Coalition Rifts Escalate as Germany's Minijob Overhaul Raises Employer Taxes to 5%

Germany’s governing coalition is showing cracks over planned changes to the "Minijob" system, a flagship piece of Chancellor Friedrich Merz’s Agenda 2030 reform package. While unions and social associations have taken to the streets, the sharpest opposition is now coming from within Merz’s own bloc — specifically from CSU leader Markus Söder, who has publicly rejected any deep restructuring of the low-wage employment model.

The core dispute centres on Merz’s plan to differentiate Minijob rules by demographic group — with separate treatment for school pupils, university students, pensioners and other workers. The proposed changes would lift the monthly earnings ceiling to €633, introduce mandatory pension contributions for Minijobbers, and raise the flat-rate employer tax from 2% to 5%. Söder warned this would inflict significant economic damage on the hospitality and agricultural sectors, where Minijobs are heavily relied upon.

Even as the coalition quarrels internally, the government has pushed ahead with other far-reaching labour and health reforms that have already triggered a wave of public anger.

Healthcare funding gap triggers cost shift

On the same day the Bundestag passed the GKV Contribution Rate Stabilisation Act — designed to plug a multi-billion-euro deficit in statutory health insurance — industry experts warned of an imminent wave of hospital bankruptcies. Gerald Gaß, head of the German Hospital Association (DKG), said cost-cutting measures and expiring supplementary payments could leave clinics short of €8 billion in total.

The law will increase patient co-payments, reduce fixed subsidies for dental prosthetics, and cap fee increases for providers. It also tightens sick-leave rules: employees will now need a doctor’s certificate from the first day of illness, ending the practice of phone-based sick notes. Social associations called the move a vote of no confidence in workers.

Labour law overhaul deepens divisions

Beyond healthcare, the Agenda 2030 package includes a planned flexibilisation of working-time law. The government wants to replace the daily maximum working hour limit with a weekly ceiling — a move DGB president Yasmin Fahimi has described as a red line. She insists the eight-hour day must be preserved, warning of "considerable conflicts."

The proposals also extend the maximum period for fixed-term contracts without objective grounds from two to four years, and permit up to six renewals until the end of 2030. Dismissal protection is also under review. Employer president Rainer Dulger welcomed the direction but demanded more: waiting days for sick pay and capping unemployment benefits at twelve months. Unions accuse him of offloading costs onto employees.

Protests broaden ahead of eastern state elections

While the government battles internal discord, opposition is swelling in the streets. On 13 July, 25 organisations — including Verdi, IG Metall and Caritas — demonstrated in Munich. Across more than 14 cities, thousands heeded calls for social protests. The atmosphere turned tense at the University of Cologne, where Chancellor Merz inaugurated a new institute for governance studies. Critics fear it will produce a one-sided, business-aligned elite education.

Even the coalition’s own legislation is facing revolt. The Freedom of Information Act (IFG), revised on 1 July, has drawn opposition from parts of the SPD parliamentary group, who argue that planned restrictions will hamper access for NGOs and journalists to state documents.

The DGB has called for nationwide demonstrations on 26 September, aiming to escalate pressure on the government ahead of the autumn state elections in eastern Germany. Researchers from the Institute for Employment Research (IAB) have meanwhile dismissed the Minijob adjustments as insufficient, saying they fail to address the core problem of crowding out regular employment.

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