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REVEALED: How much do employees really earn across Germany’s states?

Ever wondered how much money other people earn in Germany? These new figures shed some light on the pay packets of employees in industries across the country.

REVEALED: How much do employees really earn across Germany's states?
Hamburg is where employees earn the most in Germany, according to recent figures. Photo: picture alliance/dpa | Daniel Bockwoldt

If you’ve ever thought about moving to Germany for work – or you’re already here but want another job – here’s a look at recent figures on salaries published by the Federal Statistical Office, and a few other things to think about.

What was the average income in 2020?

In 2020, the average income in Germany was €47,700 gross (before tax). This means that during the first Covid pandemic year, income fell by an average of €300 compared to the year before.

The average income is the mean value of the gross salaries of all employees in Germany.

So keep in mind that it takes in what all employees earn across the country – even those earning six-figure amounts. 

The average salary of €47,700 corresponds to a monthly gross salary of €3,975 for a full-time job (35 to 40 hours a week is common for full-time in most companies). The Statista graph below shows what German employees have earned on average per month through the years from 1991 to 2020.

READ ALSO: Germany’s unemployment rate drops after Covid restrictions relaxed

Statistik: Durchschnittlicher Bruttomonatsverdienst von vollzeitbeschäftigten Arbeitnehmern¹ in Deutschland von 1991 bis 2020 | Statista

For a person with the tax class I living in Baden-Württemberg, this would result in an average take home pay of €2,526.26 net (after tax).

Special payments, for example in the form of vacation pay or bonuses are not included in the data analysed by experts. 

What do people earn in different industries in Germany?

Using the latest stats, German business daily Handelsblatt put together a special report looking at how the average income of employees in Germany varies depending on the industry, region and gender of employees. 

There are – unsurprisingly – large differences in what you take home every month depending on which sector you’ve decided to enter. 

According to the Federal Statistical Office, employees working in financial and insurance services as well as IT sectors earned the most in 2020. Employees there received a not too shabby €5,248 to €5,602 per month (gross) on average.

Photo: picture alliance/dpa | Uwe Anspach

Employees from the hospitality industry earned the least, with average gross earnings of €1,893 per month.

READ ALSO: End of home office: Are employees in Germany ready to return the office?

Average (gross) income in Germany across industries per month in 2020

1. Financial and insurance services €5,602 

2. Information and communication €5,248 

3. Energy supply €5,218 

4. Professional, scientific and technical services €4,933 

5. Education €4,650 

6. Real estate €4,271

7. Manufacturing €4,271

8. Public administration, defense and social security €4,091 

9. Mining and quarrying €4,083 

10. Manufacturing industry €4,062 

11. The service industry (total) €4,033

12. Arts and recreation €3,871 

13. Miscellaneous services €3,871 

14. Trade €3,735 

15. Water supply €3,617 

16. Construction €3,540

17. Transport and storage €3,164

18. Hotels and restaurants (hospitality) €1,893 

Source: Federal Statistical Office

What do people earn in Germany’s states?

As well as the type of industry, what you take home every month depends on the federal state where you’re employed. According to the Federal Statistical Office, full-time employees in Hamburg earn the most in Germany, with an average gross monthly income of €4,966.

This is followed by Hesse and Bavaria in second and third place. Mecklenburg-Western Pomerania brings up the rear. Full-time employees here earn the least compared to other states with €3,379 gross per month.

What is particularly striking is that even after more than 30 years of reunification, the difference in earnings between western and eastern Germany is clearly visible.

READ ALSO: What a boom in remote working could mean for Germany’s housing market

Average (gross) income in Germany across the 16 federal states per month in 2020

1. Hamburg €4,966

2. Hesse €4,835 

3. Bavaria €4,652 

4. Baden-Württemberg €4,646 

5. Berlin €4,502

6. North Rhine-Westphalia €4,429

7. Bremen €4,422

8. Rhineland-Palatinate €4,186

9. Lower Saxony €4,135

10. Schleswig-Holstein €3,963

11. Saarland €3,959

12. Brandenburg €3,575

13. Saxony €3,561

14. Saxony-Anhalt €3,539

15. Thuringia €3,401

16. Mecklenburg-Western Pomerania €3,379

Source: Statista

How does gender influence average income?

Another factor influencing the amount you earn is your gender. Sadly, women received less money for the same work than men in 2020.

According to Statista, the average gross income for men working full-time in 2020 was €22.78 an hour. For women working full-time it was €18.62. 

This is known as the gender pay gap. In 2020, women received around 18 percent less money than their male colleagues.

And at 20 percent, the difference was significantly higher in western Germany and Berlin, than in the eastern states where it was six percent.

This percentage difference has remained around the same level since 2002. The German government aims to reduce the salary gap to 10 percent by 2030.

Why do women get paid less than men?

The reasons for the large difference in average incomes between women and men are down to several reasons. One important factor is the salary levels of the industries. In male-dominated sectors such as financial services, IT and manufacturing, salaries are higher on average. In industries such as nursing and social work – where many women tend to work – salaries are lower.

However, even when industry differences are taken into account and only gross salaries are compared between, for example, male and female engineers with the same work experience, there is still a pay gap of at least six percent.

“This figure reflects discrimination against women,” Malte Lübker, an expert on wage structures at the Hans Böckler Foundation’s Institute of Economic and Social Research (WSI), told Handelsblatt.

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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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