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Working in Germany: 7 factors that can affect how much you’re paid

Wondering if there's a way of boosting your pay packet in Germany? We recommend considering these points if you're navigating the German job market.

Published: 31 January 2022 17:26 CET
A man works at a table in Munich.
A man works at a table in Munich. Photo: picture alliance/dpa | Finn Winkler

According to a study by Gehalt.de, employees in Germany earn a median salary of around €43,200.

But all kinds of factors can have an impact on how much you earn, whether it’s the type of company you work for or where you live in Germany. 

Here’s a look at some points to keep in mind. 

1. The size of the company

The bigger the company, the better you will be paid. That’s because firms with many employees usually have a larger turnover and can afford to pay more because of their positive balance sheet.

According to an analysis by Gehalt.de, companies with more than 500 to 1,000 employees in Germany pay out an average income of €57,000 per year. A micro-enterprise or small firm with up to five employees offers an average salary of €35,000.

Meanwhile, the income of a company with more than 20,000 employees can increase by up to 85 percentage points – with an average salary of about €80,000, according to the study. 

READ ALSO: How to boost your career chances in Germany

2. The economic situation of the company

It goes without saying that the salary also reflects how well the company is doing economically.

A company that’s not doing so well, and whose turnover tends to fall from year to year, will not be able to pay its employees too large a salary and will also seldom allow salary jumps. 

3. Your education

Your school career, as well as your choice of field of study, can have significant impact on your salary, especially for younger employees. Later, work experience and performance in the respective company take on a more important role.

But as many of us who have settled in Germany know, this is a land obsessed with academic titles.

Many people strive to get ‘dr’ or ‘professor’ in front of their name, and for good reason: having academic achievements can increase your earning potential, as well as your societal clout (but just don’t plagiarise your doctoral theses like many German politicians have). 

In the working world, banks and consulting companies like their employees to have titles attached to their names, while some industries (like medicine) may require them. 

According to the job platform Stepstone, academics earn on average about 30 percent more than non-academics. Among them, graduates in medicine and law can expect the highest earnings, averaging over €72,000 a year.

The same applies to people who have studied industrial engineering, business informatics and engineering.

However, those who have not studied or earned a doctorate can also score points with years of professional experience: after 11-20 years in an industry, you can expect to be paid around 67 percent more than at entry level.

Furthermore, soft skills are indispensable for top pay these days.

These include speaking skills, organisational talent and the ability to work in a team. You can learn or grow these skills through special courses and training.

If you speak more than two foreign languages, you will also gain further advantages in the global job market (and perhaps even at home in Germany). 

4. The sector

Your choice of industry has a big impact on your salary.

According to the Federal Statistical Office, employees working in financial and insurance services as well as IT sectors earn the most. Employees there received €5,248 to €5,602 per month (gross) on average in 2020.

People working in the hospitality industry earned the least, with average gross earnings of €1,893 per month.

5. Where you live

The area you live in Germany will affect your pay packet. 

According to the Salary Atlas 2021 by Gehalt.de, employees in southern Germany earn above average.

Baden-Württemberg is at the top with a median income of about €46,600 euros, which means that employees there earn almost eight per cent above the national average.

There are also attractive salaries in Hesse (€46,300) – which is home to the banking capital of Frankfurt – and Hamburg (€45,600).

At the other end of the ranking are the eastern states: in Mecklenburg-Western Pomerania (€33,700), Saxony-Anhalt (€34,800) and Brandenburg (€35,100) in particular, annual earnings are comparatively low.

But the cost of living is higher in the larger cities so keep that in mind when you’re considering where to find a job. 

The situation is similar for the salaries of executives. The front-runner here, however, is Hesse, not least thanks to the position of Frankfurt am Main as an influential financial centre. At €100,400, Hessian decision-makers can even expect a median income in the six-figure range.

READ ALSO:

6. Your role or occupation

Regardless of the location, the choice of profession also makes a huge difference to your salary, and how your salary can develop. 

Those who want to be among the top earners in Germany should consider their profession carefully.

According to the salary atlas experts, the top positions are filled by chief physicians (€196,250) and senior physicians (€121,700).

Financial experts, lawyers, management consultants and IT experts follow in the ranking. But it can take a lot of years to get into these positions. 

A high degree of responsibility as well as sound specialist knowledge and often years of training are required. 

7. Responsibility

As well as the occupation, the position and associated responsibility in the company also play a central role when it comes to pay.

Managers earn significantly more than employees – and the larger the team you manage, the higher the pay usually is.

Useful vocabulary 

Salary – (das) Gehalt

Company size – (die) Unternehmensgröße

Small company – (das/die) Kleinstunternehmen

Influence/impact – (der) Einfluss

Average – (der) Durchschnitt

In comparison – im Vergleich

Employees – (die) Beschäftigte/Mitarbeite

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TAXES

EXPLAINED: How do you close down a freelance business in Germany?

Leaving the country? Got a steady job offer you can’t say no to? Winding down your self-employment activities in Germany still requires taking a few bureaucratic steps.

Published: 15 May 2024 09:07 CEST
Updated: 15 May 2024 10:57 CEST
EXPLAINED: How do you close down a freelance business in Germany?

Striking out on your own as self-employed is one of the scariest – and potentially most rewarding things – you can do. In Germany, it also comes with its own set of rules around tax and social insurance.

But there are times when – for whatever reason – it may be time to move on.

Whether it’s because you have an exciting new opportunity or things haven’t quite worked out the way you hoped due to economic pressures – winding down self-employment the right way is crucial to avoid gaps in your health and social insurance coverage in Germany.

The steps you have to take are also a bit different depending on if you are new self-employed (Freiberufler) or have a trade licence (Gewerbe) – with some steps not being necessary for new self-employed.

Trade licences are automatically cancelled if the licenced person dies or the company ceases to have financial assets.

Resigning the trade licence or declaring it dormant

New self-employed people like writers or speakers don’t need to go through this step, as they don’t need a trade licence.

Those who have a trade licence will need to contact their competent local authority and resign it, or declare it dormant (withdrawing the licence). If you’re only winding down temporarily, declaring your trade licence dormant instead of de-registering completely may save you a few headaches later.

You may have to do this in person at your local trade office – or Gewerbeamt – depending on whether your local authority allows online de-registration or not. You’ll need to bring your official ID, trade licence, confirmation of registration and possibly an extract from the trade register. Fees are dependent on your local authority and can range from being free to €25.

You can declare the date you intend to resign the licence – which can be in the future. To ensure no gaps in your social insurance protections, including health insurance, set this date for the day before whatever comes next. For example, if you’re starting a new job on January 1st set the date for your trade licence to expire as December 31st.

The trade office will typically notify your local tax office, so you won’t need to do this yourself.

Notifying your tax office

If you’ve had to resign your trade licence, you can skip this step as your trade office will do it for you. If you’re a Freiberufler without a trade licence you need to resign, you’ll have to notify your local Finanzamt, or tax office, yourself.

Luckily, this is a pretty easy step.

First, you need to decide whether you’re ceasing operations completely or wanting to continue them part-time. If you’re ceasing completely, you’ll end up surrendering your self-employed tax number.

You don’t have to do this though. If you think you may still carry on some self-employed business as a side gig, you can inform the tax office that you intend to do so and keep your number.

At that point, the tax office should treat you as a Kleinunternehmer – or a small business making less than €22,000 a year. Having this status means that you will not need to pre-pay taxes or charge VAT on your invoices for freelance side projects.

If you derive any income from your side gig in the future though, you’ll still have to file a tax return.

READ ALSO: Can I have a freelance side gig as an employee in Germany?

Notifying your health insurance

While different private plans in Germany may have different notification requirements, if you have public health insurance in Germany, you should notify them that you’re winding up your self-employed business. Specifically, advise them exactly what date you’re wrapping up.

Again, this should be right before you start your new job or leave the country, to ensure no gaps in your coverage.

If ending your self-employment in Germany, take care to ensure that there’s no gaps in your health insurance coverage, by giving the right date for when you’re ceasing activity. You don’t want to be caught without coverage. Photo by Stephen Andrews on Unsplash

If you are in an artistic profession and thus pay pension, health, and nursing insurance through the Artist Social Insurance Fund (KSK), you should also advise them as well. If you’re leaving self-employment completely, you can typically give notice to KSK as to when it’s ending.

If you’re not, and intend to still make money freelancing as a side gig, they should know this as well. In this event, you’ll no longer pay health or care insurance through KSK, as this is covered through your main job.

You may need to continue to pay pension contributions through KSK based on the amount of money you still make from self-employed activities — depending on how much of them you continue.

KSK: How creative freelancers can pay less for German health insurance

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