German High-Earners Gain New Right to Exit With Severance as Workplace Laws Reshape
04.07.2026 - 03:56:49 | boerse-global.de
Germany's highest labour court has effectively told employers they can no longer send staff home on paid leave during a notice period without a concrete reason. In a ruling on 25 March (file number 5 AZR 108/25), the Federal Labour Court (BAG) declared blanket suspension clauses invalid – those that automatically apply regardless of which side terminates the contract. Employees now have a basic right to actually work until the legal end of their employment.
The case that triggered the decision involved a worker whose company suspended him without justification. The court awarded damages for the lost benefit of a company car he could no longer use privately – valued at €510 gross per month.
That judgment arrives as part of a broader recalibration of German employment law. At the beginning of July 2026, the governing coalition agreed a 34-point reform package that will take effect in stages. The biggest shift targets high-income employees.
From 1 January 2027, workers earning more than 1.75 times the contribution assessment ceiling for the statutory pension scheme can voluntarily end their contract in exchange for severance pay. Based on current figures for 2026, that threshold stands at roughly €177,450 gross per year – about €15,000 a month. Under the new rules, a court can dissolve the employment relationship upon the employer's application even if the dismissal is not socially justified. Compensation would reach up to 12 monthly salaries, or up to 18 for long-serving older employees. Crucially, the provision primarily covers new employment contracts signed from 2027 onwards.
The reforms also loosen fixed-term rules. For hires made before the end of 2030, fixed-term contracts without a specific reason can last up to 48 months and be renewed up to six times. The written-form requirement for such contracts disappears on 1 January 2027.
On the health front, the coalition plans to scrap the phone-based sick note. Instead, a medical certificate will be required from the first day of illness – a reversal of the relaxed rules introduced during the pandemic. That change, too, is scheduled for the turn of the year.
A separate ruling by the Hamm State Labour Court (LAG Hamm) underscores the risks of digital shortcuts. The court upheld the summary dismissal of an employee who submitted an online sick note obtained without any direct contact with a doctor. Using a pure web form, the judges ruled, constitutes a serious breach of trust. Legitimate digital certificates – issued via video consultation or telephone – have been permissible since late 2023 under certain conditions, but a note without a medical consultation is a violation of contractual duties and makes a prior warning unnecessary.
None of these changes alter the basic notice periods enshrined in § 622 of the German Civil Code. The standard remains four weeks to the 15th or the end of a calendar month. During the maximum six-month probationary period, two weeks apply. When the employer terminates, the periods lengthen according to tenure: one month after two years, two months after five, four months after ten, and seven months after twenty years.
Industry observers estimate that roughly 60 percent of companies in Germany anticipate staff cuts by 2030, putting pressure on employers to get dismissal procedures right. Experts caution that common mistakes in the social selection process for operational redundancies often derail cases. Singling out underperformers is not permitted within that framework, though grouping employees by age to maintain the company's demographic structure is legally acceptable. In practice, most dismissal proceedings today end with a settlement and a severance payment.
