Allowance Prorating Policy Expanded

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At a Glance

• Effective immediately, employers can prorate allowances for all work permit types based on the number of days an employee spent in Germany.

• This should reduce costs for allowances since the previous policy required employers to pay an allowance throughout the whole duration of the assignment.

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The situation

According to a new German Federal Employment Agency policy, effective immediately, employers can prorate allowances – which are funds the employer pays in addition to salary – for all assignment work permit types.

A closer look

Previously, the Federal Employment Agency required employers to pay allowances throughout the whole duration of an employee’s assignment – even for the days the employee was not in Germany.

The previous rule only allowed prorating of allowances for employees under the International Staff Exchange Permit.

With immediate effect, this rule now applies to the payment of allowances for other assignment work permits (e.g. Intracompany Transferee (ICT) card).

Background

All other allowance-related rules are still applicable. For example, the employer must pay the allowance directly to the employee without restrictions and working condition-related rules remain the same.

Impact

This new regulation simplifies the allowance policy for companies and should increase the popularity of permit types such as the ICT card.

Employers should ensure they can provide an overview of each employee’s days spent in Germany upon request from German immigration authorities.

If you have any questions, please contact the global immigration professional with whom you work at Fragomen or send an email to  [email protected].