Factsheet for measure
DE-2022-44/3039
– measures in Germany
Inflation compensation premium
Inflationsausgleichsprämie
Background information
The war in Ukraine and the resulting energy shortages led to enormous price increases for heating, hot water and electricity. Higher prices affect workers and companies alike. That is why the Federal Chancellor (Bundeskanzler) has brought the social partners to the table to find joint solutions in a concerted effort (Konzertierte Aktion). One of the results is the Inflation compensation premium that is also part of the third relief package of the federal government, which has a volume of €65 billion. The premium was passed on 16 December 2022 with the Annual Tax Act.
Content of measure
The benefit period is limited from 26 October 2022 to 31 December 2024. During this period, additional voluntary payments by the employers to their workers are tax- and social security-free up to an amount of €3,000. This tax allowance can also be split up on several partial amounts as long as the inflation compensation premium is paid in addition to the regular wages. Every employer can use the tax and contribution exemption for such additional payments. It is sufficient if the employer makes it clear when granting the premium that it is related to the price increase.
The inflation compensation premium is a voluntary benefit paid by the employer. The legal regulation does not foresee that the bonus has to be paid to all employees. However, the tax and social security deductions are meant as an incentive for employers to support their employees financially.
Use of measure
The data on the inflation compensation premium is still thin.
According to data from an online survey commissioned by Swiss Life Select and conducted by YouGov Deutschland GmbH on the topic of inflation, 27% of people in Germany have received an inflation compensation premium.
A total of 3,031 people took part in the survey between 12 January 2023 and 17 January 2023. The results were weighted to make them representative of the German population aged 18 and over.
According to the Leibniz Institute for Economic Research (ifo Institute) in December 2022 from their HR manager survey, 42% of the companies surveyed wanted to pay the inflation compensation premium, 44% were still undecided and 14% did not want to pay the premium.
In the HR study of the ifo Institute, around 1,000 HR managers in German HR departments are surveyed on current topics relevant to HR policy. The panel includes companies from manufacturing, wholesale and retail trade as well as the service sector.
On 7 September 2023, the WSI published its first collective bargaining report for 2023. As the report shows, employers and unions in most sectors agreed during their wage bargaining round on inflation premiums. These one-off payments range between €1,000 and €3,000 and are paid in several installments over a period of two years or as additional monthly payments. Agreements were for example reached in temporary agency work, in construction, for municipal employees in the public sector or for employees at railways company Deutsche Bahn or postal provider Deutsche Post.
Target groups
Actors and funding
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Actors
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Funding
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National government
Social partners jointly
Trade unions
Employers' organisations
Company / Companies
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Employer
National funds
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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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Consulted
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Consulted
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Form
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Direct consultation outside a formal body
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Direct consultation outside a formal body
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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: Peak or cross-sectoral level
Involvement
Social partners' comments were part of a public hearing on the new legislation held by the Finance Committee on 26 September 2022.
In addition, the inflation compensation premium was decided within the framework of the Concerted Action (Konzertierte Aktion), which is characterised by the fact that the employee's and employer's sides work together with the government to develop economic policy measures that make as much economic sense as possible.
Views and reactions
The worker's and employer's sides welcome the inflation compensation premium as a useful measure to relieve the burden on companies and employees.
The services trade union Verdi criticised that the premium would mostly be used by large companies and thus low earners would not receive the premium. The Federal Association of the German Bakery Trade (Zentralverband des deutschen Bäckerhandwerks) criticised that most enterprises would not be able to afford the special payment.
Sources
