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Tax-free overtime: New laws require employers to rethink!
Neustadt an der Weinstraße provides information about the planned tax-free overtime bonuses from 2025 and their effects.
Tax-free overtime: New laws require employers to rethink!
A new era for overtime pay is upon us. The federal government has stipulated in the coalition agreement that overtime bonuses should be tax-free in the future. However, this only applies to bonuses that go beyond the collectively agreed working hours, while the overtime itself remains taxable. If this legal framework is successfully implemented, employees can keep significantly more of their gross income. According to the Braunschweiger Zeitung, employees worked an average of 28.2 hours of overtime last year. Of these, 13.1 hours were paid overtime and 15.1 were unpaid overtime. It seems as if more attention is now being paid to the issue of overtime.
What does that mean specifically? Employers face the challenge of ensuring that only overtime that should remain tax-free is documented correctly. It will be essential to clearly separate both voluntary and regular overtime. Another aspect is the existing working time accounts, which could potentially become more complicated as a result of the new regulation. Problems therefore await: Employees could possibly demand immediate payment of tax-free overtime, which could lead to discrepancies. anwalt.de also warns.
The planned changes
In addition to advantages, the desired regulation in the future also brings with it numerous challenges. Employers must prepare to thoroughly overhaul their internal processes and create new overtime categories. Careful handling of working time accounts is necessary in order to avoid legal disputes. The Institute for Labor Market and Vocational Research (IAB) has already pointed out the large number of overtime hours that employees generate, which puts employers under pressure in their actions.
An example illustrates how the tax exemption of overtime pay could influence employees' net wages. An employee with a gross salary of 3,000 euros and 15 hours of overtime could only pay tax on the basic salary with a surcharge of 30 percent, which would lead to a higher net amount. This could bring significant financial benefits for employees.
Pay attention to tax regulations
The tax treatment of overtime has so far been characterized by many nuances. Overtime is considered taxable income and must be treated under regular tax rules. Employers are obliged to pay overtime if this is contractually agreed. According to the advice from the Herfurtner law firm, the tax treatment of overtime will be a key concern for human resources departments in the future. Part-time workers and low-income earners need to pay attention to how their overtime affects their tax burden.
The new regulation could provide an incentive for employers to redesign overtime regulations and inform employees more transparently. Clear communication could help reduce uncertainty and avoid legal complications. However, there are still many questions that need to be clarified as soon as a precise draft law comes to the table.