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Eurofound's EU PolicyWatch collates information on the responses of government and social partners to the COVID-19 crisis, the war in Ukraine, rising inflation, as well as gathering examples of company practices aimed at mitigating the social and economic impacts.

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

Country Germany , applies nationwide
Time period Temporary, 01 March 2020 – 31 December 2022
Context COVID-19
Type Legislations or other statutory regulations
Category Promoting the economic, labour market and social recovery
– Support for spending, stimulus packages
Author Birgit Kraemer (Hans Boeckler Foundation) and Eurofound
Measure added 10 January 2022 (updated 31 May 2022)

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.

19 May 2022

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 €3000 will be exempted until 31 December 2022.

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

Workers Businesses Citizens
Applies to all workers Applies to all businesses Does not apply to citizens

Actors and funding

Actors Funding
National government
Trade unions
Employers' organisations
Companies

Social partners

Social partners' role in designing the measure and form of involvement:

Trade unions Employers' organisations
Role Informed Informed
Form Not applicable Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

  • Social partners jointly
  • 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

Citation

Eurofound (2022), Tax and contribution exemption for COVID-19-related special payments, measure DE-2020-10/2132 (measures in Germany), EU PolicyWatch, Dublin, https://static.eurofound.europa.eu/covid19db/cases/DE-2020-10_2132.html

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Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process.