Who qualifies for the new tax-free allowance?

Anyone working past the statutory retirement age qualifies for tax-free wage income up to €2,000 per month, capped at €24,000 per year. The rule applies from 8 January. It covers wages from new or ongoing jobs. Regular tax rules still apply to pay above the limit and to non-wage income.

How does this help with Germany’s labor shortage?

It makes short, flexible shifts more rewarding for experienced workers, improving coverage for peak hours and training. Healthcare, construction, and logistics can fill gaps without long hiring cycles. Better shift coverage can reduce overtime, agency costs, and delays, easing the Germany labor shortage where experience adds the most value.

What should employers do first?

Map peak-hour staffing needs, create part-time rosters that align with the €2,000 monthly threshold, and update payroll systems to reflect the allowance. Communicate hours and gross pay clearly to working pensioners. Coordinate with tax advisors on documentation so year-end filings reconcile correctly, especially if employees work for multiple employers.

What are the budget and policy risks?

Estimates suggest €0.9–€1.4 billion less annual tax revenue. That is manageable but will draw review if adoption is very strong. Thresholds could be fine-tuned later. The main operational risks are payroll errors and uneven SME adoption. Early guidance and simple contract templates can limit friction and keep benefits intact.

Global Market Insights

January 8: Germany’s Active Retirement Tax Break Starts; Labor Impact

ByHuzaifa Zahoor January 8, 2026January 8, 2026

Germany active retirement tax begins on 8 January, letting employees past the statutory retirement age earn up to €2,000 per month tax-free, capped at €24,000 per year. The plan targets the Germany labor shortage by keeping experienced staff in work. We explain who qualifies, how employers may use it, and what investors should watch. Sectors like construction, healthcare, and logistics could see staffing relief, while the budget impact is estimated around €0.9–€1.4 billion in lower tax receipts.