Outplacement consulting becomes wage tax-free
Previously, employees had to pay tax on employer-financed outplacement advice as a non-cash benefit and pay income tax on the – sometimes substantial – fees. In addition, an increased tax burden was to be expected in the year in question anyway, because the severance payment had to be taxed in addition to the normal salary. Against this background, the additional burden of paying tax on the outplacement fee was unreasonable for many employees, meaning that many desirable consultations could not be carried out as a result. Some employers saw no other way out than to compensate the employee for the wage tax disadvantages. As a result, socially responsible companies incurred additional costs on top of severance pay and outplacement fees.
This is now a thing of the past. In the 2020 Annual Tax Act, the Bundestag and Bundesrat decided that outplacement advice for departing employees arranged and financed by the employer will no longer be treated as a non-cash benefit for tax purposes. Section 3 no. 19 EStG now states: “Counseling services provided by the employer or, at the employer’s instigation, by a third party for professional reorientation upon termination of the employment relationship are also tax-free. The benefits … must not be predominantly of a rewarding nature.” In addition, further training measures by the employer or a third party commissioned by the employer that serve to improve the employability of the employee should also remain tax-free. This regulation, which the BDU had also campaigned for, already applies for 2020.
This is good news not only for the contracting companies, but above all for all those employees who are threatened or affected by redundancy and job loss.
omegaconsulting offers consulting for companies on separation management and advising departing employees on professional reorientation.
