Germany is introducing practical changes to its labour policies that could have a real impact on both older workers and those earning lower wages. Starting January 1, 2026, pensioners who decide to keep working after reaching retirement age will be allowed to earn up to €2,000 per month tax-free. This is part of a new initiative called Aktivrente (Active Pension), recently approved by the Federal Cabinet (Bundesregierung).
Why This Matters
The idea is simple, encourage experienced older workers to stay in the workforce a bit longer without penalising them financially. According to the Federal Ministry of Labour and Social Affairs (BMAS), the tax-free allowance applies to regular employment subject to social insurance contributions. It does not cover mini-jobs, freelance work, or civil service roles, but for many retirees, it’s a meaningful incentive to remain professionally active.
This move comes as Germany faces increasing labour shortages, especially in skilled sectors. By making it easier for pensioners to contribute without losing out on income, the government hopes to tap into a valuable pool of talent and experience. The Aktivrente is designed to keep knowledge and expertise in the workforce while easing pressure on industries struggling to fill roles.
Minimum Wage on the Rise
At the same time, there’s another big change on the horizon: the statutory minimum wage is expected to rise significantly. While political discussions continue around a €15 per hour target by 2026, the Minimum Wage Commission (Mindestlohnkommission) has already recommended increases to €13.90 in 2026 and €14.60 in 2027. This reflects growing concern about income inequality and the cost of living. If implemented, it would mark a significant increase from the current rate of €12.82 (as of January 2025), benefiting millions of workers across Germany.
The proposed increase is not just about wages—it’s about fairness and sustainability. A higher minimum wage helps reduce poverty, strengthens purchasing power, and supports economic growth by boosting consumer spending.
The Bigger Picture
Together, these reforms show a clear shift in Germany’s approach to labour policy—one that values both fairness and pragmatism. By supporting older workers and raising the wage floor, the country is aiming to build a more inclusive and resilient economy.
- For Workers: Pensioners gain flexibility and financial security; low-wage earners see meaningful income growth.
- For Employers: Access to experienced talent and improved retention.
- For the Economy: Stronger consumer spending and a more balanced labour market.
Germany’s approach demonstrates that social policy and economic competitiveness can go hand in hand.
Leap29 perspective Simon Duff – Director Leap29 shares his thoughts.
“Germany’s new reforms are both an opportunity and a challenge. The Aktivrente scheme means businesses can retain experienced talent without the usual tax complications—a big win for sectors struggling with skill shortages. These workers bring knowledge and stability, which is invaluable. On the other hand, the planned minimum wage increase toward €15 will require careful budgeting and workforce planning. While it strengthens employee well-being and purchasing power, it also raises cost pressures, especially for SMEs. For HR and finance teams, now is the time to review pay structures and forecast impacts. Overall, these changes push us toward a fairer, more sustainable labour market—but they demand proactive adaptation from employers”
