Overtime in 2026: Between Payout, Surcharge and Tax Reform
Millions of employees in Germany regularly work extra hours. Yet how much of that overtime actually remains net at the end of the month is unclear to many — and in 2026 a possible tax reform enters the picture that could change the calculation once again. This guide explains step by step how overtime pay and surcharge are composed, how much tax and social contributions apply, and what the planned tax exemption for surcharges would concretely mean.
If you want to know quickly what your own extra work brings in, you can recalculate every figure in this article with your personal values in the <a href="/en/overtime-calculator">overtime calculator</a> — from the hourly wage to the net advantage of the planned reform.
What Actually Counts as Overtime?
Overtime is any working hour beyond the regular working time agreed by contract or collective agreement. Someone contracted for 40 hours a week who works 45 in a given week has accumulated five hours of overtime. The distinction from working-time law matters: the Working Hours Act generally limits daily working time to eight, and in exceptional cases to ten hours. Overtime must stay within these limits.
Whether overtime may be ordered at all follows from the employment contract, a works agreement or the collective agreement. Without such a basis, no one is obliged to work extra hours permanently — except in genuine emergencies.
How to Calculate Your Overtime Hourly Wage
The basis of every overtime payment is your individual hourly wage. You determine it by dividing your monthly gross salary by your average monthly working hours. Monthly hours result from your weekly hours multiplied by the factor 4.33 — the average number of weeks per month (52 weeks divided by 12 months).
An example: at 3,500 euros gross salary and a 40-hour week you reach roughly 173 monthly hours. The hourly wage is therefore about 20.19 euros. This figure is the starting point for everything else — for the base pay of the overtime hour and for the percentage surcharge.
The Overtime Surcharge: Voluntary but Common
Contrary to what many believe, there is no statutory right to an overtime surcharge in Germany. Whether a surcharge is paid and how high it is is governed by employment, collective or works agreements. In practice, 25 percent for ordinary overtime is widespread. For work at special times — at night, on Sundays or public holidays — surcharges are often higher, around 50 percent.
At an hourly wage of 20 euros and a surcharge of 25 percent, you therefore receive 25 euros per overtime hour: 20 euros base pay plus 5 euros surcharge. For ten overtime hours a month that would be 250 euros gross. How much of that remains net depends on tax and social contributions.
Tax and Social Contributions: The Current Law
Under current law, overtime including surcharge is taxed normally. Income tax at your personal marginal rate applies to the entire overtime payment — that is, the rate at which your last euro earned is taxed. On top come the social insurance contributions: health, pension, unemployment and long-term care insurance. Together the employee share amounts to around 20 percent, as long as you are below the contribution ceilings.
At 250 euros overtime gross, a marginal tax rate of 35 percent and around 20.5 percent social contributions, about 111 euros remain net. The exact split into base pay, surcharge, income tax and social contributions can be reported separately for each individual case.
The Planned Tax Exemption for Surcharges
In September 2025 a draft bill for a Labour Market Strengthening Act was presented. The core idea: overtime surcharges are to be exempted from income tax. The precise design matters, because it determines the actual advantage.
First, the exemption concerns only the surcharge, not the base pay of the overtime hour. Second, the tax-free surcharge is capped at 25 percent of the base wage. A common 25-percent surcharge would thus be fully tax-free; of a 50-percent surcharge, half would remain taxable. Third, the benefit applies only to hours above a collectively agreed or contractual full-time week of at least 34 hours. And fourth, social contributions remain in full — only income tax is exempted.
Important: This law is so far only a draft and, as of July 2026, had not been passed. Whether and in what form it comes into force is open. All calculations for the "planned law" therefore show a scenario, not applicable law.
What the Reform Would Bring Net
The tax advantage is easy to quantify: it equals the tax-free surcharge multiplied by your marginal tax rate. In the example with 50 euros surcharge (ten overtime hours, 25 percent) and a marginal rate of 35 percent, you save around 17.50 euros income tax per month — about 210 euros a year. The higher the tax rate and surcharge (up to the 25-percent cap), the greater the effect.
Because social contributions remain unchanged, the net gain is smaller than the word "tax-free" suggests. It is exactly this difference that the <a href="/en/overtime-calculator">overtime calculator</a> makes visible by placing current and planned law directly side by side.
Payout or Time Off?
Besides payout there is time off in lieu. Overtime is converted into free time — usually at a one-to-one ratio, with the surcharge often not counted. Time off in lieu is tax-free because no money flows. Those who need rest do well with it. Those who need the money benefit from payout, especially if the planned tax exemption arrives.
Conclusion
Overtime is worth more than the bare hourly wage suggests — thanks to the surcharge. Under current law, tax and social contributions noticeably reduce the payout; the planned tax exemption for surcharges could raise the net amount appreciably but, until a decision is made, remains a scenario. Run your personal case through the <a href="/en/overtime-calculator">overtime calculator</a> and compare both scenarios before deciding between payout and time off in lieu.