Germany Moves to Raise Minijob Employer Tax as Bigger Reform Is Put Off

Germany raises flat-rate tax on minijobs from 2% to 5% as pension overhaul stalls. 6.8 million workers affected; final decision postponed to autumn 2026.

Germany’s government has taken a first step on minijobs, but the larger overhaul is still unresolved. After a meeting of the coalition committee on 2 July 2026, the governing parties agreed on a compromise that leaves the model in place while increasing the cost for employers.

The main change is straightforward: the flat-rate tax paid by employers is set to rise from two to five percent. A final decision on broader reforms has been delayed until the autumn.

The debate is being driven by a proposal from the old-age provision commission dated 23 June 2026. That body wants to largely dismantle the special status of minijobs and bring workers more firmly into the statutory pension insurance system. Under its plan, all minijob workers would in future have to pay into the pension insurance scheme. The current option to opt out would disappear. The commission has only planned exceptions for pupils. It also wants minijob workers to gain an entitlement to sick pay.

Chancellor Merz has pushed back. In a television interview, he made clear that a full abolition of minijobs is not planned, putting him at odds with demands from the pension commission. Resistance is also coming from the federal states. Bavaria’s minister-president Söder said the plans to abolish minijobs were finished and argued for preserving flexibility in the labour market.

One change is already in force. Since 1 July 2026, minijob workers who were previously exempt from mandatory pension insurance have been able to return once. The aim is to broaden the base of contributors in the pension system.

The issue affects millions of people. In the first quarter of 2026, around 6.8 million people were working in minijobs. Of those, 6.55 million were in the commercial sector and 252,000 in private households. The current earnings threshold stands at 603 Euro per month.

Minijobs are especially common in retail, where more than one million people work in such roles, and in hospitality, with around 873,000. The DEHOGA and BDA associations are warning that the changes would bring more bureaucracy and could put jobs at risk.

Fitzenberger, head of the Institute for Employment Research (IAB), has ???????ed a compromise: a de minimis threshold of 250 Euro per month. Without such a limit, he warned, small-scale employment could shift into undeclared work.

The legislation package is due to be passed by the end of 2026. The main changes are expected to take effect no earlier than the beginning of 2027. For next year, an increase in the earnings threshold to 633 Euro is already planned — provided there is no fundamental system change.