New German Law Aims to Promote a More Inclusive Labor Market

The German legislature recently passed the “Act to Promote an Inclusive Labor Market” which will enter into force on January 1, 2024.

The purpose of the law is to improve the conditions for individuals with disabilities, enabling their active engagement in the labor market and facilitating more consistent participation. To achieve this purpose, it also contains provisions to help maintain existing employment relationships of individuals experiencing health impairments. Furthermore, the law aims to provide more focused assistance for individuals with severe disabilities.

The law primarily provides for an increase in the so-called compensatory levy. Employers who regularly employ more than 20 employees already have to pay such a levy if they fall below a certain employment quota of severely disabled employees. Usually, this quota is 5 percent of employees.

The amount of the levy then due is based on the respective compliance rate in the company. If the employment rate of severely disabled employees or employees with equal status in the company is between 3 and 5 percent, EUR 140.00 per month is due for each mandatory job not occupied by a severely disabled person. If the employment rate is between 2 and 3 percent, the monthly levy increases to EUR 245.00. The current maximum levy is EUR 360.00 per month if the employment rate is below 2 percent.

The new law now provides for a fourth stage: If the employment rate is 0 percent, EUR 720.00 will be payable in the future.

The reason for this tightening is that at present there are still around 45,000 employers nationwide – around a quarter – who do not employ a single severely disabled person, even though they would be obligated to do so, based on their company size. The increase in the compensatory levy is intended to encourage these employers to fulfill their legal obligation.

In addition, the law provides among other things for the following changes:

A fictitious approval will be introduced for claiming benefits from the integration office in order to speed up the approval process. If the responsible integration office does not make a decision on such an application within six weeks of it being submitted, the regulatory approval will be in the future.

Furthermore, the cap on the wage subsidy for the so-called “budget for work” is to be lifted. The purpose of the “budget for work” is to enable people with disabilities to find employment on the general labor market as an alternative to workshops for people with disabilities. The “budget for work” includes a wage subsidy to the company that employs a person with disabilities as well as support services for people with disabilities. The removal of the cap is intended to ensure that the maximum wage subsidy can continue to be granted even after the minimum wage was raised to EUR 12.00 last year. For employers, this will make it more cost-effective and thus ultimately more attractive to hire people with disabilities via the “Budget for Work”.