Germany’s Biggest Labour Law Overhaul in Years: Longer Fixed-Term Contracts, Digital Hires, and a Minijob Shake-Up
Published on 07/25/2026 at 17:06 | Redaktion boerse-global.de
The German government is pressing ahead with what it calls the “Programme for Recovery and Employment,” a sweeping reform package that will fundamentally reshape the country’s labour market. Unveiled in July, the plan grants employers far more flexibility while imposing new costs and obligations on workers, particularly those in precarious positions.
Fixed-term contracts get a major extension
At the heart of the reform is a dramatic loosening of rules on fixed-term employment. Starting soon, companies will be able to hire staff on temporary contracts for up to 48 months without providing any justification. Within that period, contracts can be renewed as many as six times. The new regulation is set to expire in 2030. Previously, the limits were far stricter.
The coalition also plans to drag hiring processes into the digital age. From 1 January 2027, the strict requirement for paper-based employment contracts will be scrapped. Employers will be able to sign contracts digitally with full legal certainty — a move expected to streamline HR departments considerably. At the same time, co-determination rights for works councils when deploying artificial intelligence in the workplace are being eased, a clear signal that the government wants to encourage innovation.
Minijobbers face a potential cliff edge
Germany’s roughly 6.8 million minijob workers could be hit hardest. The state commission on old-age security has recommended abolishing the current exemption from mandatory pension insurance contributions for these low-wage earners. Only school pupils would remain exempt. The goal is to steer more people into regular, fully insured jobs and to reduce old-age poverty.
Business groups are sounding the alarm. With a typical monthly minijob wage of €603, employees would soon have to shoulder deductions for pension, health, nursing care, and unemployment insurance. Net income could plunge to between €350 and €470. Employer representatives also object to a planned hike in the flat-rate tax on minijobs from 2 to 5 percent. While the SPD-led social authority in Thuringia has welcomed the proposal, opposition politicians warn it could destroy hundreds of thousands of low-skilled jobs.
Cuts to dismissal protection for high earners
The reform package includes several other notable changes:
- Dismissal protection: From 1 January 2027, it will be weakened for employees earning more than €177,450 in gross annual salary.
- Sick notes: A doctor’s certificate is set to become the norm from the very first day of illness.
- Surcharge caps: From early 2027, Sunday and public holiday bonuses will be capped at €75 per hour.
Courts add their own twists
Parallel to the legislative push, Germany’s highest labour court has been busy. On 8 July 2026, the Federal Labour Court ruled that dismissals during mass layoffs can remain valid even if the employer made a formal error when notifying the Federal Employment Agency. The decision introduces a new layer of legal uncertainty for workers facing collective redundancies.
The European Court of Justice has also weighed in, clarifying that travel time to changing work locations for mobile employees counts as full working time. This ruling directly affects sectors such as construction, building cleaning, and home care — and could trigger back-pay claims to ensure workers receive at least the minimum wage of €13.90 per hour.
As employment rules evolve, ensuring your workplace meets UK health and safety standards is more important than ever. A free toolkit provides ready-to-use risk assessments, checklists, and toolbox talks aligned with the Health & Safety at Work Act 1974. Download the free Health & Safety Toolkit
New obligations from August
From August 2026, updated training regulations for 19 construction trades will take effect, with the minimum training allowance rising to €724 per month. And from 2 August, companies must comply with new AI transparency rules: any content generated by artificial intelligence must be clearly labelled.
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.
