Germany scraps €1,000 tax-free worker bonus after fierce backlash
The German government has scrapped its proposal for a tax-free €1,000 bonus for workers. The plan faced strong opposition from state leaders and businesses before being officially abandoned this week.
The bonus was intended to support employees with a one-time payment, free of taxes and social contributions. But after a failed vote in the Bundesrat, the coalition confirmed its withdrawal on Monday.
Under the original scheme, employers could have paid staff up to €1,000 tax-free by mid-2027. The federal government would cover one-third of the costs, leaving the remaining two-thirds to state and local authorities. This cost-sharing approach sparked widespread criticism, with only four of Germany’s 16 states backing the proposal in last Friday’s Bundesrat vote.
Opposition from state governments and business groups left the plan with little support. Without a majority in the Bundesrat, the federal government would have needed to call a mediation committee to revive it. Instead, coalition leaders chose to abandon the idea entirely. Chancellor Olaf Scholz now plans to bring business and union representatives to the Chancellery in early June. The talks will focus on a broader reform package covering taxation, labour market rules, pensions, and reducing bureaucracy. A letter from lawmakers Jens Spahn and Alexander Hoffmann confirmed the bonus was off the table, shifting attention to wider economic negotiations.
The cancellation of the €1,000 bonus removes a contentious policy from the government’s agenda. Upcoming negotiations will instead target structural reforms in taxation, employment, and administration.
The June talks aim to produce a joint agreement between businesses, unions, and policymakers. Any new measures will need broader support to avoid the same resistance that blocked the bonus plan.
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