Plans to shorten German parental allowance – A chance for employers?

High-income earners – limitation of eligibility to parental allowance

On 3rd July 2023, the Ministry of Family Affairs had declared its intention to implement the government's savings targets by changing the eligibility to parental allowance. Instead of changing the amount of the wage replacement benefit for everyone, the eligibility threshold shall be lowered. In the future, parental couples with a taxable income of more than 150,000€ should therefore no longer receive parental allowance.

Harsh criticism – steps backwards regarding equal rights

This was followed by a media outcry and, as a result, political recriminations. The fact that cuts shall be made to an important benefit of family policy, whose amount had not been adjusted since its introduction, was met with incomprehension by many. Inter alia, it has been criticised that this would reinforce traditional role models and may increase women’s financial dependence, who statistically often earn less than men. Equality – according to the consensus – will not be accomplished thereby. It remains to be seen how the further discussion will develop and whether alternatives can be found to the plans to cut parental benefits.

Employer’s opportunity – retention through meaningful incentives

Nevertheless, employers would be well advised to follow the current discussion closely. There is an opportunity to structurally review the existing compensation systems and working conditions and, if necessary, to create incentives that are in line with requirements. With respect to attracting and retaining qualified employees, it might be necessary that employers offer options to mitigate any burdens arising from the austerity plans.

In many countries, various programs exist which offer parents (additional) paid time off that can be used for childcare after birth. Thus, saving up via working time accounts, could be a way to compensate for periods without income. Although, the establishment of in-house childcare facilities will often only be feasible in large companies, financial support for childcare might be helpful and could be deemed to be an attractive incentive for employee retention. After all, appropriate availability of childcare is often rare and very expensive. Therefore, in the future, it is to be expected that employees will demand that employers play a more important role in reconciling work and family life, if they do not want to do without well-trained, motivated employees.

Instead of fruit baskets – support of equal opportunities and families

Many companies are suffering from a shortage of skilled workers. Recruiting but also retaining qualified employees is becoming increasingly difficult. Providing a fruit basket will probably no longer be the decisive incentive with which companies will be able to score points with potential applicants. Not only employees’ satisfaction might be increased, if employers will focus on providing attractive opportunities to improve the compatibility of children and career, offering flexible working time models and even review the possibility of financial support that can reduce the potential losses of state wage replacement benefits. In fact, it is to be expected that such an approach will represent an advantage in the competition for good skilled personnel. In times of a shortage of skilled workers, companies simply can no longer afford to do without parents as employees. It would be fatal if well-educated women were to fall back to traditional gender roles and were not available to the labour market, but it is also important from a socio-political point of view to support fathers in assuming their responsibility for care work. Employees who feel valued, whose work-life balance conflicts are seen and support is offered, will repay this through motivation and loyalty.