Germany's 2027 Labour Package: CEOs Get Faster Hires, Workers Lose Phone Sick Notes as Coalition Enacts 34 Changes
Published on 07/05/2026 at 05:58 | Redaktion boerse-global.de
Germany's governing coalition — CDU, CSU, and SPD — has approved a sweeping labour market reform that will fundamentally alter the rules on fixed-term contracts, sick notes, and dismissal protection for high-income employees. The bulk of the 34 measures take effect at the start of 2027, with some provisions running as pilot schemes until 2030.
Fixed-Term Contracts Double in Length, Paper Requirement Drops
A centrepiece of the package concerns contracts without a specific cause (sachgrundlose Befristung). Their maximum duration jumps from 24 to 48 months, and employers will be able to renew them up to six times, compared with the current limit of three. This temporary rule applies until the end of 2030.
From January 2027, the written-form requirement for fixed-term agreements will be abolished entirely. The change is intended to accelerate the digital processing of employment contracts. Business associations have welcomed the added flexibility, while the DGB and Verdi warn that it will fuel a rise in precarious jobs.
Phone Sick Notes Scrapped, Doctor Visits Return
The pandemic-era allowance for sick notes by telephone will be removed. Instead, employees must attend a video consultation or see a doctor in person. In a further tightening, a general requirement for a medical certificate from the first day of illness will apply. Chancellor Friedrich Merz justified the return to pre-Covid rules as a measure to prevent abuse. Employers may still negotiate more generous arrangements with their staff, and sanctions for fraudulent sick notes are being sharpened.
Top Earners Lose Job-Protection Guarantee, Gain Severance Entitlement
For high-income earners, the reform eliminates the traditional Bestandsschutz — the right to keep a job unless there is a legally watertight reason for dismissal. This change applies to employees whose annual gross salary exceeds 1.75 times the contribution assessment ceiling, currently around €15,000 per month, or €177,000 to €180,000 a year.
In place of protection against dismissal, the law creates a statutory entitlement to severance pay. The coalition indicated a guideline of roughly 0.5 months' salary for each year of service. The policy is driven by the observation that restructuring costs in Germany average 31 months of salary, compared with just two to three months in Denmark or Switzerland.
Tax Breaks for Quick Job Switches and Higher Supplements
The reform introduces tax advantages for workers who find a new job promptly after being let go. Severance payments will receive preferential tax treatment if the transition occurs within a period still to be defined; the faster the move, the larger the financial benefit.
Other tax adjustments include raising the ceiling for tax-free Sunday and public-holiday supplements to €75 per hour. The flat tax on minijobs will increase from 2% to 5%. From 2027, the basic personal allowance, child allowance, and child benefit are also set to rise.
Bureaucracy Cuts, Migration Cap, and AI Rules
The package devotes significant space to reducing red tape for businesses. Numerous reporting obligations will be eliminated. The approval fiction — under which an application is automatically deemed approved once a deadline expires — becomes the standard procedure.
On migration, the Westbalkan regulation quota will be halved to 25,000 people per year from January 2027. As a counterweight, the coalition is launching a programme called "Zweite Chance" aimed at young people struggling to enter the job market.
On the question of co-determination rights concerning artificial intelligence in the workplace, the social partners must submit proposals by October 2026.
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