German Law Change Slashes Sick Pay for Workers Who Lose Jobs as Insolvencies Mount

New German law slashes sick-pay entitlements for employees laid off while ill, reducing payments to 60% of net salary. Amid rising insolvencies, experts warn of safety net loss.

A legislative overhaul quietly passed by the Bundestag on 10 July 2026 will dramatically reduce the sick-pay entitlements of employees who are laid off while on medical leave. The measure, part of the Statutory Health Insurance Contribution Rate Stabilisation Act (GKV-Beitragssatzstabilisierungsgesetz), takes effect on 1 January 2027 and aligns sick pay with unemployment benefit levels.

From that date, workers who lose their job during a period of illness will receive only 60 percent of their net salary – or 67 percent if they have children. Previously, the entitlement stood at 70 percent of gross earnings, capped at 90 percent of net income. Employment lawyers say the cut removes a crucial safety net at a time when corporate failures are rising across Germany, leaving more people simultaneously grappling with illness and job loss.

The Arbeiterkammer (Chamber of Labour) in the Burgenland region has responded to the worsening climate by launching special consultation slots for workers affected by employer insolvencies. Since mid-July, affected employees can book telephone or in-person appointments to get advice on unpaid wages, notice periods and severance rights. A specialist employment lawyer stresses that wages are legally due by the first day of the following month; if an employer misses that deadline, workers automatically become entitled to late-payment interest and compensation. Experts recommend never working without pay for more than three consecutive months, warning that the risk of losing everything skyrockets once insolvency proceedings begin.

A case handled by the Arbeiterkammer Oberösterreich illustrates the dangers of signing agreements under pressure. A warehouse worker secured more than €6,000 gross in severance after challenging an employer who had tried to push through a retroactive mutual termination. The president of the chamber cautioned against signing any such document hastily.

The tightening of sick-pay rules comes against a backdrop of high-profile insolvencies. At the Mannheim-based Eichbaum brewery, a court-supervised self-administration process that began in October 2025 ended with no investor stepping in. All 240 employees have now been handed dismissal notices. Production continues for the moment while the food-and-beverage union NGG pushes for a social plan. The technical director, who had spent 34 years at the brewery, described the emotional toll on staff as enormous.

In Baden-Württemberg, the Aalcon GmbH of Aalen filed a preliminary insolvency petition on 17 June 2026 after losing a major customer. The insolvency administrator said the request came too late to save the company, and all 55 workers were given notice.

Across the border in Austria, the Wels Regional Court opened restructuring proceedings on 14 July for Hinke Tankbau GmbH, a tank manufacturer in Vöcklamarkt hit by the weak economy and a limited credit line. Liabilities are estimated at between €1.2 million and €3.3 million. Employees – 50 in total – did not receive their June wages; a restructuring plan proposes a 20 percent dividend over 24 months.

Meanwhile, wind-energy developer Sowitec Group GmbH filed for insolvency at the Tübingen District Court after outstanding payments from projects in Mexico and Colombia – running into the millions – dried up. Its roughly 80 staff are now receiving their salaries through the insolvency compensation fund. Operations are expected to continue for three to six months while a buyer is sought.

Employment lawyers advise workers affected by any of these situations to consider taking out private daily sickness benefit insurance as a buffer under the new, less generous public system.