This fall and winter season, employers in Germany have several developments in German employment law to put on their radars, including optional bonus pay due to the spike in energy costs; workplace safety and health measures related to heat, and separately, COVID-19; and annual leave entitlements. Below, we summarize these developments.

Inflation Compensation Bonus

Since the beginning of the year, consumer prices—especially energy costs—have risen sharply. In order to reduce the increased financial burdens, the German legislature provided a possibility for employers to grant tax- and social security –exempt bonus payments to their employees. Until December 31, 2024, employers can, on a voluntary basis, make special net bonus payments of up to EUR 3,000. As a prerequisite for tax and social contribution exemption, however, a bonus must be paid in addition to an employee’s contractual remuneration and be aimed to compensate for inflation-related price increases. This should be documented, for example, on the pay slip. Employers may make the bonus payment as either a one-time payment or in installments. Alternatively, benefits in kind in a corresponding amount can be granted.

Employers granting inflation compensation bonuses to their workforces must observe the principle of equal treatment—i.e., if parts of a workforce are to be excluded from the payment or receive lower bonuses, there must be reasons to justify the exclusion. Otherwise, unjustly disadvantaged employees...

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