Inflation relief bonus – overview and practical options

The inflation relief bonus (Inflationsausgleichsprämie) allows employers to pay their employees a bonus of up to EUR 3,000 tax-free and free from social security costs before 31 December 2024. In addition to the possibility to make a one-off payment to all employees, the rule provides further interesting options for employers. This article explains the legal basis and what form those options might take.


The inflation relief bonus (also known as just the “inflation bonus”) is intended to give employers an incentive to pay their employees an additional bonus. It is a tax-free amount for which social security also does not need to be paid. The rule is comparable to the “Corona bonus”. However, after having to extend the “Corona bonus” numerous times, legislators decided to provide a longer time period (more than 26 months) for the payment of an inflation bonus from the beginning.


Established in the Income Tax Act (§ 3 No. 11c of the EStG), the key elements of the inflation relief bonus are:

  • The payment must be voluntary, i.e., paid in addition to other bonuses and payments owed to employees. Existing wage components (such as Christmas bonuses) may not be transformed into inflation bonuses.
  • The bonus may take the form of a cash payment or benefits in kind.
  • The payment must refer to inflation. There are no specific requirements in this respect. It will be sufficient, e.g., if pay slips indicate the inflation relief bonus.
  • The total tax-free amount may be split up into smaller payments. However, all inflation bonus payments made between 26 October 2022 and 31 December 2024 will only be tax-free up to a total of EUR 3,000.
  • This tax-free amount applies to each employer. Regardless of whether an employee has already received the full amount of the bonus from their old employer, a new employer can still pay the employee the full bonus.

As with other additional benefits, the works council must be involved and the employment law principles of equal treatment and the effectiveness of voluntary payments must be respected. Employers bound by a collective agreement should also assess whether the agreement grants employees an entitlement to the payment of an inflation relief bonus, or if such an entitlement is planned.


One-time payment or staggered payments

The bonus may be paid as a one-time payment (one payment of a maximum of EUR

3,000), or as various smaller payments made over the period until 31 December 2024. The employer may also split the amount over the whole period, e.g., pay a monthly amount of EUR 125 from 1 January 2023 to 31 December 2024. A staggered arrangement is also possible, such as a monthly payment of EUR 100 per month in 2023, increasing to EUR 150 per month in 2024.

This effectively allows employers to use the tax-free amount for wage increases that are pending but not yet binding, and generate “more net from the gross pay,” at least until 31 December 2024. To ensure the amount is tax-free, the increase must be temporary until 31 December 2024, and it must be identified as the inflation relief bonus.

It might be beneficial for those starting a job with a new company to agree to a lower basic salary until 31 December 2024, which would then be supplemented by the inflation bonus. Such an arrangement could be very attractive for both employers and employees towards the end of the period of validity – the end of 2024.

All the same or difference

Generally, employers are neither required to pay an inflation relief bonus nor to favour all employees in the same way. The employment law principle of equal treatment allows for differential treatment. As with other benefits (e.g., bonus payments), any such differential treatment requires an objective reason.

The following differences could be possible, for example:

  • Key date rule: Only employees who have an employment contract that has not been terminated at the time of the payment will receive a bonus.
  • Differences based on salary groups: The inflation relief bonus can be higher for lower salary groups. Higher salary groups can even be excluded. When the difference between the salary groups are not that big, a sliding scale should be adopted (the higher the basic salary, the lower the inflation bonus).

Cash payment or payment in kind

Even though the public debate about the inflation relief bonus has focused on cash payments, employers can pay the tax-free amount of EUR 3,000 in other benefits (e.g., vouchers for petrol, goods, or food). The financial advantage is tax-free and free from social security payments. It is also possible to split the bonus between cash payments and payments in kind.


If you look more closely at the inflation relief bonus, various options are available to employers. The basic principles of employment law and the rights of the works council must be respected when implementing the bonus. If employers have questions, they should seek legal advice. However, in view of the long period of validity, every employer should be able to find a way to use the inflation relief bonus for their benefit.

Dr Philipp Melle


Inflation Inflationsausgleichsprämie Prämie