Family Tax Breaks and a Tougher Sick-Note Rule: Berlin’s 34-Point Labour Overhaul Draws Fire

Germany's growth package introduces mandatory sick notes from day one, easier dismissal for high earners, higher minijob costs, and tax relief for families, sparking protests.

On the streets of Karlsruhe and Ulm, roughly 2,700 people demonstrated last weekend against what they see as cuts to social welfare. The trigger: a reform package the federal government finalised in early July that bundles 34 separate measures aimed at boosting growth and cutting red tape. Business associations have called it a necessary compromise; unions and parts of the public are pushing back.

One of the most immediate changes for ordinary workers is a return to mandatory medical certificates from the first day of illness. The pandemic-era rule that allowed a phone-based sick note will be scrapped. Berlin hopes this will curb the high levels of absenteeism that companies have reported. Labour-law experts caution that the so-called “favourability principle” still allows more generous agreements in collective or individual contracts to stand. Doctors’ representatives warn that practices may become overwhelmed, while unions say the rule places an unnecessary burden on employees.

At the other end of the income scale, the coalition is making it easier for employers to part ways with top earners. As of 1 January 2027, anyone with a gross annual salary above 177,450 euros can be dismissed more readily against a severance payment. According to the Institute for Employment Research (IAB), this affects just 0.27 percent of all employees—and more than half of those are aged over 55. The government also plans to introduce a tax bonus on severance payments for people who quickly find a new job, replacing the existing one-fifth rule. An RWI economist criticised the idea sharply, arguing it is not the state’s job to make work more attractive at specific points in time.

Minijobs, the low-paid mini-jobs popular in hospitality, retail and farming, are becoming more expensive for employers. The flat-rate employer contribution rises from two to five percent, and minijob holders will have to be included in the statutory pension insurance system. CSU leader Markus Söder insisted in mid-July that the positions must be preserved, warning of severe knock-on effects if they were abolished. The IAB called the plans half-hearted, saying they would have only a small impact on state revenue and employment structure. On fixed-term contracts, the government is increasing flexibility: contracts without a material reason can last up to 48 months, a temporary rule scheduled to expire in 2030.

The package does offer tax relief for families. A household with two children and an annual income of 60,000 euros will be better off by more than 600 euros a year. The basic tax-free allowance rises to 12,900 euros by 2028, and child benefit climbs to 272 euros. At the upper end, the top tax rate will be tightened: 45 percent on income above 250,000 euros and 47 percent above 280,000 euros. The deductibility of tradesmen’s services is cut to a maximum of 900 euros.

A recent ruling by the Federal Labour Court (case 2 AZR 213/25) adds another layer for employers. The special protection against dismissal that arises when parental leave is split into several segments is renewed at the start of each individual segment. Before giving notice, companies must carefully check whether any application for a future parental-leave period has already been submitted.