Net pay optimisation, also known as salary optimisation, refers to the design of the remuneration structure using statutory tax or social security concessions. The aim is to structure remuneration components as favourably as possible for the net salary within the respective legal requirements.
What is Nettolohn optimisation?
Remuneration can consist of different remuneration components. In addition to the regular Gross wage for example, further employer benefits can be part of the remuneration.
Tax and social security law provides special regulations for certain benefits. Nettolohnoptimisation describes the design of a remuneration structure taking such legal concessions into account.
The term does not refer to a separate billing process. The individual remuneration components continue to be [processed] within the regular Payroll processed.
Tax and social security treatment
Whether a remuneration component can be tax-free, taxable or subject to flat-rate taxation depends on the respective applicable tax law requirements.
Whether the benefit falls under Remuneration subject to social security contributions must be assessed separately. Tax relief and exemption from social security contributions are therefore not automatically the same thing.
in addition to the wages already due
For various tax-privileged employer benefits, the law requires that the benefit is provided in addition to the wage already owed.
According to Section 8(4) of the Income Tax Act (EStG), such additionality does not exist, inter alia, if the existing entitlement to wages is reduced in favour of the additional benefit. Whether salary conversion is permissible therefore depends on the respective statutory regulation of the specific remuneration component.
Net pay optimisation and Net pay – what is the difference?
The Net wage or rather, the net remuneration is the mathematical result after taking into account the relevant statutory deductions.
By contrast, Nettolohn optimisation refers to the preliminary design of the remuneration structure. It therefore does not describe a specific net amount, but rather the legal and remuneration-related classification of various salary components.
Relationship with Lohnarten
Different remuneration components are represented in a payroll system via corresponding Types of remuneration Pictured.
However, the technical Wage type does not itself determine the tax or social security legal position. Rather, it must reflect the professional and legally correct treatment of the respective remuneration component.
