Germany is facing a major change that could fundamentally transform the financial everyday life of millions of employees. The new government plans to introduce tax relief for overtime bonuses, which means that workers could keep a larger share of their hard-earned money.

According to the coalition agreement between CDU/CSU and SPD, it is clearly defined: 'To ensure that overtime work pays off, bonuses for overtime work that exceeds full working hours agreed in collective agreements or on the basis of collective agreements will be exempt from tax.' This precise wording emphasizes that the tax exemption applies exclusively to bonuses, while the basic pay for overtime work remains taxable, writes Fenix Magazin.

Also, the exemption applies only to overtime work above the full working hours defined by the collective agreement. As explained by the United Association for Tax Assistance (VLH): 'The emphasis is on ‘supplements’, because overtime work itself will remain taxable.'

How much overtime does Germany work?

Statistics reveal fascinating figures. In 2024, the average German worker put in 28.2 hours of overtime, according to data from the Institute for Employment Research (IAB). When this is multiplied by a total of 42 million employees, we arrive at the impressive figure of over one billion additional working hours annually. However, only 13.1 hours of that overtime was paid, while 15.1 hours remained unpaid.

According to the law, unpaid overtime is permitted only if this is explicitly stated in the employment contract or collective agreement. Otherwise, employers are obliged to pay for overtime or compensate it with days off.

How much more could workers earn?

VLH calculated a concrete example: a worker with a gross salary of 3,000 euros and a 40-hour workweek earns about 17.24 euros per hour. If they work an additional 15 hours of overtime, this brings them 258.60 euros more. The usual overtime premium amounts to 30 percent, which means another 77.58 euros.

The total gross salary then amounts to 3,336.18 euros. Under the current rules, the entire amount is subject to taxation, so the worker is left with 2,240.01 euros net. But if overtime premiums were exempt from tax, only the base amount of 3,258.60 euros would be taxed, while the premium of 77.58 euros would remain tax-free. Thus, the net salary would rise to 2,274.15 euros, which means 34.14 euros more in the pocket. Supplements for Sunday, holiday, and night work are already tax-free, but within legal limits.

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