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Legal
24. Jul 2025
Assunta Caligiuri

Tax-exempt integration subsidy - Amounts and benefits for employers

diverses Team im Gespräch

The integration subsidy pursuant to Volume III of the German Social Security Code is a key labour market policy instrument for integrating workers facing barriers to employment in the German labour market. Changes that have applied as of 2025 have direct impacts on companies and their funding options.

Realignment of funding structures as of 2025

The 2025 reform of Bürgergeld [literally ‘citizens' allowance’, a basic subsistence benefit] was accompanied by the reorganisation of the division concerned with the funding of further vocational training and rehabilitation. The tasks of advising, approving and financing such measures for job seekers capable of employment will now lie solely with the employment agencies and no longer with the job centres. The job centres will continue to be tasked with supervision and integration support. The aim of the new allocation of tasks is to simplify processes for businesses, providers and job seekers and to align the funding measures more specifically with the needs of the labour market.

Funding for professional integration - Benefits for employers 

The integration services comprise a wide range of support instruments that can be individually tailored to the needs of job applicants and the business requirements:

  • Integration subsidy - Employers can receive a subsidy for hiring persons facing barriers to employment.
  • Further vocational training and qualifications - The employment agency will provide support for further vocational training measures in order to close qualification gaps. Businesses are able to benefit from this when they hire workers with an immigration background, or lateral entrants.
  • Activation and placement measures - These include internships, trial work and coaching sessions that facilitate entry into the jobs market and give businesses the opportunity to meet potential workers.
  • Funding for language courses - The employment agency will provide support for participating in integration courses and job-related German language skills training in order to remove language barriers - a key requirement for long-term employment. These integration services are specific support measures for the integration of migrants into the labour market and complement the classic integration services, such as, the integration subsidy.

The benefits that can result from this for employers are summarised in the overview table below.

Benefit Comment
Financial relief
 Businesses receive direct financial support via wage subsidies and the coverage of training costs.
Risk minimisation
 The opportunity to first meet new workers in the context of internships or sponsored employment reduces the risk of hiring the wrong person.
Extended pool of job applicants
 Specific support for the integration of migrants opens up access for businesses to a wider range of potential skilled workers.
Accompanying support
 During the entire integration phase, contact persons at the employment agency are available for businesses and employees to provide support free of charge if there are any problems or questions.

Payroll handling

The integration subsidy is normally up to 50% of the gross wage and is granted for a maximum of 12 months (or 36 months in the case of employees aged 55 and over).

For handicapped and severely disabled individuals the funding can be paid for up to 24 months with up to 70% of the remuneration. However, after 12 months, the integration subsidy decreases by 10%. Although, at least 30% of the remuneration will continue to be paid as a grant.

In the case of severely disabled individuals whose integration into professional life is particularly difficult because of the type or severity of their disability, the duration of the subsidy can be increased up to 60 months and, when they reach the age of 55, even up to 96 months. After 24 months, the integration subsidy decreases by 10% every year up to a limit of, at least, 30% of the remuneration.

Accounting for the subsidy:

  • The employer provides the employee with the agreed full gross salary.
  • The gross salary is taxed and the mandatory social security contributions are deducted.
  • The integration subsidy is not shown on the payroll.
  • The employer applies for the subsidy every month at the employment agency and then receives the subsidy, which is paid out retroactively.

Please note

The application must be made before employment is taken up. At the end of the funding period, the employee has to continue to be employed at least for as long as the funding had lasted, otherwise the subsidy may be proportionately claimed back.

Sample calculation of the benefit

A company hires a person with an immigrant background who does not yet satisfy all the requirements of the job. The gross monthly salary is €3,000. The integration subsidy amounts to 50% for 12 months (maximum standard rate). The social security contributions have to be calculated with the employer’s share of approx. €500 each month. The actual wage costs that arise are as follows:

Position Euro
Gross salary employee 3,000
Employer’s share of social security 500
Overall wage costs
 3,500
Integration subsidy (50%) -1,500
Actual wage costs/month
 2,000

The overall annual saving thus amounts to €18,000. The subsidy is tax-exempt for the employer and considerably reduces the actual wage costs.

Conclusion

The integration subsidy provides the employer with financial relief without anything changing for the employer as regards the payroll accounting. The subsidy is processed directly between the employment agency and the employer; it is an attractive instrument for hiring new employees with a need to integrate. In view of the skills shortage, this funding option provides a decisive factor for a successful, future-oriented personnel policy.