Germany Scraps Phone-Based Sick Leave as Coalition Pushes Sweeping Labour Market Overhaul

Germany's coalition approves 34-measure labor reform expanding fixed-term contracts to 48 months, eliminating telephone sick notes, and drawing sharp union and economist criticism.

Economists and unions have roundly condemned a 34-measure reform package approved by Germany's black-red coalition, which dramatically expands fixed-term contracts, eliminates telephone sick notes, and introduces a mandatory medical certificate from the first day of illness. The legislation, defended by Chancellor Merz as a necessary response to the country's economic weakness, has drawn fire from the GEW, Verdi, and the DGB, while the DIW's president, Marcel Fratzscher, dismissed it as "symbolic politics."

The most contentious changes target the general labour market. Until the end of 2030, employers may fix-term employees for up to 48 months without stating a reason — a sharp rise from the previous limit of two years. Instead of a maximum of three contract extensions, six are now permitted. The package also relaxes dismissal rules for high earners: anyone earning more than 1.75 times the contribution assessment ceiling can be let go more easily. In exchange, severance payments are granted tax advantages when workers change jobs quickly.

Alongside these measures, the coalition has reformed the Wissenschaftszeitvertragsgesetz (Academic Fixed-Term Contract Act). Pre-doctorate contracts must now run for at least three years. After a doctorate, the first employment contract is set to last at least two years. The maximum post-doc fixed-term period is reduced to four years. Student employees, however, can work on fixed-term contracts for up to eight years — longer than before. These academic rules take effect six months after official publication, and collective bargaining partners may negotiate alternative arrangements.

The government is also abolishing the option of a telephone-based sick note, a temporary measure introduced during the pandemic, and reinstating the pre-Covid requirement for a doctor's certificate from the first day of illness. That shift, unions argue, fosters a "culture of mistrust" among employers.

On the administrative side, a separate bureaucracy-reduction package lifts reporting obligations en bloc and introduces a four-month approval fiction for certain administrative procedures. In pension policy, the government aims to implement all 33 proposals from the old-age security commission by the end of 2026 — including the elimination of early retirement without deductions.

While the Bundesverband der Deutschen Arbeitgeberverbände (BDA) praised the flexibilisation as a necessary step, the Ifo Institute warned of negative consequences for young people's life planning. The GEW said the plans breed suspicion and weaken workers' rights. Verdi and the DGB also rejected the expansion of fixed-term possibilities. Merz, however, insisted the package is designed to steer the economy out of its weak phase.