Tax exemption for premiums for work on Sundays, holidays, or at night

Employees generally don’t like them. Almost no one enjoys working on Sundays and holidays voluntarily. In many cases, employers therefore pay their employees a Sunday or holiday premium in addition to their regular wages. Tax regulations must be observed here, as this is the only way to ensure the premium remains tax-free. Your tax advisors in Düsseldorf and Oberhausen have summarized what you need to keep in mind.

Wage supplements remain tax-free to a limited extent if they are paid in addition to the base wage for work actually performed on Sundays or public holidays. A public holiday bonus for work on statutory holidays remains tax-free only if the bonus does not exceed 125 percent of the base wage. The rules for the Sunday premium are somewhat stricter. Here, it remains tax-free only if it does not exceed 50 percent of the base wage.

In addition, there is generally another condition. The tax exemption is only permitted if an additional wage payment is made. This means that the premium may not be “deducted” from the wages owed under labor law.

Tax-exemption does not always mean exemption from social security contributions

Even if wage supplements are tax-exempt, this does not always mean they are also exempt from social security contributions. It is important to note that there is a significant difference between tax law and social security law. For contribution exemption, the base wage may be set at a maximum of 25 euros per hour. Under tax law, this amount is higher; it may be up to a maximum of 50 euros per hour.

Holiday pay: 125 percent

Which days are considered statutory holidays is generally determined by the applicable state laws at the workplace’s location. Work on a public holiday is, of course, defined as work performed on the day in question from 12:00 a.m. to 11:59 p.m. Additionally, work performed on the following day from 12:00 a.m. to 3:59 a.m. is also considered work on a public holiday if the shift began on the public holiday.

The tax exemption for the holiday premium applies only to work actually performed, and the premium may not exceed 125 percent of the base wage. The base wage may be set at a maximum of 50 euros.

Higher holiday premium on certain holidays

Work on May 1 is subject to an exception. This is classified as “special holiday work.” In this case, a tax-exempt premium of 150 percent may be paid. This rule also applies to work starting at 2 p.m. on Christmas Eve, as well as for the entire day on Christmas Day. On New Year’s Eve, the premiums paid after 2:00 p.m. are tax-exempt only if they do not exceed 125 percent.

Sunday and holiday premiums are mutually exclusive

It is important to note that the 125 percent holiday premium and the 50 percent Sunday premium cannot be claimed together for tax purposes. On Sundays that are also public holidays, only the public holiday premium is tax-exempt. This means that the premium of up to 125 percent is tax-free. It is not permissible to claim a total of 175 percent in tax-free premiums.

Night work premiums payable in addition to the holiday premium

The rules are different for night work on Sundays and public holidays. If night work is also performed on Sundays and public holidays, the night work premium of up to 25 percent can be paid tax-free in addition to the tax-exempt public holiday premium. Work between 8 p.m. and 6 a.m. is classified as night work. In practice, this means that on “holiday nights,” a tax-free premium of up to 150 percent can be paid.

Base wage as an indicator of tax-exemption

The amount of the bonus is freely negotiable. This is an agreement between employers and employees. However, for the premium to remain tax-free, it must not exceed the aforementioned maximum rates. A maximum of 50 euros per hour may be used as the base wage. The maximum percentage rates for any premiums are then based on this base wage.

Tax Advisors in Düsseldorf and Oberhausen

Trimborn.Partner are your tax advisors in Düsseldorf and Oberhausen. We are well-informed and always up to date on tax and legal matters. Feel free to schedule an appointment with our experts and benefit from our team’s expertise.