On 2 July 2026, the coalition committee of the German Federal Government — comprising the CDU/CSU and the SPD — published the ‘Programme for Economic Recovery and Employment’, a 34-point reform package covering taxation, employment law and the reduction of bureaucracy.
The document is not a coalition agreement, but rather a programme of political measures containing specific legislative mandates and deadlines. It is set against the backdrop of Germany’s ongoing economic downturn and represents the CDU/CSU and SPD’s response to the current economic crisis.
The programme reflects a significant shift in priorities compared with previous years, with its focus spanning the reduction of bureaucracy, investment, digitalisation, artificial intelligence, industrial policy, the acceleration of planning processes and tax relief.
Alongside tax relief for those on low and middle incomes and a range of family policy measures, the programme contains wide-ranging provisions that directly affect employment law — from the structure of fixed-term employment contracts and protection against dismissal for high earners to questions of workplace co-determination in the context of artificial intelligence.
Why employers should act now
These changes are not merely aspirational — the programme contains specific legislative mandates and firm deadlines, meaning reforms are expected to move quickly. Employers who wait until legislation is finalised risk being caught off guard.
Several measures, including changes to fixed-term contracts, sick leave certification and Sunday pay, could require immediate updates to employment contracts, HR policies and payroll processes.
Aside from the program, there are other exciting developments that are likely to be of particular relevance to employers and could prompt a need for action in the near future (e.g., the A1 certificate reform).
Key areas to be aware of
From the programme itself:
- Fixed-term contracts — new rules will allow up to six fixed-term contracts over 48 months, with the written form requirement set to be abolished
- Sick leave — telephone sick reporting will be abolished; a sick note will be required from day one of absence
- High earners — a new dismissal scheme is proposed for employees earning above EUR 177,450 gross per annum
- Sunday and public holiday pay — tax-advantaged hourly limits will rise from EUR 50 to EUR 75 from 1 January 2027
- Mini-jobs — mandatory pension and social security contributions will be introduced, reducing net pay for affected workers
- AI and co-determination — amendments to the Works Constitution Act are planned to streamline AI adoption in the workplace
Further developments beyond the programme:
- New German Working Hours Act — a new draft bill introduces mandatory electronic time recording and greater flexibility on daily working hour limits via collective agreement
- EU Pay Transparency Directive — implementation in Germany has been delayed until early 2027, but the Directive already has direct effect for public sector employers
- A1 certificate reform — of particular relevance to international employers: the European Parliament has voted to remove the A1 certificate requirement for short-term cross-border assignments of up to three days within a 30-day period (excluding the construction sector), though the reform is not expected to take effect until mid-2028
Want the full picture?
Our guide sets out in detail the employment law provisions contained in the programme, together with our assessment of what the planned measures are likely to mean in practice — and provides a comprehensive update on the further developments outlined above.
Download the guide here for the full analysis
If you have any questions about how these changes may affect your business, please do not hesitate to get in touch with our German employment law team.
For further information, please contact:
Thomas Hey, Partner, Bird & Bird
thomas.hey@twobirds.com
