Bonuses, Supplements, and Allowances to Salaries in Germany

§ Brief Overview of Bonuses and Allowances to Salaries in Germany

In addition to regular pay in Germany, employees at companies can receive various legally stipulated allowances, as well as bonuses or supplements for specific purposes or under certain conditions, paid at the employer's discretion. These additional payments can be defined in collective agreements or employment contracts.

Some of these supplements are taxed like regular salary, while others have specific tax advantages. We will look at the main allowances, supplements, and bonuses that exist in Germany.

In addition to their salary, employees in Germany can receive various allowances, bonuses, and social supplements. These payments can be defined in legislation, collective agreements, or employment contracts. The main types of bonuses in Germany are the Christmas bonus, holiday pay, and performance-related bonuses. Allowances to salary can be given for working under challenging conditions, during weekends, shift work, and other cases.

§ List of Main Allowances and Bonuses in Germany

• Christmas bonus (Weihnachtsgeld);
• Salary payment during vacation (Urlaubsentgelt);
• Holiday pay (Urlaubsgeld);
• Compensation for unused vacation (Urlaubsersatzleistung);
• Allowances for challenging work conditions (Erschwerniszulagen);
• Allowances for additional tasks (Funktionszulagen);
• Allowances for weekend and public holiday work;
• Night work allowances (Nachtarbeit);
• Shift work allowances;
• Overtime allowances (Überstundenzuschlag);
• Travel cost compensation (Fahrtkostenzuschuss);
• One-time or regular social payments (Sozialzulagen);
• Performance-based or personal contribution bonuses;
• Inflation compensation (Inflationsausgleichsprämie).

§ Obligation to Pay Bonuses and Supplements

Only a few salary supplements are legally defined; in most cases, the obligation to pay arises from collective or employment contracts (Tarifvertrag, Betriebsvereinbarung, Arbeitsvertrag), as well as from practices established by the company (betriebliche Übung, Betriebsübung) or the principle of equal treatment (Gleichbehandlungsgrundsatz).

To find out if you are entitled to certain supplements and allowances, you can consult the company's works council (Betriebsrat), review collective agreements, employment contracts, or seek legal advice. Only a specialist familiar with the nuances of the law, the company's operations, and your personal situation can provide comprehensive advice.

§ Allowances for Specific Working Conditions

Employees may receive allowances for challenging working conditions, such as in extreme heat, performing hazardous tasks, etc.

Additionally, an employee may receive a supplement when taking on additional responsibilities, such as instructing a trainee or leading a team.

Allowances might be provided for overtime, shift work, or extra hours. For overtime work, an employee usually receives free time or regular pay.

§ Supplements for Weekend and Public Holiday Work

When working on public holidays and weekends, an employee may receive salary supplements. These supplements, within certain legally established limits, are tax-exempt. The obligation to pay and the amount of the supplement are regulated on a contractual basis.

§ Night Work Pay Supplement

Night work pay supplements are determined by legislation. See the Working Hours Act (Arbeitszeitgesetz, ArbZG). By law, night time is considered to be from 11:00 PM to 6:00 AM, and in some cases from 10:00 PM to 5:00 AM.

For night work, an employee can either receive paid time off or a monetary supplement. Usually, in Germany, the supplement is 25% of the salary.

§ Vacation Pay, Salary During Vacation, Compensation for Unused Vacation

Salary during vacation. According to German law, during an employee's annual entitled vacation, the employer continues to pay the usual salary.

Vacation pay. The law does not specify a vacation bonus or vacation pay. If vacation pay is given, the company may pay the employee a certain amount or a percentage of the salary.

Compensation for unused vacation. Upon termination, an employee has the right to receive money from the company for unused vacation in the current year.

§ Christmas Bonus in Germany

The Christmas bonus is a major bonus in Germany, which a company usually pays to an employee at the end of the year. The law does not specify the Christmas bonus and its amount, so the company is not obliged to pay it to the employee. The obligation to pay the bonus and the amount of the bonus arise from collective agreements or employment contracts (Tarifvertrag, Betriebsvereinbarung, Arbeitsvertrag). Typically, the Christmas bonus is set as a percentage of the employee's salary.

§ One-Time or Regular Social Payments

Companies may provide one-time or regular voluntary payments to employees, for example, for the birth of a child or in connection with a wedding, anniversary, relocation, death of a close relative, and other reasons. Regular payments can be for reimbursement of travel expenses or for employees with children.

§ Compensation Due to Inflation

From 2022 to 2024, the state has given employers the opportunity to pay employees of the company a tax-exempt compensation payment due to inflation of up to 3000 euros.

Bonuses, Supplements, and Allowances to Salaries in Germany