In times of acute labor shortages and an employee-driven market, employers are increasingly focusing on additional benefits beyond the established ones, such as company pension schemes. Merely complying with legal requirements is no longer sufficient to stay competitive. Instead, employers must address the well-being of their employees. Employees want flexibility regarding working hours and locations; they need freedom to balance their personal lives with their professional responsibilities. Whether due to family obligations, voluntary work, or a demanding hobby, employees often need more time off than standard agreements allow. However, many companies are unaware of the legal framework and which benefits can be offered in a tax-advantaged or even tax-free manner.
Options under German Labor Law
Vacation/Special Leave: In Germany, employees are legally entitled to 20 vacation days per year based on a 5-day workweek. However, 30 or more vacation days have become the norm in many industries, making the days when 25 vacation days were considered generous—and young employees had to earn each additional day over the years—seem outdated. The importance of special leave for both positive and challenging life events is also growing. Many employers now offer one or more days of special leave for weddings, relocations, family bereavements, or the birth of a child. Increasingly, companies are also offering “mental health” or “personal obligation” days, which employees can take spontaneously without having to provide a reason.
Maternity/Parental Leave: Recently, companies in Germany have been asking whether they are falling behind if they don’t offer additional benefits for families beyond the legally mandated maternity and parental leave. The question arises whether employers should offer additional paid time off—for mothers, partners, or both—and if so, how these days should be compensated. The answers are clear, especially in industries like tech, which are heavily influenced by American companies. Offering such benefits has become a key factor in being recognized as a “family-friendly” employer.
Home Office/Workation: In the ongoing debate about whether a return to the office is necessary post-COVID-19, or at least a reasonable expectation from employers, the answer is surprising: Flexibility is a top priority. Employees not only want to continue working from home but also desire the option to temporarily work from other locations or even abroad. Legally, it’s important to distinguish whether employees have the choice to work from home up to five days a week or if they are permanently remote. To be attractive in today’s workforce, companies are offering options like “workations” or even sabbaticals in the form of unpaid special leave or other arrangements.
Trends in non-insured benefits
Mobility: The introduction of the 49-euro ticket (“Deutschlandticket”) in May 2023 has made public transportation much more appealing. Employers can offer this ticket, or other job tickets, tax-free to their employees if provided in addition to regular wages (§3 No. 15 EStG). To maintain tax-free status, proper documentation must be kept for payroll purposes. Another popular mobility benefit is the company bike. Employers lease the bikes and allow employees to use them for both professional and private purposes. If the employer covers the leasing costs and provides the bike as an additional benefit, the employee usually enjoys this perk tax-free. Alternatively, employees can pay for the bike through a salary conversion, with the bike taxed at 0.25% of its list price over a 36-month contract period.
Family: Balancing family and work is a daily challenge for many employees and has become a crucial criterion in job searches. Employers can support employees tax-free by offering childcare subsidies. This subsidy currently has no upper limit and is tax-free under §3 No. 33 EStG, provided it only covers actual childcare expenses. Additionally, as previously reported, a family service can assist employees with childcare and caring for elderly family members.
Employee Health Promotion: Originating in the U.S. and gaining popularity, companies are increasingly focusing on employees’ general well-being. Many employees are more isolated and live farther from family support networks. Employee Assistance Programs (EAPs) help employees manage their (especially mental) health and cope with stress. Prevention plays a key role in combating both mental and physical health issues. Simple digital offerings are evolving on many platforms, and professional mental and physical health prevention services are also becoming more widely available. Consequently, many companies now offer workplace health promotion initiatives, which are tax-free under §3 No. 34 EStG. Employers can spend up to 600 euros per employee per year tax-free on services provided in addition to regular wages for the prevention and reduction of health risks and for health promotion. These services must meet the purpose, targeted goals, quality, and certification requirements of §§ 20 and 20b SGB V, which include certified prevention courses. Membership fees for sports clubs or fitness studios are excluded.
To position themselves as attractive and competitive employers, companies must invest in employee-centered benefits and adapt to the changing expectations and needs of their workforce. Employees value family-friendly benefits, a balanced work-life ratio, and health-promoting support. Remote-accessible benefits and the integration of remote work technologies, allowing employees to work from anywhere, also enhance satisfaction and productivity. These measures are increasingly critical to ensuring that well-qualified, valuable employees feel comfortable in their jobs, reducing turnover as much as possible.
Christina Demmien
christina.demmien@profion.de
Meike Berger
meike.berger@profion.de
Bettina Barz
bettina.barz@profion.de
Are you missing a topic or would you like to give us your feedback?
Keep us informed!
