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Business Backlash Builds to Germany’s €1,000 Tax-Free Bonus After Bundestag Vote

Business groups warn many firms cannot afford the employer-funded plan.

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Jörg Dittrich, Präsident des Zentralverband des Deutschen Handwerks ZDH
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Statt der vielfach kritisierten Entlastungsprämie der Arbeitgeber an Arbeitnehmer hat der Präsident des Zentralverbands des Deutschen Handwerks, Jörg Dittrich, vorgeschlagen, für drei Monate die Löhne abgabenfrei zu stellen.

Overview

  • - The Bundestag, which approved the measure Friday, opened the way for employers to give each worker a one-off €1,000 payment that is free of income tax and social contributions through June 30, 2027.
  • - The plan still needs Bundesrat sign-off on May 8, so the change is not yet in force.
  • - Handcrafts association chief Jörg Dittrich said many craft firms cannot pay the bonus and put the sector’s potential bill at about €5.6 billion.
  • - As an alternative, Dittrich proposed making the first €1,000 of wages tax- and contribution-free for one month in May, June or July so workers see a net gain without new costs for employers.
  • - Local bosses and big companies voiced split views, with some welcoming a simple way to help staff and others warning of unfair gaps between workers at paying and non-paying firms, tougher hiring for smaller shops, and dilemmas for multinationals whose non-German staff would miss out.