Germany is encouraging employers to give their staff a €1,000 tax-free bonus. Now the government plans to extend the time that firms are allowed to pay it out by six months.
The German government is preparing a package of measures aimed at easing the burden on residents amid rising fuel and living costs.
As well as tax cuts on fuel, the coalition wants to give employers across Germany the option of paying out up to €1,000 to their staff members. The payment would be free of tax and social security contributions.
READ ALSO: Germany announces tax cuts and employee bonuses for fuel relief
Initial plans stated that the bonus had to be paid out by the end of this year.
However, after an outcry from some firms, the government is set to extend the period. Now employers are likely to be allowed to issue the payment up to June 30th 2027.
That’s according to a motion for a resolution submitted by the coalition parties: the conservative Christian Democrats (CDU), its Bavarian sister party, the CSU, and the centre-left Social Democrats (SPD).
The Bundestag is set to vote on the resolution this Wednesday.
According to media reports, Finance Minister Lars Klingbeil (SPD) expects a shortfall in tax revenue of €2.8 billion.
That gap could be significantly higher if more companies make use of the option to pay out bonuses.
The government previously stated that the shortfall would be offset by a tobacco tax hike this year.
Bonus is controversial
The relief measures are being put forward due to price hikes – especially in the energy sector – in the wake of the war in the Middle East.
However, the employee bonus is already proving controversial.
Critics state that the people who most need relief – such as those in low-paid jobs – will not receive it.
That’s because larger, more profitable employers – or those with collective bargaining agreements – are most likely to pay the bonus to their staff.
Meanwhile, self-employed and freelance workers will completely miss out.
READ ALSO: Q&A – who will get Germany’s tax-free bonus?
Many employers are also not happy about the plan, with some claiming the responsibility to provide relief is being shifted onto them from the government.
In a recent survey by the German Retail Association (HDE), 83 percent of respondents said they viewed the payout as a matter for the state, not as a benefit to be provided by employers.
HDE President Alexander von Preen warned of financial burdens on businesses.
It is unacceptable for the state to promise relief to residents and then ask companies to pay for it out of their budgets on top of normal wages, he said.
“That is simply dishonest. Whoever creates the cost must also pay for it,” he added.
With reporting from DPA
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