Germany’s Sweeping Labour Overhaul: Tighter Sick Rules, Email Contracts, and Tax Breaks for Rapid Re-employment
Published on 07/08/2026 at 18:34 | Redaktion boerse-global.de
A major reform package passed by the German government aims to slash bureaucracy, boost company flexibility, and nudge workers into faster job switches. Dubbed the “Programme for Recovery and Employment,” the bundle touches everything from sick notes to dismissal protection — and has already drawn sharp lines between unions, employers, and the public.
Sick note from day one — and the end of phone-based certification
Starting with a flashpoint provision: employees will soon be required to present a doctor’s certificate of incapacity from the very first calendar day of illness. Currently, the obligation kicks in only on day four unless an employer demands it earlier. The coalition also plans to abolish the option of telephonic sick reporting.
Reactions are mixed. Supporters predict a drop in short?term absences. Yet the chairwoman of a major health insurance fund dismissed the move as symbolic, noting that phone-based certifications account for only a tiny share of all reports. Employment lawyers warn of longer periods of absence: when forced to visit a practice, doctors are less likely to issue a one?day sick note.
Germany already ranks seventh among OECD countries for illness?related working?time losses, at 6.8 percent.
Fixed?term contracts go digital; protections loosened for top earners
As of 1 January 2027, the written?form requirement for fixed?term employment contracts will be scrapped. Simple text form — an email, for instance — will suffice. The exception covers sectors with high risks of undeclared work, such as construction and hospitality.
At the same time, the use of fixed?term contracts without a material reason is being expanded. Until the end of 2030, companies may hire workers for up to 48 months with a maximum of six renewals. The existing ban on re?employing a former worker on a fixed?term basis at the same firm will also be loosened under certain conditions.
In a separate change targeting high earners, employees with gross annual income above €177,500 will see their dismissal protection weakened from 2027. Employers will then be able to apply for termination without stating reasons — provided they pay compensation.
Union representatives call the move a gateway to broader erosion of worker rights. Business associations praise the added flexibility in management ranks.
Tax incentive for rapid re?employment — and a wider fiscal shake?up
A novel provision, described as unique worldwide, ties severance tax to how quickly a person finds a new job. Researchers from the Institute for Employment Research explained that the shorter the spell of unemployment, the lower the tax burden on the severance payment.
This measure is flanked by an income?tax reform due on 1 January 2027. The package includes relief worth roughly €10 billion per year, partly by raising the basic personal allowance. Financing comes from hiking the flat?rate tax on mini?jobs from 2 to 5 percent, along with higher tax rates for very high incomes.
Extra changes for companies, clubs, and AI adoption
- Sundays and public holidays: The ceiling for tax?free supplements rises to €75 per hour from January 2027.
- Artificial intelligence: Introducing AI systems in workplaces will become easier through streamlined co?determination procedures.
- Data protection: Small and medium enterprises and clubs will get exemptions and simplifications under the GDPR.
- Shell companies: Using shelf companies to permanently avoid employee co?determination will be banned.
A recent opinion poll reveals a deeply divided public. Older respondents largely back the stricter sick?note rules, while the 18?to?29 age group overwhelmingly rejects them. Seven in ten surveyed admitted they were not yet familiar with the reform’s specifics.
Detailed draft legislation is expected between late 2026 and early 2027.
Disclaimer regarding our articles: No investment advice, no buy or sell recommendation. Information on prices, companies, and markets is provided without guarantee; changes are possible at any time. Stock market transactions can lead to substantial losses. Our articles are created and reviewed in whole or in part automatically with the support of AI.
