Factsheet for measure
DE-2020-10/2132
–
Updated
– measures in Germany
Tax and contribution exemption for COVID-19-related special payments
Steuer- und Beitragsfreiheit für COVID-19 bedingte Sonderzahlungen
Background information
In many sectors and professions COVID-19 related measures gave rise to extraordinary workload, burdens, and safety and health risks for employees. Trade unions in all sectors negotiated COVID-19 related compensation payments with employers. The German government decided in April 2020 to support these compensation payments by exempting them partly from tax and social security contributions. Economically, these payments function as a demand-oriented stimulus to keep up consumption and to mitigate rising inflation.
Content of measure
In April 2020, the German Finance Minister Olaf Scholz announced that COVID-19 related special payments by employers of up to €1,500 per employee would be exempted from taxes and social security contributions. This measure was valid initially from March 2020 to the end of 2020. Since then, it has been prolonged twice, first until the end of June 2021, and now until 31 March 2022. According to the Financial Ministry, the exemption of COVID-19 related special payments signifies a recognition of the special efforts employees make during the COVID-19 pandemic. Employers are not obliged to make a COVID-19 related special payment to the employees, but the measure sets an incentive for social partners to include COVID-19 related special payments in their collective agreements.
Updates
The following updates to this measure have been made after it came into effect.
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22 June 2022
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The measure is no longer active. It expired on 31 December 2022.
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19 May 2022
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The German federal parliament (Bundestag) decided in May 2022 to prolong the tax exemption for COVID-19 related special payments for employees in the care sector only. For care workers, special payments of up to €3,000 will be exempted until 31 December 2022.
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Use of measure
In most sectors trade unions and employers have included COVID-19 related special payments in their collective bargaining agreements for 2021. The latest analysis of the WSI Collective Bargaining Archive gives an overview (WSI 2021). The level of the payments ranges from €90 in the confectionary industry to €1,300 in the public service of the German states (Länder). The WSI analysis also shows that the COVID-19 related special payments helped mitigating the loss of purchasing power caused by high inflation rates.
Target groups
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Workers
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Businesses
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Citizens
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Applies to all workers
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Applies to all businesses
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Does not apply to citizens
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Actors and funding
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Actors
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Funding
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National government
Trade unions
Employers' organisations
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Companies
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Social partners
Social partners' role in
designing the measure
and form of involvement:
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Trade unions
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Employers' organisations
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Role
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Informed
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Informed
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Form
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Not applicable
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Not applicable
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Social partners' role in the
implementation, monitoring and assessment phase:
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Social partners jointly
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Main level of involvement: Sectoral or branch level
Involvement
The government set a framework by determining that COVID-19 related special payments of up to €1,500 remain free of tax and contributions. Social partners negotiated collective bargaining agreements including COVID-19 related special payments both on sectoral and company level.
Views and reactions
Social partners make use of the measure and agreed on COVID-19 related special payments in several sectors.
Sources
