Germany’s Coalition Unveils Sweeping Labour Overhaul, Drawing Fire From Both Sides
Published on 07/26/2026 at 03:21 | Redaktion boerse-global.de
Nearly two-thirds of Germans believe the government’s planned labour-market reforms are headed in the wrong direction, according to a ZDF Politbarometer survey from mid-July 2026. The finding underscores the deep unease surrounding a package that aims to rewrite rules on fixed-term contracts, sick leave, pensions and dismissal protection — and has managed to unite business associations and trade unions in opposition.
Flexible contracts, weaker safeguards
At the heart of the so-called “Programme for Recovery and Employment” is a dramatic expansion of fixed-term employment without a specific reason. Such contracts could run for up to 48 months, with as many as six extensions permitted — and the measure would remain in force until the end of 2030. The government also plans to relax the ban on re-hiring former employees on fixed terms and, as of 1 January 2027, to scrap the written-form requirement for employment contracts entirely.
For higher earners, dismissal protection would be eased from 2027. Employees earning more than 1.75 times the contribution assessment ceiling — roughly €177,450 gross annually — would face looser rules, with severance payments intended to smooth the separation process.
Sick notes and Sunday pay
The pandemic-era practice of obtaining a sick note by phone is set to be abolished. Instead, a medical certificate would be required from the very first day of illness, accompanied by stricter penalties for fraudulent sick-leave certificates. A new “partial sick note” would allow employees to work at 25, 50 or 75 percent capacity.
On the plus side for workers, tax-free supplements for Sunday, public-holiday and night work would rise to as much as €75 per hour from 2027. The government also plans tax incentives for rapid job changes, aiming to boost labour mobility.
As German employers brace for sweeping changes to sick-leave and dismissal rules, UK businesses face their own evolving compliance landscape. Keeping up with health and safety law is essential to avoid costly penalties. A free toolkit provides ready-to-use risk assessments and checklists aligned with the Health & Safety at Work Act 1974. Download the free Health & Safety at Work Act 1974 Toolkit
Pension shock and mini-job upheaval
The most contentious proposals concern pensions. From 2028, a capital-funded pension pillar would be introduced, financed by an additional contribution that could eventually reach two percent of gross income. Employer associations warn this would drive up non-wage labour costs significantly; the total pension-insurance contribution rate could climb from 18.6 percent to as high as 22 percent.
Around 6.8 million mini-job holders — workers in low-hour, low-pay positions — would lose their current exemption from mandatory pension contributions. Only school pupils would be exempt. The German Hotel and Restaurant Association (Dehoga) has warned that the change could spell the end for many part-time jobs in hospitality and retail.
Court rulings reshape daily practice
Alongside the legislative push, recent court decisions are already altering workplace realities. In autumn 2025, the European Court of Justice (Case C-110/24) ruled that the return journey from a worker’s last assignment counts as working time when the employer specifies the vehicle and departure time and no fixed workplace is agreed. The decision affects millions of employees in field sales, care work and skilled trades.
The Federal Labour Court (Case 2 AZR 184/25) added another layer of complexity in May 2026, ruling that a registered letter delivered via a scan procedure does not provide prima facie evidence of actual receipt. Employers must now prove receipt of key documents — such as invitations to the company reintegration management process (bEM) — through other means.
Divided reactions, mounting opposition
The Confederation of German Employers’ Associations (BDA) is calling for improvements, particularly a more substantial increase in the retirement age, and opposes the planned abolition of the block-model phased retirement scheme. Trade unions have announced protest days in multiple cities for September.
The public mood remains sceptical. Beyond the 63 percent who see the reforms as misguided, more than 80 percent of survey respondents consider the distribution of burdens unfair.
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