Question 1

Is overtime paid out tax-free in 2026?

Accepted Answer

Not yet. The plan is to exempt only the overtime surcharges (not the base pay) from income tax — capped at 25% of the base wage. It is based on the draft Labour Market Strengthening Act of 12 September 2025. As of July 2026 the law has not been passed. Until it comes into force, overtime including surcharge is taxed normally.

Question 2

How do I calculate my overtime hourly wage?

Accepted Answer

Divide your monthly gross salary by your monthly working hours. These are your weekly hours × 4.33 (average weeks per month). At €3,500 and 40 weekly hours that is roughly 173 hours per month, i.e. about €20.19 per hour. The surcharge (e.g. 25%) is added on top of this base wage. Our calculator does this automatically.

Question 3

How high is the overtime surcharge?

Accepted Answer

There is no statutory right to an overtime surcharge. Whether and how much is paid depends on the employment, collective or works agreement. 25% is common for regular overtime; for night, Sunday or holiday work higher rates (e.g. 50%) are often agreed. Night, Sunday and holiday surcharges are already tax-privileged today — the planned reform additionally covers pure overtime surcharges.

Question 4

Do social contributions on overtime remain?

Accepted Answer

Yes. The planned exemption explicitly concerns only income tax, not social insurance. Health, pension, unemployment and long-term care contributions still apply to base pay and surcharge — as long as you are below the relevant contribution ceilings. That is why the net advantage of the reform is smaller than "tax-free" might first suggest.

Question 5

Does my employer have to pay out overtime?

Accepted Answer

That depends on the contract. Ordered or approved overtime must be compensated — either by payout or time off in lieu. Blanket clauses such as "overtime is covered by the salary" are only valid if a scope is recognisable; unlimited settlement clauses are usually void. For higher salaries, settlement may be more permissible.

Question 6

Is payout or time off in lieu more worthwhile?

Accepted Answer

Financially, payout including surcharge is attractive — especially if the planned tax exemption arrives. Time off in lieu, on the other hand, is granted 1:1 in time (the surcharge often does not count here) and is tax-free because no money is paid out. Those who need rest are better off with time; those who need money, with payout. Our calculator shows you the net payout amount.

Question 7

Why do part-timers often not benefit from the reform?

Accepted Answer

Under the draft, only surcharges for hours above a collectively agreed or contractual full-time week of at least 34 hours are tax-free. Someone working 30 hours who does five extra hours is still below the full-time reference — the planned exemption does not apply to those hours. Only hours beyond the full-time threshold would be favoured. This is intended to prevent the benefit from applying to minor extra work.

Question 8

How much tax exactly do I save through the planned reform?

Accepted Answer

The advantage equals the tax-free surcharge multiplied by your marginal tax rate. Example: 10 overtime hours with a 25% surcharge at €20 base wage give €50 surcharge per month. At a 35% marginal rate you save around €17.50 income tax per month, i.e. about €210 per year. The higher your tax rate and surcharge (up to the 25% cap), the greater the advantage. Calculate your personal case above.

Guide: Overtime Calculator

Getting Overtime Paid Out in 2026: Tax, Surcharges and the Planned Exemption

Does Overtime Expire? Your Rights to Payout and Time Off

Overtime: Payout or Time Off? What Really Pays in 2026

Overtime in Part-Time Work: Why the Planned Exemption Often Doesn't Apply

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