A night shift allowance (German: Nachtzuschlag) is an additional payment for work performed during nighttime hours. Under § 3b of the German Income Tax Act (EStG), these allowances are tax-exempt up to a certain threshold: 25% of the base wage for standard night work, and 40% for work between midnight and 4:00 a.m. Whether a company is required to pay a night shift allowance – and at what rate – depends on the applicable collective bargaining agreement or works agreement. The law itself only requires that employers provide reasonable compensation under § 6 para. 5 of the Working Hours Act (ArbZG).
What Is a Night Shift Allowance?
A night shift allowance is a financial supplement to the regular hourly wage that compensates employees for working during nighttime hours. It serves two purposes: it offsets the increased health burden associated with night work, and it functions as a tax instrument to support shift work in sectors of critical importance.
Night work is particularly common in healthcare, logistics, manufacturing, retail, hospitality and security. For HR professionals in these sectors, handling night shift allowances correctly – both from a payroll tax and an employment law perspective – is a day-to-day operational requirement.
Key distinction: Night work (the factual circumstance) and the night shift allowance (the resulting compensation) are two separate concepts. Night work occurs when employees work during the legally defined nighttime period. The allowance is the financial or time-based compensation for doing so.
Legal Framework
§ 6 Para. 5 ArbZG – The Obligation to Compensate
The German Working Hours Act (ArbZG) requires employers to compensate employees for night work. Under § 6 para. 5 ArbZG, employees who perform night work are entitled to either appropriate time off in lieu or an appropriate supplement on the gross wage owed for that work. Both options are legally equivalent; the employer may choose which form of compensation to provide – unless a collective bargaining agreement specifies otherwise.
The Federal Labour Court (Bundesarbeitsgericht, BAG) has clarified what "appropriate" means in practice: where no collective agreement applies, a supplement of 25% is generally considered appropriate (BAG, Case No. 9 AZR 507/19, 2021).
§ 3b EStG – Tax Exemption
§ 3b of the German Income Tax Act (EStG) governs the conditions under which supplements for night, Sunday and public holiday work are tax-exempt. Important: tax exemption does not automatically mean exemption from social security contributions – more on this in the next section.
Tax-exempt night shift allowances apply to work performed between 8:00 p.m. and 6:00 a.m. (§ 3b EStG). This definition differs slightly from the employment law definition of nighttime under § 2 para. 3 ArbZG, which covers 11:00 p.m. to 6:00 a.m.
When Does Nighttime Begin? – Two Definitions Compared
| Legislation | Nighttime Period | Purpose |
|---|---|---|
| § 2 Para. 3 ArbZG | 11:00 p.m. – 6:00 a.m. | Employment law protection |
| § 3b EStG | 8:00 p.m. – 6:00 a.m. | Tax exemption for allowances |
For HR professionals, this means: work starting from 8:00 p.m. can already attract a tax-exempt supplement, even if it does not yet qualify as night work under employment law.
How High Is the Night Shift Allowance?
Tax-Exempt Supplement Rates Under § 3b EStG
| Time Period | Maximum Tax-Exempt Supplement |
|---|---|
| 8:00 p.m. – midnight | 25% of base wage |
| Midnight – 4:00 a.m. | 40% of base wage |
| 4:00 a.m. – 6:00 a.m. | 25% of base wage |
| Night before Sunday/public holiday (from 8:00 p.m.) | Up to 35% possible (combined rate) |
Important: The tax exemption only applies up to a base wage of €50 per hour. If the hourly rate exceeds this amount, the tax-free portion is still calculated on the basis of €50 per hour only.
Calculation Example
A nursing professional earns €18 gross per hour and works from 10:00 p.m. to 2:00 a.m.
- Base hourly wage: €18
- Night allowance 10:00 p.m.–midnight (25%): €18 × 0.25 = €4.50 tax-exempt per hour
- Night allowance midnight–2:00 a.m. (40%): €18 × 0.40 = €7.20 tax-exempt per hour
- Hourly rate is below €50 → full tax exemption applies
The night shift allowance therefore noticeably increases net pay without generating additional payroll tax liability.
Tax-Exempt but Subject to Social Security Contributions
A common misconception in payroll: tax exemption and exemption from social security contributions are not the same thing.
Night shift allowances are tax-exempt under § 3b EStG when the conditions above are met. However, they are in principle subject to social security contributions. This means that contributions to statutory health, pension, nursing care and unemployment insurance are still due on the allowance amount.
An exception applies under § 1 of the Social Security Remuneration Ordinance (SvEV): allowances are also exempt from social security contributions only if they are income tax-exempt and are calculated on the basis of an actual base wage. In practice, this distinction can be complex and coordination with the payroll department or a tax advisor is strongly recommended.
Collective Bargaining Agreements vs. No Collective Agreement
With a Collective Bargaining Agreement
Where a collective bargaining agreement applies, it will typically set the rate and conditions of the night shift allowance as a binding obligation. Examples from key German sectors:
- TVöD (public sector): Night supplement of €1.28 per hour (base rate, as of 2024), plus additional shift allowances depending on the type of duty
- Care sector collective agreement: Industry-specific rates, often 20–35%
- Retail sector (HDE collective agreement): Varying regulations by federal state
The favourability principle applies: where the collective agreement is more beneficial to employees than the statutory minimum, the collective agreement takes precedence.
Without a Collective Bargaining Agreement
Without a collective bargaining agreement or works agreement, the statutory obligation under § 6 para. 5 ArbZG applies. Based on BAG case law, a supplement of 25% is generally considered "appropriate" – this is not a fixed statutory minimum rate, but rather a benchmark established through court rulings.
HR professionals in non-unionised companies should clearly define night shift allowances in employment contracts or an internal works agreement to avoid disputes.
Practical Guidance for HR Professionals
Documentation Requirements
Accurate documentation of nighttime working hours is mandatory – both for payroll purposes and in the event of a tax audit. The following information must be recorded:
- Start and end of the night shift (including breaks)
- Total number of nighttime hours worked
- Basis for the supplement (base wage, percentage rate, applicable tax period)
All payroll records must be retained for a minimum of six years (§ 147 German Tax Code / Abgabenordnung).
Correct Disclosure on the Pay Slip
The tax-exempt night shift allowance must be shown as a separate line item on the pay slip. Incorporating it into the standard hourly rate as a lump sum is not permissible under tax law. The following details must appear on the payroll statement:
- Base hourly wage
- Number of nighttime hours per period (8 p.m.–midnight, midnight–4 a.m., 4–6 a.m.)
- Applicable supplement percentage per period
- Total tax-exempt amount
It is also good practice for HR professionals to communicate night shift allowances transparently in job postings and during onboarding – not least as part of an attractive employer brand.
Frequently Asked Questions About Night Shift Allowances
When does nighttime legally begin in Germany?
Under employment law (§ 2 para. 3 ArbZG), nighttime begins at 11:00 p.m. and ends at 6:00 a.m. Employees who regularly work at least three hours during this period qualify as night workers. Under tax law (§ 3b EStG), the relevant period is broader: 8:00 p.m. to 6:00 a.m. Supplements for work from 8:00 p.m. onwards may therefore already be tax-exempt.
How high is the tax-exempt night shift allowance?
The tax-exempt portion is a maximum of 25% of the base wage for work between 8:00 p.m. and midnight, and between 4:00 a.m. and 6:00 a.m. For the period from midnight to 4:00 a.m., up to 40% is tax-exempt. The calculation base is capped at a maximum base wage of €50 per hour.
Am I required to pay a night shift allowance as an employer?
The law does not prescribe a specific percentage. However, § 6 para. 5 ArbZG requires employers to compensate for night work either through time off in lieu or an appropriate financial supplement. According to BAG case law, 25% serves as a benchmark for "appropriate." Collective bargaining agreements may require higher rates.
Is the night shift allowance always tax-exempt?
No – only if the conditions of § 3b EStG are met: the correct time period (8 p.m.–6 a.m.), the correct percentage (max. 25% or 40%), and a base wage of no more than €50 per hour as the calculation basis. If the allowance exceeds these thresholds, the excess portion becomes taxable.
Does the night shift allowance also apply to minor employment (Minijob)?
Yes. Employees in minor employment (geringfügige Beschäftigung) are also entitled to compensation for night work under § 6 para. 5 ArbZG. The tax-exempt night supplement may be granted as long as the limits of § 3b EStG are observed. Note that the minor employment earnings threshold (€538 per month) remains independently applicable and must not be permanently exceeded by allowances, otherwise the minor employment status may be at risk.
How do I calculate the night shift allowance – an example?
Base wage: €15 per hour. Work from 9:00 p.m. to 11:00 p.m. (2 hours, period 8 p.m.–midnight).
- Supplement: €15 × 25% = €3.75 per hour
- For 2 hours: €7.50 tax-exempt
These €7.50 increase the net pay without triggering income tax – but social security contributions may still apply.
What applies when a collective bargaining agreement is in place?
A collective bargaining agreement may require higher supplements than the law demands. The favourability principle applies: the provision more favourable to employees takes precedence. In unionised companies, the relevant industry agreement (e.g. TVöD, care sector agreement, retail sector agreement) is the authoritative basis. Employers should be familiar with the collective agreements that apply to them and check regularly for updates.
How do I document night work for payroll purposes?
Records must include: exact times (start, end, breaks), total hours per nighttime period, and the applicable supplement amount. The tax-exempt portion must be shown as a separate line item on the pay slip. Payroll records must be retained for a minimum of six years pursuant to § 147 German Tax Code (AO).
Conclusion
The night shift allowance is an important component of remuneration in all sectors involving night work. Under employment law, § 6 para. 5 ArbZG requires employers to provide reasonable compensation – either as time off or a financial supplement. Under tax law, § 3b EStG enables the payment of this supplement up to a defined threshold without triggering payroll tax liability.
For HR professionals, three points are key: accurate documentation of nighttime working hours, legally compliant disclosure on the pay slip, and clear contractual regulation – particularly in companies without a collective bargaining agreement. For questions on the tax treatment of night shift allowances, it is advisable to consult a tax advisor or a specialist employment lawyer.
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Sources
- § 3b EStG – Tax exemption for Sunday, public holiday and night work supplements. German Federal Ministry of Finance, 2024. https://www.gesetze-im-internet.de/estg/__3b.html
- § 2 Para. 3 ArbZG – Definition of night work. Working Hours Act, German Federal Ministry of Labour and Social Affairs, 2024. https://www.gesetze-im-internet.de/arbzg/__2.html
- § 6 Para. 5 ArbZG – Compensation for night work. Working Hours Act, German Federal Ministry of Labour and Social Affairs, 2024. https://www.gesetze-im-internet.de/arbzg/__6.html
- § 1 SvEV – Social Security Remuneration Ordinance. German Federal Ministry of Health, 2024. https://www.gesetze-im-internet.de/svev/__1.html
- Federal Labour Court (Bundesarbeitsgericht), Judgement of 25 March 2021 – Case No. 9 AZR 507/19 (Appropriate night work supplement). https://www.bundesarbeitsgericht.de/startseite/
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