That’s the law Parental allowance: Retroactive pay counts

The Federal Social Court (BSG) recently ruled that back pay can be taken into account when calculating parental allowance.

What counts is the income parents earned during the assessment period

In this specific case, a mother had applied for parental allowance for her daughter, who was born on August 25, 2014. After deducting the maternity leave period, the parental allowance office had included the income the woman earned from July 2013 through June 2014 in the parental allowance calculation. A back-pay payment of 1,900 euros received in August 2013 for the month of June 2013 was not taken into account. The reasoning was that this income had been earned outside the twelve-month assessment period. Therefore, it was not to be included in the calculation of parental allowance.

The Federal Social Court (BSG) disagreed and cited a new provision in the Federal Parental Allowance and Parental Leave Act of September 2012. According to this provision, the calculation of parental allowance depends solely on the income that eligible recipients earned during the assessment period. It is irrelevant for what period employees earned this back pay. Therefore, when calculating parental allowance, all current earned income that the applicant actually received within the past twelve months must be taken into account. This also includes back pay that was earned before the twelve-month assessment period but paid out later.

Tjark Menssen is a lawyer at DGB Rechtsschutz GmbH. (Photo: Frank Rumpenhorst)

Bonuses, vacation pay, and Christmas bonuses are not taken into account

A different rule applies to back pay that is classified for tax purposes as “other income.” These are one-time payments, such as a 13th or 14th month’s salary, bonuses, vacation pay, and Christmas bonuses. As a general rule, these payments are not included in the calculation. A back-payment of salary for the previous year also constitutes “other income” for tax purposes and may not be included in the parental allowance calculation.

Background: The basis for calculating parental allowance is the personal net income from employment during the twelve calendar months preceding the maternity leave period; for fathers, this is the period preceding the month in which the child is born. The basic parental allowance amounts to a maximum of 67 percent of the income that eligible individuals earned in the twelve months preceding the child’s birth: up to 1,800 euros per month.

Federal Social Court (BSG) ruling of June 27, 2019 – B 10 EG 1/18 R

Tjark Menssen is a lawyer at DGB Rechtsschutz GmbH.