Germans Want To Cap On Ceo Salaries

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.

What is the average salary in Germany?

According to the Federal Statistical Office, the average gross annual salary in 2020 was 47,700 euros - that's about 3,975 euros per month before taxes eat their share. Of course, what you actually earn depends on your age, industry, experience, working hours, and where in Germany you live.

From 2000 to 2007, wages grew by less than a thousand euros total. The real surge happened after 2010. Compared to other Western European countries, Germany's average salary aligns with the United Kingdom and France. Luxembourg surpasses them all with an average exceeding 75,000 euros.

The contrast with neighbouring Poland is striking: average annual salary just over 32,000 U.S. dollars. Germans earn nearly twice as much as their Polish counterparts.

What is the minimum wage in Germany?

Germany implemented its minimum wage in January 2015 for all workers aged 18 and above. As of October 2022, it stands at 12 euros per hour - roughly 2,100 euros per month for full-time employment. Part-time employees average 19.5 hours a week, making their minimum wage about 1,053 euros gross per month.

Gender pay gap

Men earn an average of 47,320 euros per year (gross). Women: 40,533 euros. Despite numerous initiatives, the gap persists.

What do German CEOs earn?

The average CEO salary in Germany for 2024 is estimated at 131,547 euros per year. The overall compensation package includes bonuses from 10,000 to 104,000 euros and profit-sharing up to 447,000 euros, resulting in a total pay range of 62,000 to 428,000 euros.

Do Germans want to cap CEO pay?

44% of participants in the Die Zeit survey said they were in favour of a national maximum wage. The East-West split is telling: 58% of East Germans are strongly in favour, but only 41% of West Germans agree. Over a quarter said a wage cap would be a bad move. 29% were undecided.

Arguments for and against

Business advisors claim more state intervention could damage Germany's economy and make the country hostile toward investors. They also believe a wage cap would drive away top talent, causing businesses to falter and widespread job losses. In their view, wages should be decided by the market alone.

Supporters say "company performance is rarely reflected in employee wage parity." In their opinion, a company's success depends primarily on the quality of its product or service and whether there's a niche for it. They stressed that growth relies far less on individual worker performance, citing the banker-led financial crisis as an example.

This matter continues to polarise the country. Newspaper editor Henning Hoffgaard, who heads the right-wing publication Junge Freiheit, weighed in by referencing the country's turbulent history: "44 percent of Germans have learned nothing from socialist terror," he tweeted.

What happened when Switzerland tried this?

Die Zeit's poll was based on a 2013 referendum in Switzerland, headed up by the Young Socialists and supported by the Greens and Social Democrats. The 1:12 Initiative proposed limiting CEO salaries to 12 times that of their lowest-paid employees.

It was firmly rejected. Just 34.7% of Swiss voters supported the proposal. 65.3% voted against. The Swiss disagreed that a smaller wage gap would lead to better living standards.

How does gross vs net salary work in Germany?

Your gross salary (Bruttogehalt) is what's in your employment contract - before deductions. Your net salary (Nettogehalt) is what hits your bank account after taxes, social security, and other costs.

Income taxes and social security contributions typically eat about 35% of your gross. So if your gross monthly salary is 3,000 euros, expect to take home around 1,950 euros. During salary negotiations, the number will always be gross. Keep that 35% gap in mind.

If you're curious about working in Germany beyond the salary numbers, I wrote a guide on finding work here.