Tax-free inflation adjustment premium of up to 3,000 euros

Employers can now pay their employees a tax- and social security-free inflation adjustment bonus of up to 3,000 euros.

With the third relief package, the governing coalition has also announced the possibility of a one-off payment free of tax and social security contributions instead of a permanent wage increase. This is intended to help prevent a wage-price spiral that would lead to permanently high inflation. This has now been enshrined in law as part of the reduction in VAT on gas and geothermal energy.

Until December 31, 2024, employers can grant tax- and social security-free allowances and benefits in kind totaling up to EUR 3,000, regardless of whether the benefit is provided under an individual or collective agreement or as part of a company agreement. The only requirement is that the benefit is granted in addition to the salary already owed to mitigate the increase in consumer prices.

No special requirements are placed on the connection between the bonus and price increases. It is sufficient if the employer makes it clear in any form when paying the inflation compensation bonus, e.g. by making a corresponding note on the remittance slip, that it is linked to the price increase. As with the tax-free coronavirus bonus, the maximum amount of EUR 3,000 for all benefits can only be claimed once in total for all years up to the end of 2024.