Do I need to inform my employees about their tax obligations?

Yes. As soon as taxes are withheld—regardless of which of the four options applies—you are required to notify your employees of this in writing.

Form Requirements

An email is sufficient; a signature is not required. This is for informational purposes only, not for consent.

The notice should nevertheless be documented in such a way that it can be verified in the event of an audit—for example, as a mass email with a send date or as an attachment to the pay stub. Verbal notification at a staff meeting does not meet this requirement.

What it makes sense to include in it

• Which service is affected
• Which option is used for tax purposes
• When the rule takes effect
• Whether and how this affects the net amount

The factor that determines acceptance

The impact on take-home pay is the most important part of the announcement. Under the flat-rate method specified in Section 40(1) of the Income Tax Act (EStG) and under the net wage taxation system, nothing changes for employees—and that should be clearly stated.

Under Section 37b of the Income Tax Act (EStG), the social security contribution remains in effect and reduces the net pay; when treated as a regular monetary benefit, employees are responsible for paying the tax and their own contribution. In these cases, it is advisable to provide an explanation before the first pay stub raises questions.

Time of Notification

In practice, it has proven effective to include this information as part of the initial communication rather than providing it later. Explaining the tax treatment from the outset helps avoid the impression that something has been withheld.