be elevated, but that’s still not enough for everyone.

Germany’s minimum wage to raise twice in 2019, yet poverty persists
A sign for the 'Mindestlohn', or minimum wage. Photo: DPA

For the millions of employees in Germany, the legal minimum wage is set to raised two times next year.

On Wednesday, the federal cabinet decided that, from January 1st, 2019, the universal lower threshold will be increased from its current €8.84 an hour to €9.19. From January 1st, 2020 it will be increased further to €9.35.

But there is still demand raise it even further to €12 an hour. Despite a booming economy, millions of people in Germany still live on the poverty line; almost a fifth of the population in the last year was threatened by poverty of social exclusion, according to the Federal Office for Statistics.

Federal Minister for Work Hubertus Heil (SPD) said that the introduction of the minimum wage in 2015 was “a necessary and just step, adding that “it’s right to update it regularly.”

But according to Heil, the changes still only pertain to the absolute minimum wage; it’s thus necessary to expand the commitment to collective wage agreements in the economy, so that more people have the chance to earn a higher wage.

SEE ALSO: Good news for waiters: Minimum wage set to raise twice

'Still too low'

The minimum wage increases follow a vote carried out in June by a commission of employers, unions and scientists. The social association VdK criticized that “this few cents won’t help afflicted people any further.” According VdK, the minimum wage is still too low and will not protect people from poverty.

The lower wage limit applies to all employed adults – apart from long-term unemployed people who have taken up a job within the last six months. It also doesn’t apply to apprentices who are undertaking obligatory internships or internships lasting under three months.

The minimum wage was raised for the first time in 2017 from €8.50 to €8.84. The basis for this was the development of average collective wage. In several industries the minimum wage is above the basic minimum wage.

Vice Chancellor Olaf Scholz (SPD) has put his demands on the table for an even higher legal minimum wage. He considers 12 euros “reasonable”, according to an article he wrote in Bild online, and that “companies should not save on wages.” But a jump to €12 is hardly viable under the current Grand Coalition.

Threatened by poverty

As the Federal Office for Statistics reported, 15.5 million people in Germany were threatened by poverty or social exclusion. That equated to around 19 percent of the population, which was a slight decline from 2016, when 16 million people in the country – or 19.7 percent of the population – was affected. The statistics office refers to data from the survey “Life in Europe” (EU-SILC). In the EU as a whole, 22.5 percent of the population in 2017 fell into this category.

For the survey “Life in Europe”, around 14,000 households in Germany alone are surveyed by letter every year, according to information from the Federal Office for Statistics. The investigation by questionnaire can thus be considered representative.

According to EU definition, the survey considers someone as “at risk of poverty” when they have less than 60 percent of the median income of the population. In 2017, this amount was set at €1096 a month for someone living alone. For two people with two children under 14, it was €2302. In the past year, 13.1 million people, or 16.1 percent of the population, was thus considered “at risk”.

The definition for “threat of social exclusion” is a bit wider; it also means that the money in a household is insufficient for rent, a TV, heating or a week-long holiday. In 2017, this affected 3.4 percent of the population.

The president of VdK Deutschland, Verena Bentele, spoke of the shockingly high figures. “It’s scandalous that, in spite of Germany’s economic boom, 15.5 million people are threatened by poverty or exclusion.”

She demanded an overall plan of the fight against poverty. “That includes educational opportunities as well as a newly adjusted job market policy.”

 

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WORKING IN GERMANY

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. 

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