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WHAT CHANGES IN GERMANY

The important money and tax changes in Germany in 2024

The cost of living in Germany has been rising, and salaries are not keeping up, meaning many people are watching how they spend more closely. So how will changes to things like tax, health insurance contributions, and benefits affect you in 2024?

Published: 4 December 2023 13:10 CET
Updated: 3 January 2024 09:35 CET
Money
What kind of money changes are happening in Germany next year? Photo: picture alliance/dpa | Monika Skolimowska

Income tax and child allowance changes

The Inflation Compensation Act is bringing about a number of changes to what people will be left with in their wallets after tax.

Germany’s basic tax allowance increased from €10,908 to €11,604 on January 1st, 2024. For married couples, the allowance rises to €23,208. This means that any income below this limit is not subject to tax.

In January 2023, child benefits (Kindergeld) in Germany was expanded to €250 per month per child. It is expected to remain this way in 2024. 

The child tax exemption (Kinderfreibetrag), which guarantees that parents’ income remains tax free up to a certain amount, is set to be increased from €6,024 to €6,384 in 2024.

There are also adjustments to the solidarity surcharge. This already disappeared completely for around 90 percent of taxpayers in 2021. For the remaining payers, the exemption limit will increase by a further €587 from January 2024.

For a more detailed analysis of how much you’ll take home after salary deductions, fill out the Stiftung-Warentest calculator.

READ ALSO: What benefits are you entitled to in Germany if you have children?

Statutory minimum wage goes up

The minimum wage was €12 per hour, but it is set to rise in two stages: on January 1st 2024, it went up to €12.41 gross per hour and one year later to €12.82. In some sectors, there are binding minimum wages that are already higher than the general statutory minimum wage.

A person cleans a window

Minimum wage, which is especially needed in low-paid sectors such as cleaning, is going up in Germany. Image by Simon Kadula from Pixabay

Mini-job limit increases from January

What do mini-jobbers need to bear in mind with regard to the monthly earnings limit? “If the general minimum wage is increased, the mini-job limit will also rise,” says the Minijob Centre on its website with a view to the coming year.

It will increase from €520 to €538 per month from January 2024, according to the advice centre. “The annual earnings limit will increase accordingly to €6,456,” they said. 

Germany introduced mini-jobs as a way for employers to get part-time workers more easily, and for those same workers to enjoy the flexible working arrangements part-time work can sometimes offer, with certain exemptions from tax.

READ ALSO: The rules in Germany around mini and midi jobs

Bürgergeld goes up by 12 percent

The standard rates for long-term unemployment income and social assistance increased from January 2024. Single adults will receive €563 per month – €61 more than before. Adults living with a partner will receive €506 instead of the previous €451.

Those living with young dependents also get more, depending on the age of their children. For parents or guardians of young people aged 15 to under 18 will receive €471 (previously €420). For children from the age of seven to the age of 14, the rate rises from €348 to €390. For the youngest children, it will rise from €318 to €357.

School supply benefits

The amounts provided to pupils for personal school supplies increases by around 12 percent – from €116 to €130 in the first half of the school year and from €58 to €65 the second half of the school year.

The support for personal school supplies is part of the so-called education package for children, adolescents and young adults who receive Bürgergeld or social welfare or whose parents receive child supplement (Kinderzuschlag) or housing benefit (Wohngeld).

Elterngeld (parental allowance) changes 

At the moment, couples in Germany can receive parental allowance up to an annual taxable income of €300,000. But this limit was set to fall to €150,000 for couples, meaning those earning a combined income over that limit would not receive parental allowance.

However, after much criticism, the coalition government has agreed to lower it in two stages, first to €200,000 and then to €175,000. The limit for single parents – currently at €250,000 – will be lowered to €150,000.

Nothing will change for parents whose children are born by March 31st 2024. From April 1st, 2024, however, the new €200,000 limit will apply for couples and the €150,000 limit for single parents. The new limit of €175,000 will apply to couples whose baby is born from April 1st, 2025. 

Unlike Mutterschutz (maternity leave), which is solely for mothers before and after the birth of their child, Elterngeld offered an allowance of paid time off that both parents could split between them however they liked. Up to €1,800 a month is available to replace lost earnings.

READ ALSO: ‘A horrible idea’: How cuts to Elterngeld will affect families

A father and newborn baby

A father and newborn baby. Cuts to Elterngeld could impact fathers’ decisions to take time off work to care for young children. Photo: Pixabay

VAT goes up in cafes and restaurants 

For those enjoying meals at cafes and restaurants, there is a big change in 2024. 

That’s because the German government has decided to raise the VAT back up to 19 percent from seven percent. 

The tax had been lowered as a measure against increasing inflation due to the energy crisis.

The cost of eating out has already gone up significantly – so this will be another hit on people’s wallets, and will also affect restaurant owners. 

READ ALSO: How Germany’s plans to hike VAT in restaurants and cafes will affect you

Energy price brakes end

Germany’s electricity and gas price caps expired at the end of 2023.

The Bundestag had originally voted to extend the programme until the end of March 2024. 

But the government decided to end them earlier than planned after a top court ruling upended spending plans. 

The announcement means consumers could see their energy bills go up from the current limit of €0.40 per KwH for electricity and €0.12 per KwH for gas.  

However, it will depend on households’ individual tariffs and consumption.

Motor vehicle insurance premiums to increase

Motor vehicle insurance premiums will rise by at least 10 percent in 2024, according to Germany’s central Consumer Advice Centre (Verbraucherzentrale). 

The main reason for this is that the costs of repairs have risen due to high inflation. Comparing prices from different providers is worthwhile because of the tough competition. If prices go up, consumers have a special right of termination four weeks after receiving the notification.

Health insurance additional contributions may go up

From the start of 2024, additional contributions for statutory health insurance have been allowed to rise by 0.1 percent in Germany.

The move will bring these contributions up to their highest rate ever of 1.7 percent.

Previously, mandatory health insurance contributions were set at 14.6 percent and additional contributions (which are set by the health insurer) can be up to 1.6 percent. 

Not every insurer chooses to charge the maximum additional contribution set by the state. For example, Techniker Krankenkasse currently charges 1.2 percent, while Barmer charges 1.5 percent. 

Health insurance cards Germany

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

This means that not everyone with statutory health insurance will see an increase in costs next year, but some insurers are likely to opt for the additional income.

For those in employment, it could mean an extra 0.05 percent of their wages would go to their health insurance – amounting to 5 cents per €100 earned – with the other 0.05 percent covered by their employers.

READ ALSO: How German health insurance costs are set to rise from 2024

Income thresholds for health insurance and pensions go up

The majority of employees in Germany automatically pay statutory health insurance and pension contributions out of their salary – but there are exceptions for higher earners.

In 2024, the salary at which employees can opt out of statutory health insurance goes up to €69,300 per year from the current €66,600. That equates to a monthly salary of €5,775 before tax.

The so-called ‘Beitragsbemessungsgrenze’ – which caps how much of your income used to calculate your health insurance – will also increase to €62,100 in 2024 from €59,850 in 2023. So if you earn €65,000 per year, for example, your statutory insurance will only be calculated as a percentage of €62,100, rather than your full salary.

A similar system is used to calculate pension contributions: these are calculated as a percentage of your income, but only up to a certain amount.

In 2024, that amount is €7,450 per month in the former East German states and €7,550 in western states. 

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WORKING IN GERMANY

‘Far too low’: How millions of workers in Germany are earning less than €14 per hour

Germany is known for being a country of well-paid workers. But new statistics from the government reveal that more than eight million people are taking home less than €14 per hour, prompting fresh calls to raise the minimum wage.

Published: 29 April 2024 15:49 CEST
'Far too low': How millions of workers in Germany are earning less than €14 per hour

“Good work deserves a decent wage – that’s just about respect,” wrote the centre-left Social Democrats (SPD) in their election campaign back in 2021. 

When Olaf Scholz’s party entered government as the largest partner in the traffic-light coalition, one of their flagship pledges was to bump up the minimum wage to €12 per hour – a major increase from the previous €10.45.

The SPD kept their promise and on October 1st, 2022, the €12-per-hour minimum wage came into force in Germany. 

Just 18 months later, however, there are once again rumblings of dissatisfaction as left-wing parties call for another hike in wages for the lowest paid in Germany.

What do the lowest workers earn in Germany – and where do they work?

Currently, more than eight million workers – amounting to around 10 percent of the population – earn less than €14 per hour in Germany.

According to the Labour Ministry, around 8.4 million people were employed at hourly wages below €14 as of April 2023, with around 7.1 million of them in the western states. 

The proportion of these workers is particularly high in the hospitality industry, with 65.8 percent of workers in cafes, bars and restaurants earning less than €14 per hour. According to the latest data, 1.1 million employees in this industry fell below the €14 threshold. 

In retail, the number of workers earning below €14 per hour was even higher at 1.6 million. Meanwhile, in the service sector, 45 percent of the some 1.46 million workers fell into this bracket. 

The data on low earners was released in response to a parliamentary question from the left-wing Linke party and was first reported on by Spiegel on Monday. 

Following an increase at the start of the year, the current minimum wage is set at €12.41. However, €14 is a significant benchmark because it represents 60 percent of the median wage in Germany. According to an EU directive, the national minimum wage should be no less than this figure. 

READ ALSO: Minimum wage violations on the rise in Germany – Are you getting paid enough?

Why is the minimum wage such a heated issue?

Workers in Germany are in many ways facing a perfect storm right now. 

In the months it took for the SPD to bring in the €12 minimum wage, an energy crisis brought on by Russia’s war on Ukraine had sent prices spiralling in Germany.

In 2022, the cost of living rose by a staggering 6.9 percent compared to the previous year, dropping off just slightly to 5.9 percent in 2023. 

Though inflation has tailed off in recent months, employees are still facing prices of everyday goods that are in some cases double what they were just a few years ago.

Groceries lie on the conveyor belt at the checkout in a supermarket in Bavaria.

Groceries lie on the conveyor belt at the checkout in a supermarket in Bavaria. Photo: picture alliance/dpa | Sven Hoppe

At the same time, economic uncertainty has made employers reluctant to increase wages, and those on minimum wage have only had modest pay increases over the past few years.

Last year in June, Germany’s minimum wage commission proposed an increase of just 41 cents each year for this year and next, bringing the minimum wage up to €12.41 at the start of January 2024 and up to €12.82 in January 2025. 

At the time, the decision was described as “scandalous” by labour experts and trade unions, who slammed the fact that the tiny increase would amount to a real-terms cut in wages for the lowest earners. 

There was also tough criticism over the fact that the decision by the minimum wage commission had not been unanimous.

READ ALSO: Why Germany’s proposed minimum wage increase has been called a ‘scandal’

How is the minimum wage decided in Germany?

Since the statutory minimum wage was established in Germany back in 2005, a committee called the Minimum Wage Commission (Mindestlohnkommission) has been responsible for making recommendations on how high it should be. 

This committee consists of three employer representatives and three worker representatives who vote on the proposed changes, as well as two government-appointed advisors who don’t have voting rights.

Every two years, the commission decides on adjustments to the minimum wage for the next two years, and these proposals are then approved by the government. 

Controversially, the latest proposals from the Minimum Wage Commission didn’t receive unanimous approval, with the employee representatives on the panel claiming to have been outvoted.

This has recently led to calls from SPD co-leader Saskia Esken for the rules to be changed so that decisions by the commission can only be reached by consensus. 

READ ALSO: What are Germany’s top-paying jobs?

What proposals are on the table for the minimum wage?

Though the SPD haven’t united on a figure for the coming years, numerous voices in the party have spoken out in favour of a significant increase for low-paid workers.

Speaking to RND on Wednesday, Esken described the current increases as “far too low” and stated that the next minimum wage “must definitely be high enough to ensure that single people can live on it without falling into poverty if they have a full-time job”. 

This echoes calls from SPD co-leader Lars Klingbeil for a “significant increase” in the minimum wage next time around.

SPD co-leader Lars Klingbeil speaks at an EU election event in Hamburg.
SPD co-leader Lars Klingbeil speaks at an EU election event in Hamburg. Photo: picture alliance / Sebastian Gollnow/dpa | Sebastian Gollnow

Going one step further, Petra Köpping, the leading SPD candidate in Saxony, suggested a minimum wage of at least €15 per hour.

Meanwhile, the leftwing Linke party wants the government to change the law so that the national minimum wage can’t fall below 60 percent of the median salary, which currently amounts to €14 per hour.

An EU directive on fair wages that must be implemented in Germany by November 15th, 2024, suggests that the minimum wage should be set at least 60 percent of the median salary, and that collective bargaining agreements should cover at least 80 percent of the workforce. 

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