Inflation compensation bonus vs. Christmas bonus: Which special payment is tax-free and more attractive for employees?

Inflation compensation bonus vs. Christmas bonus: Which special payment is tax-free and more attractive for employees?

According to a report by regionalheute.de,
At the end of the year, many employees are happy to receive additional money, be it for insurance premiums for the coming year or for Christmas presents. One way to receive additional money is through special payments from the employer, such as the Christmas bonus or the inflation compensation bonus. According to a report by the nationwide Lohi – Lohnsteuerhilfe Bayern e. V. there are big differences between these two payments. The inflation compensation bonus, compared to the Christmas bonus, is tax-free and is paid out in full to the employees. Even for mini-jobbers, it is not counted towards the annual salary. On average, the gross Christmas bonus is around 2,809 euros, although only a good half of employees in Germany receive this payment.

The inflation compensation bonus offers employers the advantage that they do not take any risk, as it only has to be paid in addition to regular wages. In addition, employees receive it both gross and net, as it is completely exempt from taxes and social security contributions. Employers also save their share of social security contributions.

In contrast, the Christmas bonus is fully subject to wage tax, which means that employees are affected by a high tax burden. Mini-jobbers can also receive Christmas bonuses, but this is often offset against their annual salary and can have undesirable social security consequences. The inflation compensation bonus, on the other hand, has no impact on the employment relationship of mini-jobbers from a social security perspective.

Based on this information, it can be concluded that the inflation compensation bonus is more tax-advantageous compared to the Christmas bonus and is attractive for both employers and employees. These differences could lead to more companies tending to pay the inflation compensation bonus instead of the Christmas bonus.