Labour Law Reform Aims to Make Hiring Easier
The German Federal Government is planning changes to labour law to make it easier for companies to hire employees. The 32-page draft bill presented by Federal Minister of Labour Alexander Schweitzer provides, in particular, for expanded options for fixed-term employment contracts and reduced protection against dismissal for certain high earners.
The explanatory memorandum cites the weak economy and growing uncertainty in the labour market as reasons for the proposed changes. The initiative had already entered the early coordination process under Schweitzer’s predecessor, Bärbel Bas.
Expanded Options for Fixed-Term Contracts
Fixed-Term Contracts Without Objective Grounds Until the End of 2030
The proposed changes are intended to facilitate fixed-term contracts without objective grounds for employees hired up to 31 December 2030. Within a total period of four years, a fixed-term employment contract may be renewed no more than six times.
The draft bill also provides that a new fixed-term contract with a former employer may be permitted on one occasion. This would expand the current options for returning to fixed-term employment.
Protection Against Dismissal for Certain High Earners
Equal Treatment with Senior Executives
Another provision concerns employees with particularly high incomes. For the purposes of protection against dismissal, they are to be treated in the same way as senior executives. For this category of employees, the Arbeitsgericht (Labour Court) may, upon the employer’s application, terminate the employment relationship in return for a severance payment without the employer having to state grounds for the application for termination.
The relevant income threshold is to be linked to the annually adjusted contribution assessment ceiling for the statutory pension insurance scheme. The provision is intended to cover employees whose income reaches 1.75 times this ceiling. In 2026, the contribution assessment ceiling was slightly above EUR 100,000.
Application from 2028 at the Earliest
According to the draft bill, the easing of protection against dismissal is to take effect no earlier than 2028. The Bundesarbeitsministerium (Federal Ministry of Labour) cites the protection of legitimate expectations and planning certainty for the employees concerned as reasons for the delay.
Co-Determination in Large Companies
The draft bill also contains provisions on corporate co-determination. These are intended to prevent the misuse of the legal form of the European Company to avoid equal representation of employees and shareholders.
According to the explanatory memorandum, five out of six large European Companies do not have parity-based co-determination. Around 480,000 employees are said to be affected in total. The proposed rules are intended to strengthen co-determination in certain large companies.
Changes to Work on Sundays and Public Holidays
Rules for Libraries and Bakeries
Amendments to the Arbeitszeitgesetz (German Working Time Act) are also planned. They relate in particular to the following areas:
- Public libraries are to be permitted to employ staff for up to six hours on Sundays and public holidays.
- Adjustments to working time regulations are also planned for bakeries and confectioneries.
Further Legislative Process
The draft bill is to be adopted by the Bundeskabinett (Federal Cabinet) in December 2026 and subsequently submitted to the Bundestag (German Federal Parliament). As a general rule, the amendments are intended to enter into force at the beginning of 2027. However, a later date of application is envisaged for the planned easing of protection against dismissal for certain high earners.
The individual provisions may still change before the legislative process is concluded. No final legislative decision has yet been made.
Employment Law Assessment by MTR Legal
The proposed changes may be particularly relevant to the structuring of fixed-term employment relationships, the dismissal of high-earning employees and matters of corporate co-determination. Companies, employers and employees requiring further advice can obtain individual employment law advice from MTR Legal.
