When Job Cuts Loom, Workers Trade Pay for Protection: Inside Germany’s Fracturing Labour Landscape
03.07.2026 - 01:31:33 | boerse-global.de
At the Stuttgart and Kornwestheim plants of auto supplier Mahle, roughly 4,000 employees agreed on 2 July to surrender their 2026 pay rise, plus Christmas and holiday bonuses, in exchange for one thing: a guarantee that no one will be laid off before the end of 2029. The deal, struck between management and the workforce, reflects a broader pattern of concession bargaining as Germany’s industrial core struggles with falling profits and sales in the 2025 business year.
But the Mahle pact is only one piece of a much larger puzzle. While workers at that company chose security over salary, tensions are boiling over at Mercedes-Benz and Volkswagen, where the IG Metall union has called for protests on 3 July. At Mercedes, management wants to delay a special payment equal to 18.4 percent of a monthly salary into 2027, affecting some 90,000 employees. Demonstrations are planned at sites including Sindelfingen and Untertürkheim.
The situation at Volkswagen is even more volatile. In Baunatal, a cost-cutting drive announced by the parent company has provoked fury. Works council chief Carsten Büchling described the management’s communication as a “communication disaster.” Globally, Volkswagen may eliminate up to 100,000 positions by 2030. The supervisory board will decide on next steps on 9 July.
Against this backdrop of company-level strife, Germany’s federal government has pushed through a wide-ranging labour law reform package. The coalition of CDU/CSU and SPD agreed on 2 July on 34 individual measures. Among the most contentious: fixed-term contracts without a specific reason can now run up to 48 months, extended through the end of 2030. Starting in January 2027, the written-form requirement for such contracts will be dropped entirely.
Another flashpoint is the relaxation of dismissal protection for high earners — specifically, employees with annual compensation above €177,450, which is 1.75 times the contribution assessment ceiling. In return, the package includes new rules to make co-determination easier when companies deploy artificial intelligence. And it closes a loophole that allowed firms to dodge employee board representation by setting up shelf European Companies (Societas Europaea).
Reactions split along predictable lines. Employer president Rainer Dulger praised what he called a “long-overdue change of direction” and welcomed the promised reduction of bureaucracy. IG Metall sees both positive and negative elements, while Verdi has been sharply critical: the union opposes the expansion of fixed-term contracts, the abolition of telephone sick notes, and the requirement to present a doctor’s certificate from the first day of illness.
The courts, meanwhile, have been tightening the boundaries of co-determination. In May, the Federal Labour Court ruled that a foreign airline cannot set duty rosters for pilots stationed at Berlin’s BER airport without involving the local works council. The stationing site qualifies as an operational unit with its own employee representation. The court also clarified that arbitration committees may only be called in after genuine negotiations have taken place — unless one side is clearly blocking progress or talks are obviously futile.
As the political and judicial frameworks shift, the real test plays out on factory floors. Whether through formal concessions, protest rallies, or legal rulings, the relationship between employers and works councils in Germany is entering a new, more confrontational phase — one where the old certainties of collective bargaining no longer apply.
