Reforms include stopping Hartz IV payments to claimants who miss appointments or who don’t register at job centres.
Support will also stop for claimants who spend money designated for their rent on other expenses.
In future anyone receiving Hartz IV will only have to apply for the financial support every 12 months instead of every six months.
And if people on Hartz IV move into more expensive flats which are not larger than their old one, the state will only pay the old, cheaper level of rent.
Under the reforms, benefits paid accidentally to dead claimants must be transferred back to the employment agency by banks.
The changes should come into force in 2015, Bild newspaper reported on Wednesday.
Vice head of the Federal Employment Agency Heinrich Alt told Bild that the reduction in bureaucracy would make the system less fair. But he added: “If we are not prepared for a bit more inequality, the system will remain very complex.”
In March 2014 7.6 percent of the population was receiving Hartz IV with the highest percentage in Berlin at 17.1 percent.
As reported by The Local in October thousands of expats also rely on unemployment benefits.
Figures released to The Local by the Federal Employment Agency showed that in June 2013 there were 4,648 Brits and 3,664 Americans claiming Hartz IV.
SEE ALSO: 'Jobless EU citizens can claim benefits'