Midijob: Increasing the income-related sliding pay-scale to 1,300 Euros from 2019

Anyone working on part-time or doing a midijob these days has to assume that the retirement income will tend to be low in old age. This risk mostly affects individuals who are not employed on a full-time basis over a long period.

However, in order to avert poverty in their old age, the Federal Government has considered revising the income-related sliding pay-scale for the midijobs. In Germany, therefore, if somebody earns more than 450 Euros, more than a mini jobber, the individual automatically falls under the category of a Midijobber. Along with other things, the new income-related sliding pay-scale package will be responsible for improving and stabilizing the statutory pension insurance. But the question is, what does all this mean for a Midijobber?

What is a Midijob?

An individual who frequently earns more than 450 euros falls into the category of a midijobber. A midijobbber belongs to the category of low-income earners. The category in turn belongs to the flexitime working model. Until 1st July 2019, however, the glide zone of a midijob is still between 450.01 Euros and 850 Euros per month.

The midijobs are also insurable even though the amount of insurance premiums that one remits depends on the amount of income he or she earns. If the contributions for the pension insurance are around the corner, which means they are between 11 and 12 per cent, the contribution to the care and unemployed insurance do not necessarily have to be paid. Moreover, the reduced employee contributions are paid up to a certain fixed upper earnings limit. This ensures that reduced pension contributions do not lead to lower pension benefits. However, the payroll tax and income tax (Lohnsteuer and Einkommensteuer) have to be paid.

Midijob from July 2019

In order to provide more relief to a Midijobber, the German government extended the glide zone to cover a salary of up to 1,300 Euros. The result is that a reduced tax burden (Abgabenlast) would be allotted to employees within the new glide zone. So far, it was the case that the full-time employee shares had to be paid if their income exceeded the current legal limit of 850 euros. Even though the pension contributions (Rentenversicherungsbeiträge) will thereafter be lower, the pension benefits will remain fixed.

As from July, however, the gliding zone will have to degenerate to become a transitional area, which, in the essence of Code of Practice, will cover wages from more than minor occupations that regularly do not surpass 1,300 Euros per month.

Part-time Employees (Teilzeit) to Benefit for the New Regulations

Featuring prominently is the fact that all the part-time employees that earn their living from the newly implemented transition area will benefit from the new regulations. This will majorly affect women since almost 80 per cent of all part-time employees in Germany comprise of women.

As such, a midijobber who today earns about 850 euros will still be overburdened with the usual tax burden of about 20 per cent that is common for insured employees. In order for the pension insurance agencies to base the calculation of the actual remuneration on the pension calculation of the transition, the employer is required to specify the value in the remuneration reports.

From July, however, the shares in the same compensation will remain at less than 18 per cent with the same remuneration. The employees who earn more than 1300.01 euros as a monthly salary, however, will be required to meet the full tax burden.

To an extent, a midijobber is dependent on his or her average monthly salary. For the determination, therefore, all the current and future salaries of the entire year must be added together and then divided by twelve at the onset of the employment contract or any permanent change of situation. Once this has been done, the amount must then be at least 450.01 euros.