German Employment Law in Transition: Coalition Committee Agrees on Noteworthy Reforms | Littler

The German Federal Government has announced a series of proposed reforms to its employment laws as part of a new Program for Growth and Employment. These changes could mark a significant shift in how companies handle staff transitions and contract management in the coming years.

One of the most notable proposals concerns high earners. The government is considering a new severance option for employees with annual incomes above 1.75 times the statutory pension insurance assessment ceiling. This change would provide employers with a clearer, more predictable path for ending employment relationships without the traditional risk of being forced to reinstate personnel through court rulings.

Flexibility in hiring is also on the agenda. The draft package includes plans to extend the period for fixed-term employment without objective grounds up to 48 months. The government also intends to allow for renewed fixed-term contracts with the same employer. Additionally, the current strict requirement for written documentation in these agreements would transition to a simpler text-based format.

Further adjustments target workplace attendance and taxation. Officials intend to eliminate telephone-based sick notes and mandate that employees provide a medical certificate from the very first day of absence. On the compensation side, there are plans to offer tax incentives for severance payments that facilitate quick re-entry into the labor market. Furthermore, the government aims to increase the threshold for tax-exempt bonuses for work performed on Sundays and public holidays.

These proposals currently exist as political resolutions. Employers should track the legislative process closely, as the specific details of these measures remain subject to ongoing political debate. If enacted, these shifts will require firms to audit their internal policies and employment contracts to remain compliant with the updated standards.