The holiday season is also a season when many experience a financial windfall: in December, the thirteenth month salary lands on employee bank accounts. And the story behind this has Christmas-related origins.
By Thomas Weibel, Freelance Journalist
«At the Christmas party, against a backdrop of candles and Christmas lights, the boss personally gave each employee their Christmas pay (...) At the next Christmas party he asked his driver if he had also gone to church on Sunday. The driver said: ‘No, why should I have?’ ‘Well yes, to give thanks for your Christmas pay.’ ‘But I received that from the company.’ ‘No, from God, through the company’.»
With this anecdote, author Hans-Hermann Beckherrn describes the sentiment he experienced as a young industrial worker in 1950s Germany. This so-called Christmas pay, a one-off payment from employers to employees, is a vestige from the industrial revolution of the 19th century. The desolate situation of factory workers raised the awareness of factory owners not only of their economic, but also their social responsibilities.
Food Or a Coin
And so it came to pass that at Christmastime, many factory owners would walk the floors of their factories with a bag filled to overflowing and give each employee a gift, food, or with increasing frequency, a coin, in order to provide even the poorest the possibility of enjoying a pleasant Christmas. This voluntary payment was called remuneration in the English-speaking world.
Over the decades, this practice began to establish itself as a custom, and during the Weimar Republic, remuneration at regular intervals became the norm – for example, Christmas pay in December and some holiday money in June. The payments remained voluntary until the 1950s, when German and Austrian unions for the first time succeeded in securing entitlement to Christmas or holiday pay by collective agreement.
From a Single Pfennig to Several Marks
The amount of Christmas pay depends on the sector, the company, the number of years of employment with the company, and company practices. Even if Christmas pay is now generally called a thirteenth month salary (and holiday pay the fourteenth month salary), at many companies, this by no means equates a full additional monthly salary.
At the beginning of the 20th century, the difference from one company to another was still enormous and could range from a tiny payment, such as a single pfennig, all the way up to several marks.
Still No Statutory Right
In 1972, the German metal industry trade union negotiated a thirteenth month income ranging from 10 to 30 percent of a monthly salary, depending on the number of years of employment with the company. Today, this range is 25 to 55 percent.
There is still no such thing as a statutory right to holiday and Christmas pay. However, in many European countries and sectors of the economy, a full thirteenth month salary has become the norm (in individual or collective agreements), and for sectors that generate particularly high returns, there is even a fourteenth and on rare occasions even a full fifteenth full month salary. And it is probably safe to say that there are no longer any employers who inquire whether a prayer of thanks was made on Sunday for the extra pay.
On its Finanzblog (finance blog, available in German only), LGT regularly publishes information, positions and opinions written by its specialists on topics such as investments, markets and social issues, as well as an entertaining weekly finance-related piece with surprising and sometimes also useful knowledge from the world of money.
