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The agreement for around 2.5 million workers in the sector follows arbitration.
Under the deal, each worker will receive a total of 3,000 euros in tax-free payments in instalments through to Feb. 2024 to help offset inflation, said the ministry in a statement.
From March 2024, wages will rise by 200 euros per month and in a second step, there will be a 5.5% increase, it said.
The deal will run for two years.
Verdi, which had wanted 10.5% more money, said it would start a survey of its members with the wage commission making a final decision on May 15.
“We have reached our pain threshold with our decision to make this compromise,” said Verdi chief Frank Werneke.
A surge in the cost of living this year has led to some of Germany’s most disruptive strikes in decades.
Consumer prices soared by 9.6% in Germany in 2022 but price pressures have abated in recent months after a winter energy crunch did not materialise and supply chain problems eased.
“This agreement brings noticeable relief to employees. The tax-free payments will show up quickly in wallets,” said Interior Minister Nancy Faeser.
Last month, strike action from unions Verdi and dbb brought railways and airports to a near-halt in Germany’s biggest walkout in more than three decades, according to Verdi.
