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Christmas bonus in Germany: What employees need to know

Annually, numerous employees in Germany eagerly anticipate their Christmas bonus (Weihnachtsgeld). In 2023, the projection for this special payment is an average of around 2,809 euros gross, indicating a modest increase of approximately 2.3 percent compared to 2022. However, it falls below the recent inflation rate of 3.8 percent.

With soaring inflation, many employers are grappling with economic constraints. This raises questions about whether employees can still anticipate their remuneration. Here are the key facts at a glance.
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Who is entitled to Christmas bonus?

According to data from the Federal Statistical Office, a substantial 85.8 percent of all collective bargaining employees are set to receive Christmas bonuses in 2023. The distribution of Christmas bonuses among collective bargaining employees is notably influenced by the specific industry. Industries such as the ‘extraction of crude oil and natural gas‘ and ‘coking and mineral oil processing‘ stand out for offering an above-average standard Christmas bonus. In 2023, the special payment in these sectors amounts to 5,733 euros and 5,586 euros gross, respectively.

For collective bargaining employees in the ‘manufacture of other goods‘ sector, the expected average Christmas bonus is 2,807 euros, while those in the ‘manufacture of food and animal feed‘ sector can anticipate 2,801 euros gross. Notably, in these sectors, 100 percent or 82.4 percent of all collective bargaining employees are recipients of a Christmas bonus.
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In essence, the Christmas bonus is not obligatory. Employees possess a legal entitlement only if the Christmas bonus is explicitly outlined in the employment contract, collective agreement, or a works agreement. This holds true even in economically challenging times, as seen during the recent Corona crisis. In the absence of such agreements, employees lack a legal right to special remuneration. Nonetheless, voluntary payments by the employer are permissible at any time.

Christmas bonus is subject to income tax
Christmas bonus is subject to income tax obligations

When will voluntary payment become mandatory for employers?

The voluntary Christmas bonus payment transforms into what is known as an ‘operational practice‘ if the payment has been consistently made without reservation for a minimum of three consecutive years. In such instances, the Christmas bonus becomes an established and permanent component, obligating the company to continue providing special bonuses in the future — even in the absence of explicit contractual stipulations. Once this status is reached, cessation of payment becomes impracticable.

The principle of equal treatment also follows a similar premise: The special salary only becomes obligatory if a company discriminates by excluding a specific group of individuals from receiving it while granting it to others. Such a practice would constitute a violation of labor law and be deemed discriminatory on the part of the employer.
What can result in a claim?

  • Employment contract
  • Collective agreement
  • Company agreement
  • Voluntary payment by the employer
  • Company exercise
  • From the principle of equal treatment

Christmas bonus amount

The amount of the payment is contingent on the specific Christmas bonus agreement in place. As a result, the sum can vary significantly across companies and collective bargaining agreements. Typically, employees receive 60 to 80 percent of their monthly salary as part of the Christmas bonus.

When to expect Christmas bonus payment?

When it comes to the disbursement of Christmas bonuses, a common practice is for eligible employees to receive this additional payment conveniently integrated into their November salary. This thoughtful timing not only aligns with the festive season but also serves to offer a timely financial uplift to individuals as they gear up for holiday celebrations.

Is Christmas bonus taxed?

Christmas bonuses, contrary to common belief, do not enjoy tax-free status. Similar to various special payments, the Christmas bonus is subject to income tax obligations. It is specifically classified under the umbrella term of “other remuneration” when it comes to taxation. This means that, just like regular income, the Christmas bonus is liable to be taxed, and the applicable rates depend on local tax regulations and individual financial circumstances.

Christmas bonus is usually intergrated in the November salary
Christmas bonus is included in November salary

Is there an obligation to refund the Christmas bonus after termination?

Upon terminating your employment, the question arises: is the entitlement to the Christmas bonus still valid? Repayment clauses, frequently found in collective agreements, may stipulate conditions, especially in cases of terminations within the initial quarter after the bonus is issued. These clauses specify the timeframe for the repayment of the Christmas bonus.

However, such clauses are generally not applicable to standard employment contracts. Unless the purpose behind the bonus payment is explicitly stated – in which case a refund may be triggered. Company loyalty is an example of a purpose that might necessitate repayment. It is crucial to carefully review the terms of the employment agreement to ascertain the conditions surrounding the Christmas bonus in the event of termination. Seeking clarification from the employer or legal professionals can provide insight and ensure a clear understanding of the applicable terms.