(de-news.net) – Germany has announced that it intends to reform its parental allowance program, keeping the current 14-month benefit duration while enhancing income replacement for parents who take shorter leaves of absence and hiking payout ceilings. The proposal by Family Minister Karin Prien (CDU) seeks to encourage fathers to participate more, but an analysis by the Ifo Institute cautions that higher claims could drastically lower anticipated government savings. Stronger family support must indeed be balanced against government budgetary limits among worries that the proposed increases cannot completely offset inflation. Final approval is still pending.

Germany’s Federal Government plans to retain the existing 14-month parental allowance (Elterngeld) period while increasing minimum and maximum payments and providing higher income replacement for parents who take shorter periods of leave. The revised proposal from Minister Prien means that an earlier plan to reduce the benefit period to 12 months will be abandoned. The draft has entered internal government coordination, although final approval and a definitive implementation schedule remain pending.

At the center of the proposed reform is a 4-6-4 model designed to distribute parental leave more evenly between mothers and fathers. Four months would be reserved for each parent, while six additional months could be divided flexibly between them, preserving the maximum entitlement of 14 months. Single parents would also remain eligible for up to 14 months of benefits. During the four months reserved for each parent, income replacement would rise from the current standard rate of approximately 65 percent of previous net earnings to 80 percent. For the six months that parents could allocate freely, the replacement rate would fall to 50 percent.

The Government also plans to raise the minimum monthly payment from 300 euros to 330 euros and the maximum from 1,800 euros to 1,900 euros. The increases would represent the first adjustment to the benefit since its introduction in 2007. By combining higher replacement rates for shorter leave with lower rates for additional months, the proposal seeks to strengthen financial support during the early stages of parenthood while encouraging both parents to participate in childcare.

Reform would expand flexibility and restore simultaneous payments

The proposed changes extend beyond payment levels and the allocation of leave. Parents would once again be able to receive the basic parental allowance simultaneously without the restrictions introduced under the previous reform. Under those rules, both parents generally could receive the basic benefit at the same time for only one month during the child’s first year of life. The revised approach would allow them, for example, to take their four reserved months together.

The draft also provides for an extension of the sibling bonus, an additional payment for families with other children in the household. Administrative procedures would be simplified to help eligible parents receive payments more quickly. In addition, Christmas bonuses and other supplementary forms of compensation would be included when calculating net income for benefit purposes.

According to the Family Ministry, the measures are intended to make parental allowance more responsive to contemporary family arrangements and to strengthen incentives for fathers to participate in early childcare. The higher replacement rate during reserved months is a central element of that approach, offering parents a stronger financial incentive to take leave during the period when their participation is specifically encouraged.

Prien has presented the agreement as an effort to modernize family support while maintaining budgetary discipline. The governing coalition of the CDU and the Social Democratic Party (SPD) had committed to reforming and increasing the allowance. However, savings requirements initially led the ministry to consider reducing the benefit period from 14 months to 12 months.

Under that earlier proposal, three months would have been reserved for each parent, with six additional months available for flexible allocation. If only one parent claimed the benefit, the maximum entitlement would have been limited to nine months. The proposed reduction drew criticism before the Government abandoned it in favor of retaining the longer eligibility period.

Budget targets raise questions about the reform’s fiscal impact

Although the revised proposal preserves the existing benefit period, its financial consequences remain uncertain. Federal budget guidelines call for savings of approximately 350 million euros from parental allowance spending in 2027, with cumulative reductions expected to exceed 1.4 billion euros by 2030. The Government must therefore balance its plans to improve support for families against the requirement to reduce public expenditure.

The Family Ministry has not clarified whether the latest proposal would meet those targets. Higher replacement rates and increased minimum and maximum payments could raise expenditure for some recipients, while the lower replacement rate for the six flexible months could reduce payments for others. The overall fiscal effect will depend in part on how parents respond to the new incentives and how they divide their leave.

An analysis by the Dresden branch of the ifo Institute suggests that the reform could deliver substantially less in savings than the Government anticipates. For the period from November 2027 through December 2030, researchers estimated potential savings of up to 880 million euros, compared with the Ministry’s target of approximately 1.6 billion euros over the same period.

The difference reflects, in part, the financial implications of encouraging more fathers to claim parental allowance. Men receive higher monthly payments on average than women, largely because their earnings before childbirth tend to be higher. If the reform succeeds in increasing paternal participation, the resulting additional expenditure could offset some or all of the savings generated by the revised payment structure.

Greater paternal participation could sharply reduce savings

The ifo analysis illustrates how sensitive the projected savings are to changes in the share of fathers receiving the benefit. Based on data for children born in 2023, slightly fewer than half of fathers claimed parental allowance. If that proportion remains unchanged, the reform could save approximately 880 million euros between November 2027 and the end of 2030.

The estimated savings would fall to 597 million euros if the share of fathers claiming the allowance increased by one percentage point annually. With an annual increase of two percentage points, the savings would decline further to 311 million euros. If paternal participation rose by approximately 3.1 percentage points each year, the projected savings would disappear entirely.

Although the share of fathers receiving the benefit has recently increased by only about 0.2 percentage points annually, researchers cautioned that a faster rise remained possible. Parents could have a stronger incentive to claim their reserved months if failing to do so meant losing access to those benefits. The share of fathers receiving parental allowance has nearly doubled since 2010, demonstrating that participation can change substantially over time.

The findings highlight a potential conflict between two objectives of the proposed reform. The government wants to encourage a more balanced division of childcare responsibilities, but greater participation by fathers could make the benefit more expensive because their average monthly payments are higher. Consequently, the degree to which the reform achieves its family-policy goals could directly affect its ability to meet fiscal targets.

Earnings differences shape payments to mothers and fathers

Official statistics help explain why increased participation by fathers could have a significant effect on spending. In 2024, fathers received an average of 1,337 euros per month in parental allowance, compared with 830 euros for mothers. The difference largely reflects employment patterns and earnings before childbirth, which determine the income used to calculate the benefit.

Among employed recipients, fathers had average qualifying net earnings of 2,344 euros before the birth, compared with 1,789 euros for mothers. Because the allowance is linked to previous income, these differences translate into higher average monthly payments for men. However, fathers generally claim the benefit for substantially shorter periods than mothers. As a result, their average total payments in 2024 amounted to 4,185 euros, compared with 11,462 euros for mothers. The distribution of maximum payments also differed considerably: approximately one-third of fathers received the maximum benefit, while only about one in eight mothers did.

These figures underscore the financial considerations involved in decisions about parental leave. The proposed higher replacement rate during reserved months is intended to make leave more attractive to fathers, but the resulting increase in participation could also affect the Government’s overall spending calculations.

Proposed increases would not fully offset inflation

Separate analysis by the Institute of the German Economy (IW) suggests that the planned payment increases would fall well short of restoring the allowance’s purchasing power. According to the institute’s calculations, the maximum monthly benefit would need to reach 2,591 euros, rather than the proposed 1,900 euros, to account fully for inflation. The benefit has reportedly lost approximately 38 percent of its purchasing power since its introduction in 2007. The planned increases would provide some additional support, but the gap between the proposed maximum and the amount calculated to offset inflation illustrates the limits of the adjustment.

The issue is particularly relevant because parental allowance is intended to replace part of the income parents forgo when taking time away from work to care for a child. Its value therefore depends not only on the nominal payment but also on how that amount compares with household expenses and previous earnings. The proposed reform would increase the available support while leaving unresolved the extent to which payments have kept pace with rising costs.

Recipient numbers continue to decline

The number of people receiving parental allowance has fallen in recent years despite the benefit’s continuing role in supporting families during periods of childcare-related leave. Approximately 1.61 million people received the allowance in 2025, down 62,000, or 3.7 percent, from 2024. The number of recipients had exceeded 1.8 million in 2021. Government spending on the benefit amounted to approximately 7 billion euros in 2025.

These figures provide the fiscal context for the proposed changes, as the Government seeks to revise payment rules and strengthen incentives for shared parental leave while also reducing expenditure. The decline in recipients does not, by itself, establish the reasons for the change. Nevertheless, the figures demonstrate that the benefit’s reach and total cost have shifted in recent years, factors that are relevant to assessments of the reform’s potential impact.

CDU/CSU backs higher payments and retention of existing duration

The proposed increases have received support from the CDU/CSU parliamentary group. Anne König, the group’s family policy spokesperson, described the planned higher payment limits and replacement rates as important measures for strengthening the financial security of young parents during the first months after childbirth. König also argued that the changes could make parental allowance more attractive to self-employed women. She welcomed the decision to retain the 14-month entitlement, noting that the Union had worked with Prien in recent months to prevent a reduction in the number of eligible months.

The position reflects the broader political significance of the revised proposal. Retaining the existing duration addresses concerns raised by the earlier plan to shorten eligibility, while the proposed payment increases offer additional financial support. At the same time, the lower replacement rate for flexible months preserves an element of expenditure restraint.

Final approval and implementation timeline remain unresolved

The reform’s final provisions, fiscal consequences and implementation date have yet to be settled. Although the draft has entered internal government coordination, it has not been adopted as law. The government must still reconcile its commitment to improve parental support with its budgetary objectives. The ifo Institute’s findings point to a central challenge in that process: stronger financial incentives for fathers to claim parental allowance could undermine the savings the reform is intended to achieve. The extent of that effect will depend on how paternal participation changes after implementation.

By retaining the 14-month benefit period, raising payment limits and introducing higher replacement rates for reserved months, the Government is seeking to strengthen support for young families and encourage a more balanced distribution of childcare responsibilities. Whether those changes can achieve both objectives without compromising the planned budget reductions remains an open question.