Germany’s Declining Collective Bargaining Rate Triggers EU Legal Risk Amid Broad Labor Reforms

Only 49 percent of German employees now work in a company covered by a collective bargaining agreement, according to a fresh study by the Economic and Social Sciences Institute (WSI) of the Böckler Foundation. That figure falls well short of the 80 percent threshold set by the EU’s minimum-wage directive, which requires a national action plan once coverage drops below that level. The deadline for submitting such a plan already passed at the end of 2025, and Brussels is now understood to be preparing a potential infringement procedure. For perspective, countries such as Italy and Belgium report nearly full coverage of their workforces under collective agreements.

The news lands as Chancellor Merz convenes a high-level summit to tackle Germany’s broader economic stagnation. In early June, government officials, employer associations, and trade unions gathered at the Chancellery for a three-hour meeting aimed at crafting a package to strengthen the economy. The focus areas are the labour market, social insurance, and cutting red tape. A coalition committee is scheduled to adopt key points in early July, and the final reform package must be ready before the summer break in mid-July.

Negotiations remain fraught. Employers are pushing for more flexibility, social welfare groups warn against cuts, and unions are demanding tax-policy changes, including a wealth tax. Government spokesperson Kornelius described the atmosphere as one of “constructive willingness” among all participants.

Separately, the EU’s Pay Transparency Directive is already forcing changes in German workplaces. Although Berlin has postponed national transposition until 2027, parts of the directive must be interpreted in line with EU law now. For the public sector, rules such as the right to information on pay and the reversal of the burden of proof apply directly. Private-sector firms should begin adjusting their compensation systems. Employers must now disclose the starting salary or a pay range to job applicants before the interview, and the old practice of asking for a candidate’s previous salary is no longer permissible. Larger companies also need to prepare for reporting requirements on gender-specific wage gaps.

Another major shift concerns working hours. Germany’s existing daily maximum limit in the Working Hours Act is being replaced by the EU’s Working Time Directive, which looks at a weekly rather than daily perspective. Theoretically, that could allow workdays of up to 13 hours. Labour lawyers caution, however, that employers cannot unilaterally impose such schedules; contractual agreements and industry standards remain decisive.

Changes are also coming for mini-job holders. Starting in July 2026, employees in marginal employment can reverse a previous decision to opt out of mandatory pension insurance. The choice is final and applies prospectively. The earnings threshold, based on the current minimum wage of €13.90 per hour, stands at €603 per month. As of January 2026, Germany counted roughly 7.46 million people in such jobs.

A new form of partial incapacity for work is being introduced. The federal cabinet approved the draft law earlier this year, allowing employees with illnesses lasting more than four weeks to return to work gradually. The return can proceed in steps of 25, 50, or 75 percent of the usual working time, provided a doctor deems it medically viable and the worker agrees voluntarily. Employers have a seven-day right to object. Crucially, the entitlement to full continued wage payments remains intact.

On the financing side, the government plans adjustments to the long-term care insurance system. Effective January 1, 2027, the contribution assessment ceiling will rise to over €7,000 per month. The surcharge for childless individuals is set to increase to 0.7 percent.

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