Opting out of tax/social-security items

14 posts in this topic

Posted

I've just discovered that I'm going to have to switch from being selbständig to being a permanent employee. I tried hard to fight it but lost.

 

So the employer is asking me what salary I want (not that I'll necessarily get what I ask for).

 

So I'm thinking that currently as selbständig I invoice for X, pay Y in taxes and expenses (e.g. accountant, health insurance), and I'm left with net income of Z.

 

Naturally I'd like to try and end up with the same "Z" amount of net income. As a contractor, I get to take deductions (office, electric, phone and so on). I won't have that benefit as a permie.

 

I've worked out that my net income (Z) is currently 62% of X (my gross/invoiced amount). The thing I'm not sure about though is how many of the items you normally see on a German's wage slip I'm paying. I don't know if I pay unemployment insurance, solidaritätszuschlag and the other small % items. It's a bit late to be calling my accountant.

 

My main question is, as a Brit living here, are we allowed as permanent employees to avoid any of these charges? For example, if we're not entitled to a pension or unemployment insurance, it would be daft contributing to it and maybe we could get an exemption.

 

Using this german income tax calculator I think I'd need to ask for X+10% in order to roughly maintain my current net income after switching to permie. Without the pension/unemployment contribution (which you can do in that calculator) I don't need to increase that X at all. I'd much rather say to the company "keep the salary the same and just switch me to employee". It sounds better. It might even seem like I'm making a sacrifice.

 

edit: Single/No Kids

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Posted

Employee? Brit? Irrelevant. You have to pay into unemployment insurance ( if you´re publicly health insured ) and the Soli and the pension as an employee..

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Posted

Thanks John, but can you try again, with what I want to hear ;)

 

Seriously though, am I right to infer that if I'm privately health insured, the unemployment insurance is not mandatory? I've probably reversed the logic and made an assumption that isn't true. I live in hope though.

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Posted

You will have to pay the same as every other employee (source):

 

  • 9.45% of your gross salary public pension insurance
  • 1.5% public unemployment insurance
  • if your gross yearly salary is:

     

    • above the Versicherungspflichtgrenze of 52,200€ (in 2013), then you are allowed to keep your private health insurance and your employer will contribute about half of its cost.
      But if this is the first time that you will be an employee in Germany, you will also now have a one-off right to join public health insurance if you want to.
    • the Versicherungspflichtgrenze of 52,200€ or lower then you will have to pay:
      8.2% public health insurance
      1.275% public nursing insurance

     

And before you ask, that option "without pension/unemployment insurance" is meant for immatriculated students.

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Posted

Thanks Panda. With that, I've got all I need now.

 

I've worked out that I need to ask for about 9% more as a permie than I was invoicing as a freelancer to retain the same netto number. I rounded the number to 7%. Hoping they don't laugh in my face at the audacity :D

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Posted

You are being offered a chance to name your price, I'd say 20% more. This is nothing to do with what you end up with - your bottom line. This is about that they clearly need you long term.

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Posted

I don't know if I'd state it quite like that. It was more a case of tell us what the number is and we'll see if we can manage that. I'll be amazed if they don't freak the hell out at the (7% higher) number that I already gave them. Also, they've managed without me for 12 months now, so I can't claim to be essential to operations.

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Posted

Don't forget that your full-time position comes with 5 or 6 weeks of paid vacation, plus the potential for Christmas/vacation pay and other bonuses (if those bonuses are not already included in your annual calculation).

 

Normally you would ask for 40-50% more to go from employee to freelancer - to compensate for the lack of employer contribution to health insurance, pension insurance, loss of vacation, costs of business (rent, equipment), etc. So it's very generous of them to offer you more to go in the other direction.

 

I think you did the right thing not being too greedy.

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Posted

 

Don't forget that your full-time position comes with 5 or 6 weeks of paid vacation, plus the potential for Christmas/vacation pay and other bonuses (if those bonuses are not already included in your annual calculation).

 

Yeah, the extra vacation will be nice. My Gerwoman gets 6 weeks and I was only on 4, so that was spoiling our vacation plans a lot in the last few years. The weird thing is going to be negotiating christmas vacation (the 13th payment) and termination period. I'll basically be going to the HR department and be saying something along the lines of "hey, you're going to be employing me, these are the things I want". I'm sure they'll enjoy that, not.

 

 

Normally you would ask for 40-50% more to go from employee to freelancer - to compensate for the lack of employer contribution to health insurance, pension insurance, loss of vacation, costs of business (rent, equipment), etc. So it's very generous of them to offer you more to go in the other direction.

 

Yeah that's what happened originally. I was working for them in America as an employee, then moved back to Germany and switched to being contractor and got 30% more on top. A year or so later I told them I was suffering due to the dollar/euro exchange rate and that I'd like to stop invoicing them in $$$ and switch to €€€. So that if the rate got worse, I'd be saved the extra pain. Plus, I wanted a bit of a payrise. That was when they decided to give me a 55% pay rise. Holy shit, yeah that's what I thought. I've had that rate (twice was I was earning as an employee in New York) for the last few years. Switching that now back to being an employee might freak them out when they realize they could be getting two (or three) Software Engineers in New York for what they're paying me here.

 

 

I think you did the right thing not being too greedy.

 

You can see why I wasn't being too greedy ;) Even if I take a 10% pay CUT, I'll still be alright.

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Posted

 

as a Brit living here, are we allowed as permanent employees to avoid any of these charges? For example, if we're not entitled to a pension or unemployment insurance, it would be daft contributing to it and maybe we could get an exemption.

 

As a Brit living here you pay the same contributions as anyone else living and working here. Also, as a Brit living (and working) here, should you suddenly become unemployed you will receive unemployment money, the same as anyone else living and working here. I don't know why you think being a Brit may exclude you from this. Likewise with a pension.

Should you become unemployed or when you retire you may find these payments useful.

 

Of course you can always opt out of the church tax.

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Posted

 

I don't know why you think being a Brit may exclude you from this. Likewise with a pension.

 

I didn't think that, I was asking the question. I've never had a permanent job in Germany so I didn't know which things a non-German has to pay and/or is entitled to.

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Posted

There is no differentiation between what a German and what a non-German employee have to pay.

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Posted

Thanks, but that was established already.

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Posted

And there are no differences in the benefits.

It's not unusual being a non-German national and working in Germany.

Both the EU and the German Constitution prohibit anything other than equal treatment.

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