A planned tax bonus for overtime compensation, championed by the German government as part of its coalition agreement, is facing increasing scrutiny and criticism for its limited impact and perceived failure to deliver on its promises. A new analysis by the Böckler Foundation, a labor-aligned think tank, reveals the measure is unlikely to provide significant relief to workers, raising questions about the efficacy of government policy and the broader debate surrounding work incentives.
The foundation’s assessment, based on detailed wage statistics, indicates that a staggering 98.6% of German employees will see no benefit from the proposed tax break. The primary reason for this widespread exclusion lies in the increasingly common practice of flexible working arrangements, particularly the utilization of time-off accounts rather than direct overtime compensation. Many employees simply do not accrue overtime bonuses eligible for the tax break.
Even for those who “do” qualify, the projected windfall is minimal. The Böckler Foundation estimates an average bonus of just €1.35 per overtime hour – a sum deemed insufficient to meaningfully reward employee effort or serve as a genuine incentive for increased productivity.
The initiative, initially presented by the Christian Democratic Union (CDU) during the election campaign as a means of recognizing and rewarding performance, is now drawing sharp criticism. The foundation’s conclusion is blunt: “The result is sobering”. Critics argue the proposal represents a superficial attempt to address underlying issues within the labor market, potentially diverting attention from more substantial reforms needed to improve working conditions and fairly compensate employees. This situation intensifies the political debate around the practicality and effectiveness of government-led economic incentives, particularly those targeting specific segments of the workforce. The inadequacy of the proposed bonus further fuels a broader discussion on the effectiveness of tax policy as a tool for social and economic policy.