inflation compensation premium

The federal government launched the so-called inflation compensation bonus at the end of October 2022. This is a voluntary benefit that enables employers to grant their employees a tax- and duty-free amount of up to €3,000. The Bundestag and Bundesrat have approved this resolution, which is valid until the end of 2024. The extensive period during which payment is possible is intended to provide some relief and flexibility for employers.

The inflation compensation bonus is part of the third relief package from September 3, 2022. “The federal government is prepared to exempt an amount of up to 3,000 euros from taxes and social security contributions for additional payments from companies to their employees,” it says in point 10 of the decision. The basis for this is the “Law on the temporary reduction of the sales tax rate on gas deliveries via the natural gas network”, which was announced on October 25, 2022 and came into force retroactively on October 1.

The most important points of this regulation include:

• The limitation of the benefit period until December 31, 2024,
• The amount, which is limited to a maximum of €3,000,
• The possibility for employers to pay out the tax allowance in several installments
• The obligation on the part of the employer to grant the bonus in addition to the wages still owed and
• The note that a corresponding note on the transfer slip as part of the payroll is sufficient to establish the connection with the price increase when the bonus is granted.

Furthermore, the Unemployment Benefit II/Social Benefit Ordinance was supplemented so that the inflation compensation premium is not counted as income for the corresponding social benefits.

Finally, it should be emphasized that this bonus is a purely voluntary contribution from the employer. No employee has a fixed right to the same. There is no provision for such an addition to the resolution, which would oblige employers to grant the bonus.