For many people receiving unemployment benefits in Germany, especially ALG 1 (Arbeitslosengeld I), earning extra income can be both a financial necessity and a way to stay active during a period of job search. However, there are specific regulations and limitations that recipients must be aware of when it comes to earning additional money while receiving ALG 1. Understanding these rules is crucial to avoid financial penalties or the risk of losing benefits altogether. This topic provides a detailed guide on what it means to ‘dazu verdienen’ (earn additionally) while on ALG 1, including limits, reporting obligations, and strategic advice.
Understanding ALG 1 and Its Purpose
What Is ALG 1?
ALG 1, or Arbeitslosengeld I, is the first tier of unemployment benefits in Germany. It is intended for people who have lost their jobs and have paid into the unemployment insurance system. The benefit usually lasts between 6 to 12 months, depending on age and prior employment duration. The amount is calculated based on the individual’s previous net income, generally around 60% (67% if the person has children).
The Goal of ALG 1
The primary purpose of ALG 1 is to provide financial security during a transitional period and to support recipients in their efforts to re-enter the workforce. It is not meant to be a long-term solution but rather a temporary assistance while actively searching for a new job.
Additional Earnings While Receiving ALG 1
Is It Allowed to Earn Extra Money?
Yes, individuals receiving ALG 1 are allowed to earn some additional income, but only under strict conditions. The German Federal Employment Agency (Bundesagentur für Arbeit) allows a small margin of earnings without affecting the unemployment benefit. This opportunity is useful for maintaining work habits, staying connected to a profession, or simply supplementing a tight budget.
Income Limits
The key rule is that you may work up to 15 hours per week and earn up to €165 per month without having your ALG 1 benefits reduced. This amount is called the ‘Freibetrag’ or tax-free allowance. Any income above this threshold will reduce the benefit payment accordingly.
- Maximum working hours: 15 hours per week
- Tax-free earning limit: €165 per month
- Exceeding the limit: Reduces ALG 1 on a euro-for-euro basis
Examples of Side Jobs
Many ALG 1 recipients choose part-time or freelance work to earn additional income. Common options include:
- Freelance or contract work (writing, translation, consulting)
- Mini-jobs (450-Euro-Jobs, now increased to €520 as of recent changes)
- Temporary employment with flexible hours
- Online income (if correctly declared)
How to Report Additional Earnings
Mandatory Reporting
It is mandatory to inform the Bundesagentur für Arbeit before beginning any paid work while receiving ALG 1. This includes jobs with low pay or irregular hours. Failure to report such earnings can result in penalties, repayment obligations, or even termination of benefits.
Documentation Required
When declaring a side job, you must submit:
- The contract or written agreement with your employer/client
- Expected working hours and income
- Any changes in the job or income during the benefit period
Monthly Income Proof
You will also need to provide monthly proof of income, such as invoices or payslips, to ensure compliance with the earning limits. The employment agency uses this data to calculate how your side income affects your ALG 1 benefits.
What Happens If You Exceed the Limits?
Consequences of Exceeding 15 Hours
If you work more than 15 hours a week, you are no longer considered unemployed according to German law. This means your ALG 1 benefits will be stopped entirely from the date you exceed the time limit. Even if you still need financial support, the benefits system assumes you are no longer actively seeking full-time employment.
Impact of High Earnings
If your side income exceeds the €165 exemption, the excess amount is subtracted from your ALG 1 payment. For example, if you earn €300 per month, €135 will be deducted from your monthly unemployment benefit.
Strategic Tips for Earning Extra on ALG 1
Choose Flexible Jobs
Opt for jobs with flexible scheduling that allow you to stay within the 15-hour limit. Freelance or online gigs are often ideal for this.
Keep Good Records
Maintain detailed records of your hours and earnings. Always submit this information promptly to avoid any issues with the employment agency.
Consult Your Agent
Speak regularly with your case officer at the Bundesagentur für Arbeit. They can help clarify rules, ensure compliance, and sometimes offer suggestions for approved part-time work opportunities.
Consider Tax Implications
Even if you stay within the ALG 1 limits, your side income might be taxable, especially if you have other sources of revenue. Keep this in mind when filing your yearly tax return.
Special Cases: Self-Employment While on ALG 1
Starting a Small Business
Some ALG 1 recipients use their time to start a small business. As long as the activity is part-time (under 15 hours), this is allowed. However, it must be declared in advance, and you will still be subject to the income limits.
Gründungszuschuss (Start-Up Grant)
If you plan to become fully self-employed, you may apply for the Gründungszuschuss, a start-up grant for ALG 1 recipients. This transitions you out of the unemployment system and supports you as you build your business.
Earning extra income while receiving ALG 1 known in German as ‘dazu verdienen’ is permitted within certain guidelines. The major considerations are staying under the 15-hour weekly limit and ensuring your monthly earnings do not exceed €165 unless you’re prepared for a reduction in your benefit. Accurate reporting, clear communication with the employment agency, and careful planning can help recipients supplement their income without jeopardizing their financial safety net. Whether through mini-jobs, freelance work, or small business efforts, additional earnings during unemployment can be both practical and empowering when managed correctly.