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Volkswagen AG on Wednesday agreed to a new pay deal with Germany’s largest labor union to alleviate soaring inflation in the country, including a bonus of 3,000 euros ($3,092).

The car maker
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agreed to a collective bargaining agreement with Germany’s IG Metall union covering 125,000 employees, which will increase pay in two stages, by 5.2% in June 2023 and 3.3% in May 2024.

The agreement also includes an inflation-adjusted, tax-free bonus of EUR2,000 in the first quarter of 2023, and EUR1,000 in early 2024, the company said.

“The collective bargaining agreement mustn’t hide the fact that we must continue to keep our costs strictly under control,” Arne Meiswinkel, Volkswagen Passenger Cars’ board member for human resources, said.

Germany’s consumer-price index rose 10.4% in October, according to Germany’s statistics office.

Write to Ed Frankl at edward.frankl@dowjones.com


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