## Notes from 08 June 2025 [[2025-06-07|← Previous note]] ┃ [[2025-06-09|Next note →]] ### Breaking the hidden walls of bureaucracy _Why tearing down pension silos is key to energizing talent flow, boosting mobility and building a stronger civil service_ When it comes to remuneration, Germany’s statutory civil servants (_Beamte_) aren’t paid by salary alone; they’re part of a package of substantial benefits that ought to be factored into total workforce-cost accounting. The problem is that any reform proposal is immediately met with claims it will jeopardize the civil service independence, which is simply not true. These extra-payslip benefits are symptoms of a network of artificial barriers that inflate administrative complexity and keep the state from deploying the skills it needs to tackle modern challenges. The [recent remarks](https://www.merkur.de/verbraucher/beamtenbund-warnt-vor-renten-reform-unter-merz-regierung-sozialverbaende-halten-kritik-fuer-ueberzogen-93764993.html) by Germany’s Social Affairs Minister, Bärbel Bas, on [folding civil servants into the general pension scheme](https://www.zdfheute.de/politik/deutschland/rente-baerbel-bas-beamte-selbststaendige-100.html) have predictably ignited [union backlash](https://www.dbb.de/artikel/silberbach-absage-an-zwangs-einheitsversicherung.html). Yet the real challenge isn’t pensions per se but talent management: the conversation should be reframed not as “pension reform” but as part of a broader state-modernization agenda. Beyond a few outliers - most notably [Andreas Görgen’s recent piece for re:form](https://reform-staat.org/fahrplan-staatsreform-durchlassigkeit/) - there’s scant discussion of how benefit integration ties into talent strategy, fiscal transparency and labor-market mobility. What gets billed as “pension reform” is really about removing friction from public-sector labor markets, creating clear compensation structures, and boosting state capacity through more fluid talent flows. #### The continental model's talent barriers Germany's _Beamtenrecht_ exemplifies how separate benefit systems create parallel labor markets that fragment talent pools. Unlike systems where civil servants are essentially employees with enhanced job security (like in the US or the UK), Germany (and other continental European countries) developed distinct legal categories that treat public servants as something fundamentally different from other workers. This separation made sense when public administration was primarily about rule implementation. But in an era where government effectiveness depends on cross-sector collaboration and diverse expertise, these institutional walls have become barriers to the kind of agile governance that modern challenges demand. The scope of Germany's benefit separation becomes clear through specific numbers. Regular employees fund their healthcare through the statutory system (_GKV_), paying roughly 17.05% of gross income in 2025, with contributions transparently split between employer and employee on every payslip. [Civil servants (Beamte) are exempt entirely](https://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/VV_SpotGes_GKV_engl_final.pdf). Instead, the state reimburses 50% of their medical costs (up to 80% for family members) through the off-budget "_Beihilfe_" scheme, while civil servants purchase private residual insurance - typically €150-250 monthly versus €500+ for full private coverage. The pension disparity is even more dramatic. Standard employees contribute 18.6% of their earnings to statutory pension insurance - deducted directly from payroll - [while civil servants contribute nothing](https://www.sachverstaendigenrat-wirtschaft.de/fileadmin/dateiablage/gutachten/jg202324/JG202324_Chapter_5.pdf). Instead, the state guarantees their pensions outright, with entitlements accruing at about 1.8% of final salary per year of service, up to roughly 71.75% of final salary in retirement. This special pension scheme is an unfunded liability, paid each year from general budgets rather than a dedicated pension fund. The fiscal implications are staggering. [Taxpayers covered approximately €65.5 billion in civil servant pensions in 2021, and this figure is expected to rise to €81 billion by 2025](https://www.focus.de/finanzen/news/kosten-steigen-rapide-beamte-kosten-im-ruhestand-im-schnitt-das-dreifache-eines-rentners_id_183387940.html). However, these liabilities remain hidden from individual compensation statements, creating massive information asymmetries that distort career decisions and prevent strategic talent management. #### The strategic disconnect: competence versus status The most effective government modernization happens when institutions manage and treat civil servants strategically - aligning career pathways, benefits and other HR mechanisms around their competencies rather than their legal status. Benefit normalization is therefore a necessary step toward a professional HR framework that makes competence the true foundation for career management, especially when complex problems demand diverse skill combinations. The current dual-track system creates structural barriers that prevent this professionalization. Germany's federal administration employs circa 176 thousand civil servants under public-law appointment (_Beamte_) alongside 132 thousand employees under labour-law contracts (_Angestellte_) [as of June 2023](https://www.bmi.bund.de/DE/themen/oeffentlicher-dienst/zahlen-daten-fakten/zahlen-daten-fakten-node.html). This dualization doesn't just create administrative complexity - it fundamentally distorts talent management by making legal status more important than professional competence. The system actively penalizes strategic thinking. When talented professionals face pension traps and benefit disruptions for crossing sectoral boundaries, managers have powerful incentives to favor legal status over skills. Leadership positions typically require _Beamte_ status, creating talent bottlenecks precisely where cross-sector experience would be most valuable. The result is institutional stagnation disguised as administrative tradition. #### Building professional HR management Minister Bas's pension integration proposal represents more than rationalization - it's about dismantling the structural barriers that prevent professional HR management. The dual-track compensation system isn't just unfair; it's the primary defense mechanism of status-based thinking that blocks competency-focused talent management. Breaking down hidden walls requires more than benefit transparency. It demands building professional HR systems that manage the "bloodline" of public administration - the managers, project leaders, policy experts, and specialists who execute the daily work of government. These professionals need fluid career paths based on skills, not legal categories that create artificial silos. This isn't about eliminating all distinctions. Certain highly specialized functions with unique constitutional roles (judges, prosecutors or military positions) might always require distinct frameworks where independence is paramount. But for the professional core of public administration, the goal is creating a level playing field where talent and expertise can flow based on competence rather than appointment type. Effective integration means making total compensation visible and portable while building competency-based management systems. The key insight isn't reducing compensation but changing the fundamental question from "What is your legal status?" to "What skills can you deliver?" This transformation requires compensation transparency as the essential enabling step - not the end goal, but the prerequisite for genuine professional HR management. To see these ideas in action, look abroad: Since 2020, the Netherlands has implemented the “[normalization](https://www.taylorfrancis.com/chapters/oa-edit/10.4324/9781003458333-14/civil-service-netherlands-alexander-de-becker?utm_source=chatgpt.com)” of civil service employment, harmonizing benefits and employment conditions between civil servants and regular employees. This reform builds on earlier steps toward unification, such as the [2006 Health Insurance Act (ZVW)](https://ec.europa.eu/eurostat/documents/6939681/9010625/20150713+remuneration+of+national+civil+servants+in+the+Netherlands+-+data+supply.pdf/a819acfc-2aa8-409f-abdd-15ead5c0b27e#page=15.18), which aligned health coverage for all workers. As a result of these changes, civil servants now participate in standard pension funding schemes instead of maintaining separate arrangements. With total compensation becoming more transparent, there are signs that lateral entry into public service is [becoming more common](https://www.werk.nl/imagesdxa/kwart_werkgevers_nam_zij-instromers_aan_27022024_tcm95-455728.pdf). Brazil offers another relevant data point. Recent reforms require that new federal employees join the general pension system, with the option to contribute to individual-account-based supplementary pension funds, while safeguarding accrued rights for existing staff. The reform also introduced a combination of mandates and incentives [encouraging states and municipalities to follow suit](https://documents1.worldbank.org/curated/en/099550004042224301/pdf/P17483603189580590a33b0b368392a27a5.pdf). [Talent pools have not shrunk](https://agenciabrasil.ebc.com.br/radioagencia-nacional/geral/audio/2024-02/concurso-unificado-tem-recorde-com-265-milhoes-de-inscritos). #### The competency framework imperative The most pressing governance challenges today - from AI regulation and climate coordination to pandemic preparedness - require collaboration across sectors. Yet rigid, status-based employment systems often stand in the way. Addressing these challenges means shifting from legacy structures toward HR policies that organize roles and careers around demonstrated competencies rather than legal classifications. Dual-track employment frameworks exacerbate fragmentation, reinforcing silos that undermine strategic workforce planning. When public employers can’t readily access diverse professional backgrounds - due to benefit cliffs and restrictive status rules - they face not only operational inefficiencies but also a loss of cognitive diversity, exposing institutions to blind spots and groupthink. Establishing [competency-based frameworks](https://www.functiegebouwrijksoverheid.nl/over) also requires dismantling the compensation infrastructure that protects status-based logic. Separate benefit regimes incentivize managers to privilege legal status over professional qualifications, making transfers between departments financially disruptive and external recruitment procedurally painful. Germany’s pension debate matters because it tests whether a traditional public administration can modernize its talent systems without abandoning public sector values. The goal is not narrow cost-cutting, but strengthening institutional capacity through better talent mobility and alignment. Talent must flow to where it’s most needed. Minister Bas has taken an important step by opening the door to professional HR thinking. But moving forward requires more than symbolic gestures, it requires connecting benefit reform to a deeper restructuring of public employment around skill, not status. Each year of delay increases the opportunity cost of maintaining these artificial barriers. The technical details matter less than the strategic vision: building government institutions that manage talent based on skills rather than legal categories. **The question isn't whether Germany will eventually reform its civil service system - talent competition and institutional pressure make change inevitable. The question is whether Germany will lead this transformation toward professional HR management or be forced into piecemeal changes by external pressures.** Breaking down these hidden walls isn’t merely about compensation transparency. It’s about creating the structural conditions necessary for modern, competency-based governance. Normalizing benefits isn’t the end - it’s the enabling condition for professionalization based on what people can do, not what status they hold.