The stumbling block of total cost

Copyright: KNIESEL HRS 1

Hello! Nice to meet you again. Today we
will have a look at the calculation of total
costs within the German payroll system.
Be carful not to get trapped!

Copyright: KNIESEL HRS 2

Employers and Employees
part of social security
payments

Copyright: KNIESEL HRS 3

All payments are divided into two parts

Health insurance Health insurance

Care insurance Care insurance
Pension insurance Pension insurance
Unemployment Unemployment
insurance insurance

Employers part of social Employees part of

security payments social security payment

Copyright: KNIESEL HRS 4

In general, the payments get split 50% - 50%

Health insurance 50% Health insurance 50%

Care insurance 50% Care insurance 50%
Pension insurance 50% Pension insurance 50%
Unemployment Unemployment
insurance 50% insurance 50%

Employers part of social Employees part of

security payments social security payment

Copyright: KNIESEL HRS 5

 And now be careful: The
employers part of social
security payments IS NOT
In general, the payments get split 50%
part-of50%
the salary by
contract !

Health insurance 50% Health insurance 50%

Care insurance 50% Care insurance 50%
Pension insurance 50% Pension insurance 50%
Unemployment Unemployment
insurance 50% insurance 50%

Employers part of social Employees part of

security payments social security payment

Copyright: KNIESEL HRS 6

The trap of top down
calculation

Copyright: KNIESEL HRS 7

 Gross income minus
Wage tax and Starting point of calculation: Gross income
Employees part of social or
contribution Net Pay
=
Net pay

Gross income = salary by contract

./. Wage tax
./. Employees part of social contribution

Net Pay

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 Gross income plus Starting point of calculation: Gross income
Employers part of social
contribution
=
Total costs
Total costs

+ Employers part of social contribution

Gross income = salary by contract

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 you can calculate top- Starting point of calculation: Gross income
down or bottom up in the or
range of gross income and Net Pay
Net Pay

Gross income = salary by contract

./. Wage tax
./. Employees part of social contribution

Net Pay

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 Starting point of calculation: Gross income
but ONLY bottom up in
the range between gross
income and total costs!

Total costs

+ Employers part of social contribution

Gross income = salary by contract

Copyright: KNIESEL HRS 11

This is the calculation
system

Total costs

+ Employers part of social contribution

Gross income = salary by contract

./. Wage tax
./. Employees part of social contribution

Net Pay

Copyright: KNIESEL HRS 12

NEVER try to calculate top
down like this!

Always remember: It is not

possible to fix the amount
of total costs.

Total costs

+ Employers part of social contribution

Gross income = salary by contract

./. Wage tax
./. Employees part of social contribution

Net Pay

Copyright: KNIESEL HRS 13

 Driving Wrong way on
payroll road leads you right
into danger zone on the
highway to insolvenzy

Total costs
NO
+ Employers part of social contribution

Gross income = salary by contract

./. Wage tax
./. Employees part of social contribution

Net Pay

Copyright: KNIESEL HRS 14

Intercultural misunderstanding

Copyright: KNIESEL HRS 15

 Salary by contract =

Gross income

(in the German sense of the German

meaning) meaning

Gross income = salary by contract

Is never identical with total costs

Copyright: KNIESEL HRS 16

 if your home country
system is working in a kind
like this

Gross income = total costs

= salary amount by contract

./. Wage tax

./. social contribution

Net Pay

Copyright: KNIESEL HRS 17

 Salary by contract
Possible
may mean meaning in
your home
Gross income = total costs country

Gross income = salary by contract

Is identical with total costs

Copyright: KNIESEL HRS 18

 German
Can you see the issues meaning
ready at hand?

Gross income = salary by contract

Is never identical with total costs

Possible
meaning in
your home
country

Gross income = salary by contract

Is identical with total costs

Copyright: KNIESEL HRS 19

 please consider, that you
have to deal with two
different meanings of the
word gross income

Home country German system:

system:

Gross income = salary by contract

= total costs Is not total costs

Copyright: KNIESEL HRS 20

 in other words: Take care
to put the right amount into
your labour contract. Your
law office can help you to
add a clarification clause.

Home country German system:

system:

Gross income = salary by contract

= total costs Is not total costs

Clarification clause

Copyright: KNIESEL HRS 21

Thats all for today. If you need more information,
please dont hesitate to contact us.

In the next file, you will find some important facts

about figures and deadlines.

Join us at
Fit for German payroll system
See you soon!

Copyright: KNIESEL HRS 22

Copyright: KNIESEL HRS 23