DE: ‘Inflation Bonus’ Is Garnishable

Jun 14, 2024 Benn-Ibler Rechtsanwälte

The inflation adjustment bonus (hereinafter referred to as inflation bonus) paid by employers is income from employment and as such is garnishable, according to the German Federal Court of Justice (Bundesgerichtshof, hereinafter BGH).

In the present case, a male nurse was involved in insolvency proceedings. He had received an inflation bonus from his employer. In June 2023, he applied for the bonus to be declared non-garnishable and paid out to him. However, the insolvency court rejected his application. The court of appeal then dismissed his immediate appeal. The registered appeal allowed him to pursue his application for releasing the funds. Protection against garnishing is governed by the provisions of the German Code of Civil Procedure (Zivilprozessordnung, hereinafter ZPO) on protection against garnishing.

According to the BGH, the inflation bonus paid by employers is in principle garnishable as earned income within the limits of Section 850c of the ZPO.

Pursuant to Section 850c of the ZPO, all payments to which a debtor is entitled as a result of work and services, irrespective of their designation or method of calculation, are deemed to be employment income.

The inflation bonus granted to the debtor is a voluntary additional benefit paid out of the employer’s own resources. It does not compensate for additional or overtime work and is not a special one-off payment. The protection against seizure is therefore determined in accordance with Sections 850a to 850h of the ZPO.

The inflation bonus cannot be classified as a non-garnishable hardship allowance under Section 850a no. 3 of the ZPO nor as a non-garnishable expense allowance.

The inflation bonus is also not an aid measure financed from public funds, but merely enjoys tax and fiscal advantages.

Lawmakers did not provide for the premium to be exempt from garnishing, unlike the energy cost bonus, nor may the inflation bonus constitute a non-garnishable claim under Section 851 of the ZPO in conjunction with Section 399 of the German Civil Code (Bürgerliches Gesetzbuch, BGB) since only earmarked claims can fall under this provision. However, the inflation bonus is not tied to a specific purpose, especially as compared to state corona aids – as employees can use the bonus as they wish.

BGH IX ZB 55/23 (25 April 2024)