Guide for Business Owners: How to Properly Tax Mini-Jobs
As a business owner, you want to meet your customers’ needs as flexibly as possible. Small and medium-sized businesses, in particular, often have to deal with sudden changes in order volume. Staffing shortages are a common challenge in this context. Especially for large projects or seasonal spikes in workload, business owners need additional staff for a limited period of time. In many cases, it doesn’t make sense to hire new full-time employees. That’s why it can be a good idea to consider hiring a part-time worker. Below, our tax advisors from Düsseldorf and Oberhausen have put together a clear guide for business owners. If you want to register a part-time worker, you should read this article carefully!
Registering a part-time worker: Here’s how!
If you, as a business owner, wish to hire a part-time worker, you are responsible for registering them as an employer. In principle, the registration process is not complicated. However, there are a few formalities to keep in mind:
- Step 1: Before you can begin the registration and contribution process, you need an eight-digit employer identification number. You can apply for this through the Employer Identification Number Service (BNS) at the Employment Agency.
- Step: As an employer, you are required to verify whether the prospective mini-jobber has any other employment relationships. This is important for determining the future employee’s exemption from social security contributions. The easiest way to conduct a social security assessment is by using employee questionnaires. You can find a suitable sample form from the Minijob-Zentrale here.
- Step: Certain details about the mini-jobber and the employment must be submitted to the Mini-Job Center. This serves as the registration for social security. Always ensure that all of the employee’s data is reported correctly. Always ask to see official documents and the employee’s ID card.
- Step: After successful registration, the Minijob-Zentrale requires a monthly contribution statement. This statement shows the total amount of contributions for all minijobbers employed by your company. Various programs make it easier to generate these contribution statements. Useful and free software is available at www.minijob-zentrale.de.
Minor-Income Employment vs. Short-Term Employment
Minijobs can be divided into two different categories. The best-known type is marginal employment. In this case, the employee receives regular pay of no more than €450. For so-called €450 minijobs, the specified salary limit must not be exceeded.
Alternatively, there is short-term employment. With this option, the minijob is limited to a maximum duration of 70 working days or three months (if employed at least five days a week) per calendar year. Therefore, it must not be a regularly recurring employment relationship.
Income tax is mandatory
Hiring a mini-jobber has many advantages due to the low tax burden. Nevertheless, mini-jobs are subject to income tax. Income tax can be levied on an individual or flat-rate basis. As an employer, you can choose the form of income tax withholding.
Individual income tax
For this form of income tax withholding, the employee’s individual income tax characteristics are relevant. These include:
- Income tax bracket
- Number of children
- Any tax exemptions
- Religious status
As an employer, these details are provided to you by the tax authorities. All you need to do is provide the employee’s tax identification number and date of birth.
Under the individual taxation system, income tax is only payable once the basic exemption of €9,168 is exceeded. Accordingly, income tax does not apply to mini-jobbers in tax classes I through IV. However, it is possible that even mini-jobbers may have to pay income tax if, for example, they have additional income or are in a different tax bracket. To avoid misunderstandings, you should therefore always consult a tax advisor beforehand in individual cases.
Flat-Rate Income Tax
Levying income tax on a flat-rate basis can reduce the administrative burden for employers. Additionally, the flat-rate system may be more cost-effective for those who, as mini-jobbers, would otherwise have to pay income tax based on an individual calculation.
There are three different types of flat-rate income tax:
- A uniform flat-rate tax of 2%, including the solidarity surcharge and church tax, for low-wage employment;
- A flat-rate income tax of 20% plus the solidarity surcharge and, if applicable, church tax for low-wage employment;
- A flat-rate income tax of 25% plus the solidarity surcharge and, if applicable, church tax for short-term employment.
In this article, we do not intend to delve deeper into the individual flat-rate amounts. It makes sense to consult a tax advisor on a case-by-case basis. Therefore, seek advice and decide together with an expert which of the options mentioned is best for your company and the employee.
Decision-Making Guide: Income Tax Options
| Individual payroll tax | Flat-rate method |
|---|---|
| For income tax brackets I, II, III, IV |
For income tax brackets V, VI, and/or |
| e.g., schoolchildren and students | Employees with additional taxable income, e.g., another job, rental income, pension benefits |
It is difficult to provide a general recommendation for either of the two methods of income tax withholding. The decision always depends on various personal factors. The table below can give you an initial idea of which income tax withholding method is best suited to your situation. It is always advisable to consult a qualified tax advisor for the final decision. Our team of tax advisors in Düsseldorf and Oberhausen will be happy to assist you with this decision.
Any questions? We’re here to help!
Are you an entrepreneur planning to hire a part-time worker but have no prior experience? We’re happy to answer all your questions and provide detailed advice so that your business can achieve the best possible outcome. Our team looks forward to your visit. Contact us now!
