If the net decrease of gross income occurs, you'll be required to pay a substantial amount
The German government has made significant changes to the contribution assessment limits for social insurances, including health and nursing care, in 2023 and 2025. These changes, reported by NTV from government circles, impact well-paid employees by raising the maximum salary amount subject to contributions, potentially reducing their net income marginally due to higher mandatory deductions.
In 2025, the contribution assessment ceiling for nursing care insurance increased to €5,512.50 per month (or €66,150 annually), while the ceiling for health insurance rose to €5,512.50 (previously €5,175). For pension insurance, the ceiling will be €8,050 (previously €7,550) in the future.
These increases mean that well-paid employees earning above the previous limits will pay contributions on a larger portion of their salary. For instance, if the pension insurance contribution ceiling rises, employees contributing the maximum will pay contributions on a higher portion of salary, thus reducing net income.
It's important to note that the contribution rates for health, nursing care, and pension insurance remain stable, but they apply to higher maximum income thresholds. This results in a slight decrease in net income for these employees, assuming gross income remains the same.
However, it's worth mentioning that these rules for higher income taxes are separate from insurance contribution limits. Higher income means tax return filing requirements apply as usual, and supplementary income over certain exemptions (e.g., €410 annually) is taxable.
The Ministry of Labor's plan, which particularly targets well-paid employees who are compulsorily insured, comes amidst the state of the ailing health and pension insurance funds. In the coming years, there are likely to be significant increases due to the state of these funds.
Interestingly, the Ministry of Finance, under Christian Lindner, has dropped its resistance to the Ministry of Labor's plan to increase contribution assessment limits. This development could result in some households paying a lot more in taxes, potentially causing problems with private health insurance for high-earners.
These increases are based on an estimated wage growth of 6.4 percent from 2023. It's essential for well-paid employees to prepare for higher contributions in 2025 and beyond, as they may experience a decrease in their net income from gross income due to these changes.
The increases in the contribution assessment ceiling for pension insurance to €8,050 per year may impact well-paid employees who earn above this amount, resulting in a higher portion of their salary being subject to contributions and potentially reducing their net income.
The Ministry of Finance's decision to drop its resistance to the Ministry of Labor's plan to increase contribution assessment limits could result in high-earners paying more in taxes, which might cause issues with private health insurance for such individuals.
