Net salary: The Mirz government wants to impose new taxes - affecting millions of workers
The government of Friedrich Merz is preparing to implement a major tax change that could affect millions of workers across Germany. The proposal aims to make overtime more attractive by offering tax-exempt bonuses, allowing employees to receive a slightly higher net salary.
According to the new plan, additional wages that exceed the agreed full working hours will be exempt from taxes. According to the coalition agreement: "To ensure that overtime is rewarding, additional wages that exceed the agreed or negotiated full working hours will be exempt from taxes." This means that any bonus an employee receives for extra hours after official working hours can be paid without tax deductions.
However, the exemption will not apply to all overtime hours. The exemption will only cover the additional part of the wage, under specific conditions. The decision will apply to work that exceeds 34 hours per week in jobs with collective agreements, or 40 hours per week in jobs not subject to agreements. Regular overtime will remain taxable, and the decision will not cover specific times such as evenings, weekends, or public holidays.
Nevertheless, the impact of this decision may be clearly reflected in the salaries of workers. According to data from the Institute for Employment Research (IAB), the average German employee works 28.2 extra hours annually (by 2024), and more than half of these hours are unpaid. Calculations indicate that an employee earning a gross salary of 3000 euros and working 28.2 extra hours monthly could receive an increase of about 64 euros in their net salary under the new rules.
However, critics of the plan believe that the reform benefits only full-time employees, while part-time employees – who made up about 30% of the German workforce in 2024 – are excluded from benefiting. This is considered particularly unfair to women, as one in two women works part-time, compared to only 12% of men. As a result, many see this step as potentially raising some people's incomes, but it may also increase the existing gap and inequality in the labor market.