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Compensation, taxation, retirement benefits
Increased personal finances in 2022
Many individuals are projected to experience a rise in disposable income by 2022
Increased minimum pay, pension adjustments, and tax reductions: 2022 promises enhanced financial circumstances for some citizens. Eight key modifications boosting personal income are detailed below.
The new national administration’s policies are still in their early stages. However, several upcoming financial shifts impacting citizens in 2022 are already confirmed. Eight such alterations, either legally mandated or otherwise, are highlighted here that will positively impact disposable income. Additional consumer-focused updates are available elsewhere.
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2. Elevated Sector-Specific Minimum Pay
The national minimum wage isn’t the only amount increasing. Collective bargaining agreements across various industries will also mandate higher pay. Starting January 1st, minimum wages will climb in the electrical trades, meat processing, and education sectors. Compensation boosts are also in store for building maintenance personnel and cash handlers. Elderly care workers will see a raise in April 2022, followed by temporary agency staff, scaffolding specialists, roofers and stonemasons later in the year. Several industry minimum wages currently fall below €12, meaning workers in these fields will benefit from the overall wage hike.
3. Enhanced Compensation for Trainees
Apprentices will also enjoy improved minimum compensation. The 2022 apprenticeship year will see a minimum wage increase from €550 to €585 per month in the first year. Subsequent years provide increments of at least 18 percent (second year), 35 percent (third year), and 40 percent (fourth year) above the initial rate. Certain industries, via their collective bargaining agreements, offer even more lucrative trainee wages.
4. Pension Enhancements
Germany’s 21 million pensioners are anticipating a financial uplift by July 1, 2022. The increase, however, will be less substantial than initially projected due to governmental adjustments to a catch-up mechanism. Labor Minister Heil anticipates a 4.4 percent raise in West Germany and a 5.1 percent increase for those in the East. This represents a reduction of 0.8 percentage points from prior estimates.
5. Minor Increase in Unemployment Benefits
January 2022 will bring modest adjustments to unemployment benefit II, social welfare, and basic old-age security payments. Single adults will receive €449 monthly—a €3 increase. Child and youth benefits will see increases ranging from €2 to €3. Significant attention surrounds the upcoming “citizen’s money” program intended to replace Hartz IV. While the governing coalition’s agreement doesn’t mention broader benefit expansion, it does propose enhanced supplementary income opportunities. Furthermore, asset and housing size assessments will be suspended for two years.
6. Enhanced Net Income for Taxpayers
Tax adjustments favor all income earners. Tax brackets see an upward revision of 1.17 percent. This aims to offset the effects of inflation, even though current inflation figures are considerably higher. Furthermore, the tax-free allowance is increased. For single individuals, this rises from 9,696 to 9,984 euros; married couples enjoy double that exemption.
7. Tax-Free COVID-19 Bonuses
COVID-19 bonuses issued by employers to compensate for added burdens remain tax-exempt until the end of March 2022. This exemption applies to sums up to 1500 euros. Individuals who already received such bonuses in 2020 must include them when calculating the total.
8. Subsidies for Workplace Retirement Plans
Employees participating in deferred compensation workplace retirement plans are guaranteed employer subsidies starting in 2022. The mandate for a 15 percent employer contribution extends to agreements established before 2019.
