Germany’s Biggest Labour Law Overhaul in Decades Sparks Employer-Union Showdown
Published on 07/26/2026 at 03:51 | Redaktion boerse-global.de
Berlin — The German government has unveiled a sweeping reform package that touches nearly every corner of the employment relationship, from how long a contract can last to when workers must produce a doctor’s note. Employers have welcomed the changes as a long-overdue dose of flexibility, while unions are mobilising for what they call an assault on core worker protections.
Contracts without cause could stretch four years
At the heart of the plan, dubbed the “Programme for Upturn and Employment,” is a dramatic expansion of fixed-term contracts. Companies would be allowed to hire workers on temporary deals for up to 48 months without needing a specific justification — a period that currently stands at 24 months in most cases. Up to six extensions would be permitted, with the rule set to expire at the end of 2030.
Starting 1 January 2027, the requirement that fixed-term agreements be in writing would also be scrapped. The government says this cuts red tape; unions counter that it opens the door to abuse, making it harder for workers to prove the terms of their employment.
Top earners face easier dismissal — for a price
Employees earning more than €177,450 a year — 1.75 times the social security contribution ceiling — would face a new regime: employers could terminate them more easily in exchange for a severance payment. The reform also introduces a “severance privilege” for workers who quickly land a new job, reducing the total payout companies must make.
At the same time, the government plans to clamp down on shelf European Companies (SEs), a legal structure some firms have used to bypass co-determination rules that give worker representatives a seat on supervisory boards.
Workweek could hit 73.5 hours in exceptional cases
As working hours and employment rules evolve, keeping your workplace safe and compliant with UK law remains a constant priority. A free toolkit gives you ready-to-use risk assessments, checklists, and templates that cover key regulations like the Health & Safety at Work Act 1974. Download the free Health & Safety Toolkit
The Working Hours Act is in line for a fundamental rewrite. A weekly maximum of 48 hours would become the standard, but in exceptional circumstances that limit could rise to 73.5 hours. The Food, Beverages and Catering Union (NGG) warns this would effectively kill the eight-hour day. Data cited by critics shows the risk of workplace accidents doubles after 12 hours of work. The union also argues the change would strain work-life balance, particularly given Germany’s already low childcare enrolment rates.
Sick note from day one, higher night-work premiums
From the first day of illness, employees would need a doctor’s certificate. Criminal penalties for submitting false sick notes would be tightened. On the positive side for workers, tax-free supplements for Sunday, public holiday and night work would rise to as much as €75 per hour from 2027. Works councils would see their co-determination rights over AI software simplified — a move the government says will speed up digital adoption.
Pension system gets a capital-funded pillar
The retirement system is being restructured. Starting in 2028, employees and employers would pay an additional contribution of between 0.5% and 2% of gross wages into a capital-funded scheme. The goal is to keep the pension level above 48% of average earnings from 2040 onward.
Employers’ federation president Rainer Dulger warns the plan will cost “double-digit billions” and instead calls for raising the retirement age to 67.5 by 2041 and scrapping the option of penalty-free early retirement after 45 years of contributions.
Mini-jobbers face loss of tax perks
One of the most contentious elements targets the country’s 6.8 million mini-jobbers — workers earning up to €538 a month with minimal social insurance. An expert commission on pension security has recommended bringing them into the statutory pension system without an opt-out, except for school pupils. Currently, only 21% of mini-jobbers pay any pension contributions at all. If the privileges disappear, net earnings could fall from the current €603 to between €350 and €470 a month.
Protests set for July 2026
With employment law shifting, it's a good moment to check your own compliance foundations. A separate, free toolkit focused on the Health & Safety at Work Act 1974 provides nine practical tools, including director liability guides and risk assessments, to help you stay on the right side of UK regulations. Get the free Health & Safety at Work Act 1974 Toolkit
The social partners are digging in. The German Trade Union Federation (DGB) in Middle Franconia has called a rally in Nuremberg for 29 July 2026. IG Metall and the Education and Science Union (GEW) are protesting the reallocation of public funds and planned cuts to partial-retirement schemes.
Separately, Germany must transpose the EU directive on platform work into national law by 2 December 2026. Several federal states are pushing for a requirement that delivery-service riders be directly employed, aiming to stop companies from using subcontractors to sidestep labour standards.
Disclaimer regarding our articles: No investment advice, no buy or sell recommendation. Information on prices, companies, and markets is provided without guarantee; changes are possible at any time. Stock market transactions can lead to substantial losses. Our articles are created and reviewed in whole or in part automatically with the support of AI.
