Barlohn

Cash wages are wages paid in cash. This concept is important for the bKV because it represents the flip side of non-cash wages: as soon as a cash payment is possible, the tax benefit is completely eliminated. The 50-euro exemption limit no longer applies—regardless of how small the amount is.

What Happens from a Tax Perspective

Bar wages are treated the same as regular wages. This means:

• Payroll Tax Based on the Employee's Individual Characteristics
• Social Security for Employers and Employees
• No use of any of the four flat-rate options available for non-cash compensation

For employees, this means that they receive noticeably less of the amount the employer contributes. A cash subsidy of 50 euros leaves only a portion of that amount as net pay, whereas the same amount, when provided as in-kind compensation within the exemption limit, is fully counted toward insurance coverage.

The classic example: the grant

In supplementary health insurance (bKV), cash benefits are most commonly provided through a subsidy model. The employee takes out supplemental insurance on their own, and the employer contributes a monthly amount.

The structure seems straightforward and uncomplicated—it eliminates the need for a collective bargaining agreement, the selection of an insurer, and consultation with the workforce. That is precisely why it is frequently chosen by smaller companies, often without a full understanding of the tax implications.

The earmarking of the funds does not change this. Whether the subsidy is expressly intended for insurance, whether proof of its use is provided, or whether the amount is forwarded directly to the insurer—the decisive factor for classification is that the employee is the policyholder.

Other Constellations

• The employee can choose whether to receive the supplementary health insurance or a cash payment instead
• Insurance coverage can be purchased for a fee
• Upon termination, a residual value is paid out
• If there is no contractual provision regarding classification, then cash wages are the obvious result

Why the error cannot be fixed

For the benefit to be treated as a non-cash benefit, the employer must be the policyholder and pay the premium directly to the insurer. This arrangement cannot be established retroactively: Those who started with a subsidy model can no longer qualify for the tax benefit for past periods. A change in the arrangement applies only going forward.

Anyone who is already paying subsidies and wishes to make the switch should coordinate the timing and handling of existing cases with the payroll department. In particular, it is important to clarify what will happen to existing individual policies—whether they will be canceled, placed on hold, or continued in parallel.

When Cash Wages Are Still the Right Choice

There are situations in which the subsidy model cannot be avoided—for example, when no insurer considers the minimum number of participants for a group policy to be met, or when employees wish to remain under existing policies. In such cases, classifying the payment as cash wages is not a mistake, but a deliberate decision. It simply needs to be calculated accurately before it is communicated.

Conclusion

In the bKV, bar Lohn is usually a design flaw, not a deliberately chosen model. The course is set during the drafting of the contract—and this determines whether the entire tax framework of the bKV is even available.

This article provides a general overview and is not a substitute for tax advice in specific cases.