If employees work on Sundays and public holidays, many employers pay them surcharges for this. However, payroll accounting must ensure that the surcharges are treated correctly for tax and social security purposes.
In 2023, there will again be numerous public holidays on which many employees come to work. If you consider just the many skilled workers in hospitals, local public transport, the hotel and catering industry – to name just a few examples – it quickly becomes clear that many people have to work on public holidays. For example, also on Whit Monday.
Surcharges for work on Sundays and public holidays
To recognise this commitment, many employers pay so-called Sunday and public holiday surcharges. These are surcharges that are paid in addition to the basic wage.
But of course, the questions then arise here:
- Does income tax have to be withheld?
- Are social security contributions payable?
In fact, there are some tax benefits that are granted here for the surcharges. For payroll accounting, however, the devil is in the detail.
Income tax treatment
Sunday and public holiday surcharges that are paid in addition to the basic wage are tax-free, provided they do not exceed certain limits. A corresponding legal regulation can be found in § 3b of the Income Tax Act. Accordingly, they remain tax-free insofar as they do not exceed 50 percent of the basic wage for Sunday work, 125 percent for public holiday work (as well as for work from 2 pm on New Year’s Eve) and 25 percent for night work (or 40 percent for night work between 0 am and 4 am). Special regulations apply to Christmas Day and May Day: Surcharges for work on December 24 from 2 pm, on December 25 and 26 and on May 1 remain tax-free, provided they do not exceed 150 percent of the basic wage.
Tip: The tax authorities explain in detail what is to be understood by basic wage in the Income Tax Guidelines R 3b paragraph 2 LStR.
The tax office takes a close look
In wage tax audits, for example, surcharges that have been treated as tax-free are often examined in more detail. It is therefore all the more important that the accounting department ensures correct processing here. It is particularly tricky when possible surcharges overlap. For example, the surcharge is not doubly favoured as Sunday work and public holiday work. However, both a public holiday and night surcharge can be favoured (cf. also R 3b paragraphs 3 and 4 LStR). Expertise is therefore particularly important here in detailed questions. If this is calculated incorrectly and the wage tax auditor makes corresponding findings, then there may be corresponding back payments.
Attention: Social security differs from tax law
In addition, employers must note that although surcharges may be tax-free, they may be subject to contributions. For payroll accounting, the implementation is therefore associated with some complex questions.
As a partner for payroll accounting, we have all regulations in view and implement them in our customer projects. Would you like to find out more about working together in the area of payroll accounting? No problem: Please feel free to contact us! We look forward to hearing from you and will be happy to advise you personally and without obligation.
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Author
Sylvia Meier
Guest Author
Sylvia Meier is a certified financial economist (FH) and has worked at the tax office, in consulting (Big Four firm), and for a specialized publisher. Today, as a freelance consultant, she supports companies and can demonstrate numerous publications, particularly on the topics of taxes, controlling, accounting, and finance.
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