How to calculate your net salary in Germany in three minutes

When our children were younger, they would jump with excitement when the doorbell rang – hopeful that the DHL delivery was a present. 

The parcel was often a huge brown box. We would slit open the box with a knife, then the kids would anxiously pull out screwed up brown paper and bubble wrap. Finally, several layers down, the present would emerge. It was about one twentieth of the size of the oversized packaging, which was now scattered around the room. The kids would sigh in disappointment when the gift turned out to be so much smaller than their expectations. 

Getting your first month’s net salary in Germany can elicit similar feelings.

You may have negotiated an excellent annual salary with your new employer. But then, when you “open the packet”, at least a third of the pay is gone. 

“All these deductions,” you ask. “What’s going on?”

Don’t despair. I completely understand this dismay. 

I believe the best way to avoid this disappointment is to set realistic expectations. So in this post I’ll explain what happens to your salary when you work in Germany—how much will be deducted, and why it’s not all bad.

Knowing your net salary in advance will help you plan your budget—and understand which other costs you won’t need to budget for. 

So whether you’re still in the planning stage of your move, or you’re currently negotiating with an employer and checking the recognition of your qualifications—let’s learn how to calculate the net, in-hand salary using a simple online calculator, Nettolohn. Don’t worry – I’ve outlined each step below, so you can try this even if you have zero knowledge of the German language and tax system.

Step by step guide to using Nettolohn to calculate your in hand salary (even if you don’t know German)

1. Go to nettolohn.de

2. Just like in the screenshot below, enter the gross annual salary you expect to receive (the gross figure is what you see in a job ad or in an employment contract), without using a comma eg. 50000 for 50K

3. Select Abrechnungszeitraum: Jahr. See the second red arrow below. 

4. Leave the next few fields blank (unless you have access to any specific information about this, but it’s probably not too important at this stage):
Betriebliche Altersvorsorge
Geldwerter Vorteil
Abrechnungsjahr (this should be automatically set to the current year)
Jährlicher Steuerfreibetrag

5. Ihre Steuerklasse. This is your tax class. Set it on 1 if you are single and 4 if you are married

6. Zahlen Sie Kirchensteuer – Do you plan to pay compulsory tithes to a German religious institution. If not, select nein. (This question is more related to taxes than your actual belief.)

7. Ihr Bundesland – select the state in Germany where you are planning to live. Munich is in Bayern, and Düsseldorf and Cologne are in Nordrhein-Westfalen. If you are not sure, just choose one of those two states, or Hamburg or Berlin.

8. Krankenversicherung – This is compulsory health insurance. Just leave this drop-down exactly as it is for now.

9. Krankenversicherungszusatz – leave this as it is

10. Haben Sie Kinder – Do you have children? Select ja if so, even if your children are grown up and live somewhere else. Choose nein if you don’t have children. 

11. Kinderfreibetrag – Another question related to children. Do nothing here for now

12. Ihr Alter – select your age in the drop-down menu.

Don’t touch the remaining settings (Rentenversicherung, Arbeitslosenversicherung, wöchentliche Arbeitsstunden, Anzahl Gehälter pro Jahr). They are not relevant at this point.

That’s it. 

Now scroll down and click on Berechnen, as shown next to the thick red arrow in the screenshot below.

In the next step Nettolohn will take you to the results page. Here you’ll get an estimate of your net salary, both monthly and yearly.  

Gehalt: your monthly salary (gross) and annual salary (gross)

Then there’s a list of all the insurances and contributions which will be deducted from your pay.

Scroll down until you see a line all marked in blue. That’s where you’ll find out your in-hand pay, next to the word Netto. First, your monthly net salary (red arrow) and second, your annual net salary (yellow arrow).

That figure is your in-hand salary, after all the taxes and insurance contributions have been deducted. The monthly net salary will be paid into your bank account every month.

(Side note: the comma in German numbers equals the English decimal point. The full stop—or period— in German numbers is like a comma in English numbers.)

So if you start with a gross annual salary of €50K, you can expect a net in hand salary of: 31.554,44 € , which is thirty-one thousand, five hundred and fifty-four euros and forty-four cents. 

That’s a substantial difference, isn’t it?

Why is my net salary or in hand pay so much lower than the gross salary?

The way Germany’s social market economy works means that the majority of employees must pay into state funded health insurance, social insurance and pension schemes. That’s just how it is. But it also means that basically everyone has health insurance coverage and access to other benefits if something disastrous happens, eg. chronic illness or unemployment.

Plus, the taxes are automatically deducted from your salary and sent to the tax office.

Advantages of a net salary in Germany

Unlike self-employed people, if you are employed by a German company, you won’t need to set aside money each month to pay health insurance or taxes on your salary. By the time you receive your net income, your health insurance premium and tax on salary have already been paid in full. So there are no (or fewer) surprises when it comes time to file your taxes.

Plus, if your spouse doesn’t work or earns below a certain threshold, and your children are under 18, their health insurance will also be covered by your salary—without any additional costs. That’s a very valuable arrangement that a lot of expats take advantage of. For families with chronic illnesses it’s financially very advantageous.

So the gross – net breakdown is not all bad, even if many people—including Germans—do reel in shock when they first realize how much is deducted.

Our kids know now that massive boxes don’t always mean huge gifts inside. They no longer howl with disappointment like they used to. They’ve also learned to understand that smaller gifts are often extremely valuable in other ways.

In the same way, I hope that by using Nettolohn you’ll have a realistic expectation of your net salary. Then you’ll be able to plan a budget for you and your family accordingly. Most of all, I hope this will minimize the stress of moving countries and help you focus on enjoying your new experiences in Germany.

More questions?

Can I optimize my salary to increase the in hand amount?

Yes, you can talk to your employer or the human resources department about this. There are several legal and recommended ways to make your net salary higher, eg. by including travel, internet and childcare costs in your salary.

Can I claim some of the tax and social contributions back?

If you file an annual tax report covering all your sources of income and including your expenses, you can claim back expenses and may end up with a sizeable tax return. 

You may also be able to claim back up to five years’ worth of state pension payments if you move away from Germany permanently.

Does this apply to self-employed people?

This online calculator, Nettolohn, is not for everyone. 

It’s designed for anyone who is employed by a company that’s based in Germany. It also only applies to those whose annual salary ranges from €5,400 to €64,350, which covers the majority of employees.

The gross-net calculation through Nettolohn doesn’t apply to you if you’re a freelancer, self-employed or a student. Also, if a company in your home country posts you to Germany but keeps you on a non-Germany-based contract, then these in-hand salary figures don’t apply to you either, because you’ll be subject to different rules.