Expected changes to overtime in Germany: Millions of employees may receive a higher net salary
The German federal government, led by Friedrich Merz, is preparing to enact new tax regulations that could affect millions of employees. This plan aims to introduce tax-exempt bonuses for overtime work, in an effort to alleviate the financial burden on workers and slightly increase their net salaries.
According to the coalition agreement, bonuses for overtime work that exceed the agreed full working hours will be exempt from taxes. However, the rule does not apply to the overtime pay itself, but only to the additional bonus paid for the extra hours. These exemptions only come into effect if working hours exceed 34 hours per week in collective contracts, or 40 hours per week in non-collective contracts. This means that the rule focuses on 'regular overtime' and not on evening hours, weekends, or public holidays.
Research from the Institute for Employment Research (IAB) shows that employees in Germany worked an average of 28.2 overtime hours in 2024, with more than half of these hours unpaid. According to the new plan, an employee earning a gross salary of 3,000 euros per month and working the average number of overtime hours could receive about 64 euros extra in their net salary.
However, criticisms have already emerged regarding the target group of the measure. The exemption only applies to full-time employees, while part-time workers – who accounted for nearly 30% of the workforce in 2024 – are unlikely to benefit. Women have been particularly affected, as nearly half of female workers are part-time, compared to only 12% of men.
Experts have warned that the new regulation could deepen inequality in the labor market. Many part-time workers also perform extra hours, but according to the current proposal, these hours will not be eligible for tax exemption, raising concerns about unfairness and unequal benefits.