Germany's New Welfare System Offers Tax-Free Bonuses for Low-Income Workers
Employers will be allowed to pay a planned tax-free bonus of up to €1,000 to recipients of the new basic welfare benefit—provided they earn income from paid work—according to a draft law from the coalition factions of the CDU/CSU and SPD. The legislation, set to be approved by the Bundestag, was reported by Die Welt (Wednesday edition). The new basic welfare system is scheduled to replace the current Bürgergeld (citizen's allowance) starting in July, officially falling under benefits regulated by Social Code Book II (SGB II).
The draft specifies that "payments made by employers—beyond the regular wages owed—to employees as a relief bonus of up to €1,000" will not be counted as income for recipients of SGB II benefits. This means those receiving basic welfare can keep the full bonus on top of their state benefits and wages without deductions. Elsewhere in the text, the law clarifies: "Employees shall receive these payments in full, even if they are in receipt of SGB II benefits."
Experts within the CDU/CSU defend the provision as justified. "The coronavirus aid and the inflation compensation bonus followed the same principle," said Fritz Güntzler (CDU), the coalition's financial policy spokesperson in the Bundestag. He dismissed suggestions that the move was unexpected, arguing that if employers pay employees a one-time extra sum—such as €100—the state cannot simply claw it back elsewhere.
The SPD-led Finance Ministry also pointed to the precedent set by the inflation compensation bonus, a tax- and social-security-exempt payment of up to €3,000 that businesses could disburse between 2022 and 2024. At the time, the bonus was likewise not treated as income for those receiving supplementary welfare.
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