Inflationary bonus for workers in Germany, up to 3000 euros without tax. This measure is better known as inflation compensation bonus (Inflationsausgleichsprämie).

January 23, 2023

Inflationary package

Employers can give their employees up to 3,000 euros tax- and duty-free starting on October 26, 2022. This is provided for by the so-called inflation compensation premium proposed by the federal government and approved by the Bundestag and Bundesrat. Employers offer this payment measure voluntarily. The news was published on the website of the federal government.

Payment of up to 3000 euros

By the end of 2024, employers should be able to make payments of up to 3,000 euros without taxes and social security.

OGLAS

Benefits package

The third relief package, which comes into effect on September 3, 2022, includes a premium for inflation compensation. Point 10 of the resolution states that “the federal government is willing to exempt an amount of up to 3,000 euros from taxes and social security contributions in case of additional payments by companies to their employees.”

The bonus is valid until the end of 2024The bonus is valid until the end of 2024The bonus is valid until the end of 2024The bonus is valid until the end of 2024

The “Law on the temporary reduction of the tax rate on the supply of gas through the natural gas network” serves as the basis for the inflation compensation premium. It entered into force retroactively on October 1, 2022, after it was published in the Federal Law Gazette on October 25, 2022.

Voluntary decision of the employer on the payment of premiums

The employer voluntarily pays the offered benefit known as the inflation compensation premium. The tax exemption of the inflation compensation premium does not stipulate that the premium must be distributed to all employees. The employer voluntarily decides how and to whom to pay the premium. This means that employers can only pay the premium to selected employees.

Some of the main points of the regulation are:

The benefit period lasts from October 26, 2022 to December 31, 2024 and is limited in time. This period allows employers flexibility for payment.
Employers are allowed to make payments of up to EUR 3,000 during this time without paying tax or social security.
This is a tax-free amount that can also be paid in several installments.
Wages already due must be paid on top of the inflation compensation premium. Exemption from tax and duty is available to all employers for these additional payments.
It is sufficient if the employer, when awarding the premium, explicitly states on the payslip that the premium is related to a price increase (Inflationsausgleichsprämie).

Supplement to the regulations

The Ordinance on benefits during unemployment II/social care (Hartz IV or Jobcenter) was also amended so that the premium for inflation compensation for income-related social benefits is not considered income.