It’s been some time since the German government introduced a national minimum wage. A survey by Die Zeit indicates that almost half of Germans would like to see a maximum wage cap.
Now, this isn’t Germany trying to talk itself out of an extra buck – far from it. The survey – designed as “a typical snapshot through which a country’s pulse is felt” – aims to find out how Germans feel about the rising gap of wages between CEOs and average employees. The disparity between CEO and employee earnings is currently a hot topic in Germany, prompting public scrutiny and debate.
Average Salary in the Federal Republic of Germany
Germany – the most populous member state of the European Union and the second most populous country in Europe – boasts a dynamic economic landscape and a well-established workforce. According to the Federal Statistical Office of Germany, the average gross annual salary in 2020 was reported to be 47,700 euros, equivalent to 3,975 euros per month.
However, it’s essential to note that individual salaries can vary significantly due to factors such as age, seniority, industry, experience, working hours, and geographical location. From 2000 to 2007, wages experienced modest growth, increasing by less than a thousand euros. The real surge in wage growth occurred after 2010. In comparison to other European countries, Germany’s average annual salary aligns with those of major counterparts in Europe’s Western region like the United Kingdom and France. Nevertheless, Luxembourg surpasses them all, boasting an average annual salary exceeding 75,000 euros.
Comparing Germany to Other Countries in Central Europe
The contrast with neighboring Poland is striking, where the average annual salary is just over 32,000 U.S. dollars. This implies that Germans, on average, earn nearly twice as much as their Polish counterparts, highlighting the economic diversity within the European Union.
Salary Range, Minimum Wage, and Starting Salary
Germany implemented its minimum wage in January 2015, extending coverage to all workers aged 18 and above, subject to biennial reviews. As of October 1, 2022, the established minimum wage stands at 12 euros per hour, translating to a monthly income of approximately 2,100 euros for full-time employment. Part-time employees work on average 19,5 hours a week, making their minimum wage 1.053 euros gross a month.
Gender Pay Gap
Similar to other regions globally, Germany faces challenges in narrowing the gender pay gap. Despite numerous initiatives aimed at addressing this issue, studies continue to highlight a disparity, with men earning an average salary of 47,320 euros per year (gross) compared to women earning 40,533 euros per year (gross).
Average Salary for a CEO
Salaries for a CEO position in Germany range from 3,720 EUR (starting salary) to 12,800 EUR (maximum salary). The average Chief Executive Officer (CEO) salary in Germany for the year 2024 is estimated to be €131,547 per year. This figure encompasses various components, with a median base salary of €132,000.
The overall compensation package for CEOs includes bonuses or incentives ranging from €10,000 to €104,000, profit-sharing between €10 and €447,000, resulting in a total pay range of €62,000 to €428,000. CEOs typically have a Bachelor’s degree and a Master’s degree in business administration or a field related to their industry.
Salary Survey Data
44% of the participants in a recent survey said that they were in favor of a national maximum wage. Interestingly, there is a strong difference of opinion between East and West Germany. 58% of East Germans indicate that they are strongly in favor of such a move, but only 41% of West German residents agree to this proposition. Over a quarter of survey respondents indicated that a wage cap would be a bad move, and 29% of those questioned said they were undecided.
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A Stronger Economy?
Arguments from both sides focus on whether a wage cap would be detrimental to the national purse. Business advisors claim that more state intervention into the private sphere could be hugely damaging to Germany’s thriving economy as it could lead Germany being hostile towards investors. They also believe that introducing a wage cap will lead to a loss of top talent, causing businesses to falter and consequently widespread job losses.
In their view, wages should be decided by the market alone. However, supporters of the idea say that “company performance is rarely reflected in employee wage parity.” In their opinion, the success of a company or business depends primarily on the quality of the product or service they are offering, and whether there is a niche in the market for them. They stressed that a company’s growth relies far less on the individual performance of workers, citing as an example the banker-led financial crisis.
This matter continues to polarize the country, eliciting some pretty sensationalist remarks from some corners. Newspaper editor Henning Hoffgaard, famous for heading up the right-wing publication Junge Freiheit, weighed in on a debate by referencing the country’s turbulent history. “44 percent of Germans have learned nothing from socialist terror,” he tweeted.
The Swiss Vote
Die Zeit’s poll was based upon a 2013 referendum in Switzerland, headed up by the Young Socialists and supported by the Greens and the Social Democrats. The 1:12 Initiative proposed limiting the salaries of CEOs to just 12 times that of their lowest-paid employees. The proposal was taken to the polls and was firmly rejected by the Swiss population, who disagreed that a smaller wage gap would lead to better living standards. Just 34.7% of Swiss voters showed their support for the proposal, in contrast to the whopping 65.3% of citizens who turned out to vote against the plans.
Gross and Net Salary in Germany
Gross salary and net income in Germany can be a source of surprise for many expatriates, given the variations in the tax system compared to their home countries. The base salary represents the minimum income an employee can anticipate for their time or services. It constitutes the amount earned prior to the inclusion of benefits, bonuses, or additional compensation. Your gross salary (Bruttogehalt) is the amount specified in your employment contract, representing your monthly or annual income before any deductions.
On the other hand, your net salary (Nettogehalt) is the actual amount deposited into your bank account each month after deducting taxes, social security contributions, and other associated costs. During discussions with future employers about salary, the focus will always be on gross salary. It’s crucial to be aware of the substantial difference between gross and net income when engaging in salary negotiations.
Calculating your Net Salary
In total, income taxes and social security contributions typically account for around 35% of your gross salary. For instance, if your gross monthly salary is 3,000 euros, after deductions, you can anticipate taking home approximately 1,950 euros per month.
FAQs
Here are also some of the most frequently asked questions about how much a chief executive officer makes
Do any countries limit CEO pay?
Yes, some countries may impose limitations or regulations on CEO pay to address income inequality and ensure fair compensation practices.
How much is a chief executive officer paid in Germany?
The salary of a chief executive officer (CEO) in Germany can vary widely depending on factors such as company size, industry, and individual negotiations.
The average CEO salary is reported to be €354,413 as of March 2021, but the range typically falls between €174,796 and €575,460.
Why are CEOs allowed to make so much money?
The salary for a CEO is determined by various factors, including the size and success of the company, the CEO’s experience level, education, industry norms, and negotiation skills. The compensation reflects the value and responsibilities associated with leading a business.
What is a great salary in Germany?
A great salary in Germany can vary based on factors such as job title, industry, and location.
It typically exceeds 70,000 euros per year, and skilled workers achieving this level of income usually have seven years of experience or more.
What is the top salary in the EU?
A top salary in the European Union can vary depending on factors such as job position, experience level, industry, and location. Executives or professionals in high-demand jobs may command top salaries exceeding six figures or more.
Summing Up: Germans Want to Put a Cap on CEO Salaries
The ongoing discourse in Germany regarding CEO’s high salaries and potential wage caps unveils a complex perspective. Public support for a maximum wage, juxtaposed with concerns about economic consequences and talent retention, underscores the intricate landscape.
This discussion is intertwined with considerations of job title, diverse companies, and the significance of base salary and average salary in different sectors, contributing to a multifaceted exploration of fair compensation dynamics within the German job market.