Pay off overtime

Do you often work overtime and wonder how you can get it paid out optimally? Find out everything about legal bases, tax aspects and best practices now at Regional Hero.

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The world of work is constantly changing and companies are always facing new challenges. One of these challenges is dealing with overtime. Is it better to pay them out or should employees celebrate the extra working hours? This decision can have various effects — on employee satisfaction, employee loyalty to the company, corporate culture and, last but not least, on the company's financial situation. Although it seems like a simple question at first glance, there are many aspects to consider: legal requirements, tax consequences, economic effects and also psychological aspects. In this guide, you'll find out which different options are available and which factors you should consider when making your decision. Special attention is also given to the possibilities and limits of overtime as a motivational tool and to best practices for dealing with overtime. This gives you a comprehensive tool to make informed decisions for your company.

1. Basics of overtime — legal aspects and business practice

Overtime is always a hotly debated topic in companies. As an employer, you are faced with the challenge of ensuring the wellbeing of your team and meeting operational requirements at the same time. The legal framework and the practical handling of overtime play a decisive role in this.

Legal bases

The legal aspects of overtime are regulated in the Working Hours Act (ArbZG). A distinction is made between two types of overtime: overtime and extra hours. If you exceed the legal maximum working time of eight hours per working day, this is known as overtime. In certain cases, however, up to ten working hours per day are allowed if compensation is made within six months or 24 weeks. These extra hours are only considered overtime if the average working time of eight hours per day is exceeded. It is important to know that there is generally a legal right to pay for overtime.

corporate practice

In practice, companies handle overtime very differently. The spectrum ranges from a clear rejection to flexible regulations and the active promotion of overtime. The company working time model is decisive for dealing with overtime.

For example, a flexitime model enables employees to arrange their working hours flexibly and thus avoid or reduce overtime. In other models, working time is regulated by a collective agreement or works agreement. Overtime accounts, for example, can be kept here, which provide an overview of overtime and enable compensation or time off.

The basics of overtime and its legal aspects are therefore varied and can vary significantly depending on business practice. It is your responsibility as an employer to deal with these in detail and to ensure fair and legally compliant practice in your company.

2. Pay out or pay off overtime - differences and advantages of both approaches

In today's dynamic business environment, it is not uncommon for employees to work overtime. Here we would like to clarify whether it is better to pay off this overtime or to celebrate it, looking at the differences and advantages of both approaches.

Pay off overtime

The payment of overtime is common practice in many companies. Financial compensation is paid here for additional hours worked. This can be particularly attractive for employees who are looking for immediate financial advantage. In addition, paying out overtime can make the value of work visible and motivate employees to make additional efforts when necessary.

However, this model also poses challenges. For one thing, it can lead to a culture of overwork if the company doesn't clearly communicate that overtime should not become the rule. On the other hand, there may also be tax consequences when paying out overtime, which must be carefully considered.

Celebrate overtime

Working overtime offers the opportunity to get free time for additional hours worked. This approach focuses on work-life balance and can be particularly attractive for employees who place great value on their free time.

By working overtime, companies can send a positive signal about the health and well-being of their employees. At the same time, however, careful management is also needed to ensure that this additional free time does not result in a staff shortage.


Whether you, as an HR manager or managing director, decide to pay out or pay off overtime depends on many factors. In addition to your company guidelines and tax considerations, corporate culture also plays an important role. Ultimately, it is important to find a balance that is in the best interest of both companies and employees. It is important to regulate overtime fairly and transparently, keeping in mind both the wishes of employees and the needs of the company. With clear and open communication, you can create an environment in which overtime is neither avoided nor exploited, but rather seen as a sign of flexibility and commitment.

Nachhaltigkeit trifft Mitarbeiterzufriedenheit. Entdecke die Regional Hero Card.

Vereine regionales Engagement mit steuerfreien Arbeitgeberzuschüssen und schaffe einzigartige Mitarbeiter-Benefits.

3. Tax benefits and consequences of paying out overtime

Paying out overtime instead of compensating for time off has tax consequences for both employers and employees. Even when planning overtime pay, it is therefore important to have a sound knowledge of tax aspects.

Tax benefits of paying out overtime

Payment of overtime is generally subject to social security and tax. However, by cleverly designing overtime pay, the tax advantage for employees can be optimized. One option is to pay overtime within certain allowances. As part of the tax-free subsistence minimum, overtime benefits can be paid out free of social security and tax free.

Employers also benefit from tax benefits when they pay out overtime. The overtime payments expended are tax-deductible for them as operating expenses. In this way, they can reduce the financial burden of overtime pay.

Tax consequences of paying out overtime

However, when paying out overtime, the tax consequences must also be considered. For example, the payment of overtime generally results in a higher tax burden on employees, as the additional income can increase the personal tax rate.

As an employer, you also have additional costs due to the payment of overtime: You must pay social security contributions and income tax. Another aspect concerns the tax recognition of overtime pay: If overtime is paid in a lump sum and without specific proof, the tax office may not recognize these expenses as operating expenses.

It is therefore important to accurately record and document overtime. An effective strategy can also be to combine overtime pay with other forms of compensation that are tax-advantaged.

When planning and carrying out the payment of overtime, it is therefore important to consider both the tax benefits and the tax consequences and, if necessary, seek expert advice. In this way, you can ensure that you not only strengthen the motivation and loyalty of your employees, but also avoid tax pitfalls.

4. Overtime as a motivational tool - opportunities and limits

Overtime can be used as an effective means of corporate management to increase employee motivation. There are a number of options, but there are also limits that you should consider.

Overtime as an incentive

One of the most effective uses of overtime is to use it as an incentive. It can be either in the form of additional payment or as compensation through free time. For many employees, monetary compensation for additional work is a strong motivation. They see their efforts directly rewarded in the form of higher income. But the offer to convert overtime into free time can also be attractive. For example, they can be used for longer holidays.

Balancing motivation and stress

It is important to create a healthy balance between the need for overtime and employee wellbeing. Permanently high overtime figures can lead to overwork and stress, lower performance and increase the risk of illness. It is therefore important to ensure regular breaks and recovery phases to avoid overloading employees.

Integrate overtime into corporate culture

Overtime should also be handled transparently and integrated into the corporate culture. This means that overtime regulations and forms of overtime are clearly communicated and that willingness to do so is appreciated. Good handling of overtime can thus contribute to stronger employee loyalty to the company.

Observe legal framework conditions

However, it is always important to keep an eye on the legal framework. According to the Working Hours Act, employees may not work more than eight hours per day on average. Up to ten hours are only allowed in exceptional cases. Breaks and rest periods are also required. If a company violates these requirements, there is a risk of severe penalties.

Overall, overtime offers many opportunities to strengthen employee motivation and loyalty to the company. However, the health and well-being of employees must not be neglected. Responsible and fair handling of overtime is therefore essential in any case.

Nachhaltigkeit trifft Mitarbeiterzufriedenheit. Entdecke die Regional Hero Card.

Vereine regionales Engagement mit steuerfreien Arbeitgeberzuschüssen und schaffe einzigartige Mitarbeiter-Benefits.

5. Effects of overtime regulation on employee retention

Employee retention is a key factor for a company's success. It not only keeps skilled workers in the company, it also makes a significant contribution to strengthening corporate culture and employee satisfaction. Handling overtime can be a major influencing factor here. In the following, we look at the potential effects of various overtime regulations on employee retention.

Introduction of a fair and transparent overtime regime

A fair and transparent regulation for overtime is a decisive element of a company's credibility vis-à-vis employees. This includes clearly communicating when overtime is required, how it is compensated or remunerated, and whether a payout or compensation of time off is possible. Such an approach creates trust and can strengthen employee loyalty to the company.

Options for compensation for overtime

Whether payment of overtime or compensation for time off contributes more to employee retention depends on the individual preferences of employees. Some employees prefer an additional financial benefit, others are happy to have additional free time. A good approach can therefore be to offer employees a choice. This shows that the company takes the needs of employees into account and can thus also contribute to retaining skilled workers.

Overtime and work-life balance

Handling overtime can have far-reaching effects on the work-life balance of employees. When overtime becomes the norm and employees have little opportunity to recover, this can lead to dissatisfaction and, in the worst case, health problems. A company can strengthen employee loyalty by ensuring a good balance between work and leisure. This also includes careful handling of overtime.

All in all, companies should regard overtime as an important tool for employee retention. With transparent and fair regulations that take into account the needs of the workforce, they can make a positive contribution to a pleasant working environment and to the satisfaction and retention of their employees.

6. Best practices for dealing with overtime — strategies for effective and fair regulations

Overtime can occur in almost any company. However, they can also lead to dissatisfaction and stress among employees. Therefore, a sophisticated system for dealing with overtime is of great importance. Create a fair and transparent overtime model that takes into account both the interests of employees and the company.

Fair and transparent overtime arrangements

Transparency is a key aspect of effectively structuring overtime. Make sure employees know exactly what to expect and how overtime is handled. This includes both clear rules as to when overtime is required and how this is compensated.

Choosing between payout and time off

A frequently used practice is to offer employees a choice between payout and compensation for time off. This gives them a degree of control and flexibility and can help increase engagement and satisfaction. Make sure that both options are designed fairly and that one does not severely disadvantage the other.

Building an overtime pool

Another option is to set up an overtime pool. This is a type of credit account to which the overtime worked is credited. Employees can then access this credit when the time comes. This is a flexible solution that meets the individual needs of employees.

Involving employees in decision-making processes

Involving employees in decision-making processes can also contribute to a fairer handling of overtime. For example, they can be involved in drafting overtime regulations. This not only creates a stronger understanding of the need for overtime, but also increases acceptance of the regulations.

Finally, it is essential that companies regularly review and adjust their overtime practices. This is the only way they can ensure that their strategies are not only legally compliant, but also efficient and fair.

Any more questions?

Everything you want to know — simply explained.

What is a cash benefit card?

A benefit card in kind is a tool with which companies can provide their employees with tax-free benefits in kind. The Regional Hero Card is a special benefit card that aims to promote the local economy. The card works like a prepaid credit card and can be used at all acceptance points that accept Mastercard. Employers can conveniently top up the cards with tax-free benefits in kind, which employees can then use in shops and services in their region. The Regional Hero Card provides a convenient way to provide employees with tax-free benefits while supporting and strengthening the local economy. It promotes employee loyalty to the company and contributes to the attractiveness of the workplace. The card can be used both online and offline and is supported by a user-friendly app that helps employees discover local offers and keep an eye on their available amount.

How do companies and employees benefit from a benefits card?

Companies and employees benefit from a benefit card in kind, such as the Regional Hero Card, in various ways. Companies can pass on tax-free benefits in kind to their employees and thus increase employee motivation and retention. By supporting the local economy, they also improve their corporate image and contribute to the sustainable development of the region. Employees benefit from tax-free benefits that increase their disposable income and have the opportunity to support local businesses and services. The Regional Hero Card helps them discover the diversity of their region and promotes awareness of the importance of the local economy. Overall, the card therefore creates added value for everyone involved.

What tax-free benefits in kind can companies offer with a benefits card?

With a benefit card such as the Regional Hero Card, companies can offer their employees various tax-free benefits in kind. In Germany, for example, benefits in kind of up to 600€ per year and employee are tax-free, in addition, 180€ per year and employee can be granted for personal events such as birthdays or anniversaries. The tax-free benefits in kind include meal vouchers, vouchers for local shops, leisure facilities or cultural events. The Regional Hero Card allows companies to easily and conveniently pass on these tax-free benefits to their employees while supporting the local economy.

How can I order and activate the Regional Hero Card?

To order the Regional Hero Card for your company, please use the contact field on our website to make an appointment with us. In an online meeting, we will discuss the requirements and the desired number of cards for your employees. As soon as the cards have been ordered, your employees will receive the physical card by post or the digital card via email. The Regional Hero Card is activated via the corresponding app. Your employees must download the app on their smartphone and log in with their personal details. They then enter the activation code that they received with the card. After successful activation, the card is ready for use and the credit can be used at participating stores and service providers. The app also provides an overview of the current balance and the option to view transactions.

How does the Regional Hero Card contribute to sustainability and strengthening the local economy?

The Regional Hero Card contributes to the sustainability and strengthening of the local economy by allowing employees to spend their tax-free credit with regional businesses and service providers. In this way, the money flows directly into the local economy, which helps to secure jobs, support local companies and strengthen purchasing power in the region. By specifically promoting the local economy, sustainability is improved as transport routes are shorter and local resources are used. This results in a reduction in the ecological footprint. In addition, the Regional Hero Card promotes awareness of the importance of the local economy and the benefits of shopping with regional suppliers. By combining tax-free benefits for employees and supporting regional companies, the Regional Hero Card helps create a sustainable and economically strong community.

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