From Day-One Sick Notes to Capped Severance: Germany’s Broad Labour Overhaul Takes Shape

Sick leave is costing Germany an estimated €82 to €85 billion a year in lost productivity, according to Chancellor Friedrich Merz. To tackle the drain, the federal government has unveiled a sweeping package of labour reforms that will require employees to present a doctor’s note from the first day of illness and strip away longstanding dismissal protections for the highest earners.

The new rules, approved in early July, abolish the phone-based sick note entirely. Workers who fall ill must now obtain a physical medical certificate before they can stay home. Employers and unions can still negotiate more flexible arrangements under the “favourability principle” for existing contracts. But doctors’ associations warn the change could trigger up to 30 million extra practice visits a year. The chairwoman of the AOK health insurance fund dismissed the move as symbolic politics, and a DIW economist noted that telephone sick notes account for only about one percent of all medical certificates issued. Critics add that requiring a clinic visit from day one may paradoxically lead to longer sickness durations, as physicians write longer certificates to avoid repeat visits.

The shift to stricter sick?note rules highlights how vital proper compliance documentation is. Many UK companies risk hefty fines because they lack the right health & safety records – from risk assessments to training logs. A free Health & Safety Toolkit gives you ready?to?use templates that cover UK regulations and can help you stay inspection?ready. Download the free Health & Safety Toolkit

Parallel to the government’s push, Microsoft has introduced a feature called “Workplace Check-in” that automatically logs office attendance via company Wi?Fi on Windows and macOS computers. Administrators must activate the tool manually, and employees can control their own visibility. The tech giant also raised prices on several 365 subscriptions as of 1 July, with increases of up to 43 percent hitting Business Basic, E3, E5 and Frontline plans. Microsoft is simultaneously cutting roughly 5,500 jobs. A pause function for AI?powered features in Teams meetings is due at the end of July.

High-income workers face a separate overhaul. The government plans to ease dismissals for employees earning more than €177,450 a year gross — 1.75 times the current social security contribution ceiling. Severance for operational redundancies would be capped at 12 months’ gross salary, rising to 18 or 20 months for staff over 55 with at least 20 years of service. Legal experts warn that the change would hollow out the protections of the Kündigungsschutzgesetz (Dismissal Protection Act) and leave top earners with significantly less financial cushion.

Court rulings are also reshaping workplace rules. Germany’s Federal Labour Court (BAG) reaffirmed in a March 2026 decision that dismissals without a proper mass?layoff notification are invalid. The legally mandated 30?day standstill period before any collective redundancy can take effect is now strictly enforced. Meanwhile, the Thuringia State Labour Court ruled that blanket policies banning consecutive holiday of more than two weeks are legally risky — employers must assess each case individually.

Beyond labour law, several other changes took effect on 1 July: pensions rose 4.24 percent (€78 more for a standard pension), the old Bürgergeld benefit was replaced by a new basic income support system, and minimum wages in the care sector climbed to €16.52 for unskilled workers and €21.03 for skilled staff. Cryptocurrency exchanges now require a licence under the EU’s MiCA regulation, new cars must be fitted with automatic emergency braking and lane?keeping assist, and the temporary fuel discount ended, pushing up petrol and diesel by around 17 cents a litre.

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