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WORKING IN GERMANY

What employees in Germany need to know about Weihnachtsgeld

Many workers in Germany can look forward to a special Christmas bonus from their employer. But who's entitled to it - and how much should it be? Here's everything you need to know about 'Weihnachtsgeld'.

Christmas bonus payment
Small presents lie on top of a pile of euro notes. Photo: picture alliance/dpa/dpa-Zentralbild | Monika Skolimowska

OK, so what’s Weihnachtsgeld?

Weihnachtsgeld – or Christmas money – is an annual bonus that gets paid out to employees each winter. In Germany, it’s one of the most popular ways to reward and compensate employees, and around 55 percent of German workers receive it on top of their salary each year.

It was originally designed to help employees cover the additional costs of buying Christmas gifts, but these days bosses use it as a way to motivate employees throughout the year, or simply as an additional perk of the job. 

The likelihood of getting Weihnachtsgeld depends on the type of contract you’re on, the region you live in and even your gender. In western German states, around 59 percent of employees get a Christmas bonus, while just 39 percent of employees in former East German states are lucky enough to get a payout. Similarly, while 57 percent of men receive Weihnachtsgeld, just 51 percent of women do. 

People with long-term contracts are also more likely to be treated to some extra spending money at Christmas: 56 percent of permanent employees get Weihnachtsgeld in Germany, while just 45 of those on short-term contracts do. 

As an alternative to Weihnachtsgeld, employers may choose to pay what’s known as Urlaubsgeld – or holiday pay. This is sometimes paid out along with the salary when the employee takes annual leave, or at another set time of year. 

I haven’t heard about a bonus this year – am I entitled to one?

You may well be – but the legal situation is a little complicated. Essentially, German labour laws don’t mandate that employees have a right to receive Weihnachtsgeld, but in some cases you could still be entitled to it.

The most common ways that workers can claim a Christmas bonus are as follows:

  • Through a collective agreement negotiated by your trade union
  • Through a company agreement between the workers’ council and employer 
  • If entitlement to a bonus is written in your contract 
  • If your employer has repeatedly given Christmas bonuses in the past 

According to German law, when an employer pays Weihnachtsgeld for at least three years in a row, the entitlement to an annual bonus is considered an unwritten part of the contract. That means that if your boss usually pays out an annual bonus and suddenly decides not to, you may still have a claim to the additional cash. 

Another important thing to note is that employees should be treated equally when it comes to any Christmas bonus payouts. In other words, an employee can’t be excluded from receiving Weihnachtsgeld unless there is a legally valid reason for doing so. 

If your contract or a collective agreement entitles you to Weihnachtsgeld, it’s important to check the terms and conditions carefully. That’s because some companies may require you to continue working there for a set period of time after recieving your bonus – so leaving before a set date could cause you to lose your entitlement to the money. 

READ ALSO: Why German employers will soon have to record staff working hours

How much should Weihnachtsgeld be? 

The amount of Weihnachtsgeld employees can get isn’t defined by law, but it’s often calculated as a proportion of an employees’ salary and may also relate to the amount of time you’ve spent at the company.

According to Federal Office of Statistics from last year, workers in Germany who have a collective agreement received around €2,747 for their Christmas bonus on average.

Frankfurt Christmas shopping

A man carries a wrapped present through the centre of Frankfurt. Photo: picture alliance/dpa | Frank Rumpenhorst

However, there are significant differences between different industry sectors. At a time when fossil fuel prices are soaring, workers in the crude oil and natural gas sector enjoyed the highest bonuses of around €5,504 on average, followed those in the petroleum and coking sector who netted an average bonus of €5,450. On the other end of the scale, employees who work in recruitment got an average of €327 on top of their usual salaries. 

Collective agreements negotiated by trade unions will often lay out what percentage of an employee’s salary should be paid as a bonus at different stages of their employment. In most cases, employees who’ve been at a company for six months will get 25 percent on top of their normal monthly salary, which is increased to 35 percent after a year, to 45 percent after two years and to 55 percent after three.

READ ALSO: Jobs in Germany: Should foreign workers join a union?

When can people expect their bonus?

Different companies may choose to do things in different ways, but traditionally Weihnachtsgeld is paid out at the end of November along with your salary.

This is to ensure that people can use the extra cash to start buying Christmas presents and enjoying the festive season in December. 

Is there anything else I should know?

It’s important to remember that Weihnachtsgeld counts as taxable income, so you should see all the usual reductions for income tax and social contributions on your payslip along with details of the bonus. 

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For members

WORKING IN GERMANY

EXPLAINED: The legal steps for starting a business in Germany

Whether it's a small start-up or a much bigger venture, there's obviously legal steps to bear in mind when starting up a for-profit business in Germany.

EXPLAINED: The legal steps for starting a business in Germany

Starting up a for-profit company in Germany follows different procedures than either forming a non-profit foundation (a Verein) or registering as self-employed.

If you need to register as a corporation, the first step is to figure out which of two general company types your venture would fall into in Germany. The first is a Gesellschaft mit beschränkter Haftung (GmbH), which is a limited liability company. This is by far the most common option. Another is an Aktiengesellschaft (AG) – or a joint stock company or corporation. While these two tend to be the most common, there are a few others as well.

EXPLAINED: How to start up your own verein in Germany

Setting up a GmbH

A GmbH is very common in Germany – and under it shareholders in the company aren’t personally responsible for the firms debts. You can set up a GmbH with only one person or shareholder. If you have more than one, you’ll need to draw up a notarised agreement between them.

A GmbH must also appoint at least one Managing Director (Geschäftsführer). The Managing Director is allowed to have shares in the company and is entitled to represent the company legally, whereas other board members are ordinarily not able to.

Shares in a GmbH are ordinarily only represented in notarised documents. There are no certificates which confirm that you have shares and those shares cannot be listed on stock exchanges. Shares, however, can be transferred through notarised documents.

The minimum start-up capital needed to form a GmbH in Germany is €25,000. If founders don’t have this, they can start up as an Unternehmergesellschaft – or entrepreneurial company – for €1. However, these are considered as vehicles to get to the financial capital of a GmbH. As such, UG’s are expected to set aside at least 25 percent of any annual surplus as savings. Once they hit the €25,000 mark, they need to change to a GmbH.

A GmbH is generally the most common type of corporation in Germany because the capital and administrative requirements tend to be less onerous – making it suited for small enterprises, for example. As soon as a GmbH enters the Commercial Register (Handelsregister), it legally exists as a company.

READ ALSO: Everything you need to know about becoming a freelancer in Germany

Grounding an AG

A German AG is a company at a different level – and tends to be more for mid-sized to larger-sized business ventures.

In contrast to a GmbH – which needs only one member – an AG needs to have a minimum of five members.

The capital requirements are also twice as much as for setting up a GmbH. You’ll need €50,000 for an AG. These shares can be listed on stock exchanges – although they don’t have to be.

Choosing which legal model of company for your business in Germany depends on its size, your available capital – and how much liability you’re comfortable with. Photo: Getty Images

You’ll need articles of association, authenticated by a notary, to set one up too. As with a GmbH, an AG legally exists when it enters the commercial register.

An AG must also have a managing board (Vorstand). Members are officers of the company and make its day-to-day decisions. They do, however, answer to a supervisory board (Aufsichtsrat). They must also hold general meetings (Hauptversammlungen) to allow for shareholders to exercise control over overall policy.

READ ALSO: What’s the outlook for the German job market in 2024?

Other types of German companies

In general, GmbH and AG companies are the most common ones you’re going to see in Germany. But other – mostly more complex models – exist.

These include an Offene Handelsgesellschaft (OHG), or General Partnership. This would often be for a company of two partners who had each contributed half the capital. They would share in half the profits but also each be liable for the firm’s debts – to an unlimited amount. You may find that certain family-run businesses use this model. The risk here is that the partners would be personally liable – down to their own assets – for the firms debts.

A variation of this is a Kommanditgesellschaft (KG) – or a limited partnership. This happens when one partner is entirely liable for the firms debts – down to their personal assets, while the other one is not. The limited liability partner would still be liable for the firm’s debts up to and including the amount they had invested in the company itself though. This model might be common for family-owned businesses that bring in outside experts to run day-to-day administration – for example.

Another complex arrangement is a combination of a GmbH and a KG – to a GmbH & Co. KG. Essentially this joins a GmbH and a KG together in a partnership agreement. While very complex and not often used, this kind of partnership may serve as a way to limit the recourse a company creditor has to go after a company member’s personal assets – with more liabilities tied up in the GmbH, which has limited liability.

More complex arrangements are available too for companies that want to have a presence in Germany but their head office might be abroad. These include a subsidiary (Töchtergesellschaft) and Zweigniederlassung – or a branch office. If you’re dealing with these kinds of entities, it’s recommended you seek tax and compliance advice to confirm which one is necessary. In general though, a subsidiary will manage many of its own affairs apart from its parent company. A branch office is likely to have only a small presence in Germany while the bulk of administrative tasks are handled elsewhere.

Knowing which one is applicable is important as it helps establish whether you need to make an entry in the commercial register or not – and what taxes will have to be paid.

Articles in The Local are not meant to replace professional legal or tax advice. We recommend speaking to an appropriated professional in case of further questions.

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