German Government Unveils Major Business and Employee Policy Changes for 2026

The German coalition government has introduced significant policy changes set to take effect in 2026, aimed at revitalizing the economy and supporting businesses, employees, and consumers. Central to these reforms is a substantial reduction in bureaucracy, targeted to ease economic pressures by 25%, translating to about 16 billion euros in relief. This ambitious plan encompasses various sectors with key measures including an increase in the minimum wage to 13.90 euros per hour from January 1, 2026, with a further rise to 14.60 euros planned for 2027. Child benefits will be standardized to 259 euros per child monthly, while incentives for electric vehicles will include a purchase premium and extended tax exemptions to boost environmentally friendly transportation.

Additional initiatives focus on digital transformation, such as introducing a digital crafts card and a centralized online portal to streamline business registrations. The government will also launch a new KfW subsidy program supporting age-friendly and barrier-free home renovations starting spring 2026. However, there are cost increases as well, including a rise in the CO2 tax on heating fuels and the monthly price of the Deutschlandticket increasing to 63 euros.

Businesses and the self-employed express cautious optimism, awaiting tangible impacts beyond the announced promises. Beyond economic policy, pension adjustments and taxation rule changes are also slated to take effect, reflecting a broad governmental effort to modernize and stimulate Germany’s economic and social landscape.