Inflation Compensation Bonus: How You Can Now Support Your Employees With Up To EURO 3,000 Tax- And Social Security-Free

In view of inflation and the high cost of living, employers can support their employees financially. Under the law passed on the initiative of the German government, up to EURO 3,000 can be paid free of tax and social security contributions as part of the third relief package.

For employees, this means that they can collect the inflation compensation premium gross for net. For employers, the advantage is that no ancillary wage costs are incurred, i.e. in particular no employer contribution to social security is payable.

The benefit period is limited to December 31, 2024. As with the Corona premium, the maximum of EURO 3,000 can be paid in one amount or in several installments.

The inflation compensation premium can also be paid to employees in a second job, to mini-jobbers, to part-time employees and to shareholder-managers.

The prerequisite for the preferential treatment is that the payments are made in addition to the wages owed in any case. In other words, the bonus may not be offset against the entitlement to wages, the entitlement to wages may not be reduced in favor of the bonus, the bonus may not be granted in lieu of a future increase in wages that has already been agreed, and the wages may not be increased accordingly if the bonus is discontinued.

Practical tipps:

• If these additional criteria are not observed, wage tax must be paid and social security contributions must be paid for the inflation compensation premium. If a violation is only noticed after months, this entails a financial risk for the employer, as employers may then no longer be able to claim the employee contribution at all or only partially from the employee, but will have to bear the full social security contributions alone.
• Please observe the principle of equal treatment under employment law when awarding contracts!
• If there is a works council in your company, please note possible co-determination rights!

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