The inflation compensation premium is coming to an end - how companies can still act

11/25/2024
Reading time 3 Minutes

At the end of 2024, the opportunity for companies to grant their employees a tax and duty-free inflation compensation bonus of up to 3,000 euros will expire. Companies that have not yet taken advantage of this opportunity should now consider whether a bonus payment makes sense in order to offer their employees financial support.

To counteract the effects of the energy and inflation crisis, the German government introduced the inflation compensation bonus at the end of 2022. This tax and social security contribution-free payment of up to €3,000 was intended to offer companies the opportunity to support their employees financially without incurring taxes or social security contributions on the amount. The bonus is not sector-specific and can also be used in full for mini-jobbers and trainees as well as employees on part-time or short-time work.

Last payment in December 2024

December 2024 is the last month for companies to pay out the inflation adjustment bonus if they have previously waived payment of the bonus in full or in part.

Review of premium payments already made

It is also important to check payments that have already been made. This is the only way to ensure that the upper limit of EUR 3,000 is not exceeded in total and that all payments comply with tax and legal requirements. Employers must ensure that the criterion of additionality to the salary already owed is met when granting the inflation compensation bonus in order to avoid tax and social security disadvantages.

The company must also take the principle of equal treatment into account when paying the inflation bonus. An employment lawyer can provide support in the event of uncertainties.

Communication with employees - creating clarity

It is also advisable for companies to inform their employees in good time about the end of the inflation adjustment bonus and explain possible changes to the salary structure. Transparent communication can help to avoid misunderstandings. It also gives employees the opportunity to prepare for any financial changes. This is particularly important if the bonus was paid as a regular payment and will be discontinued from January 2025.

Conclusion

The inflation adjustment bonus offered companies a valuable opportunity to support their employees in difficult times. With the expiry of this regulation, many companies are faced with the challenge of finding alternative models to provide financial support for their employees. Timely planning and careful consideration of possible alternatives are crucial in order to offer employees financial security and motivation in the future. If you need advice on this topic or on alternatives in the area of tax-free benefits in kind, you are welcome to contact our experts.