From Sick Notes to Severance: Germany’s Labour Reform Package Reshapes Workplace Rights
Published on 07/03/2026 at 06:53 | Redaktion boerse-global.de
The telephone sick note is being scrapped. Under a sweeping reform package passed by Germany’s governing coalition in early July, employees will have to produce a doctor’s certificate from the very first day they call in ill — a reversal of the pandemic-era easing that allowed a phone-based fit-note.
That change is one of several designed to shake up German labour law. The package also eases dismissal rules for top earners, doubles the maximum duration of fixed?term contracts, and cuts a further ten billion euros in taxes for low- and middle-income households.
Higher Pay, Lower Protection
From January 2027, any worker earning a gross annual salary above €177,450 — equivalent to 1.75 times the pension?insurance contribution ceiling — will lose the full protection of Germany’s traditional dismissal safeguards. Instead, employers can terminate those contracts more easily, provided they pay a severance. The new rule applies only to contracts signed from 2027 onward.
To encourage job?hopping, severance payments will benefit from tax privileges — but only if the employee quickly moves into a new role. Economists have praised the logic, arguing that while the old system shielded workers, it often blocked companies from restructuring.
Longer Temp Hires and Higher Weekend Pay
Without requiring a specific reason, employers will soon be able to offer fixed?term contracts for up to 48 months — twice the current 24?month limit. Workers hired before the end of 2030 can also see their contracts extended up to six times within that period.
To make unsocial hours more attractive, the government is raising the tax?free caps on Sunday and public?holiday supplements. The hope is that more staff will volunteer for weekend shifts as a result.
Tax Cuts for Families, New Top Rate for the Wealthy
The reform bundle includes a ten?billion?euro income?tax cut focused on small and medium earners. By 2028 a family with an annual household income of €60,000 will save more than €600 a year. The top marginal rate stays at 42%, but the “wealth tax” bracket is being redrawn: earnings above €250,000 will be taxed at 45%, and above €280,000 at a new top rate of 47%.
On the bureaucratic front, the coalition promises to scrap or shorten dozens of documentation and reporting obligations for businesses. In a separate clause aimed at landlords, the package explicitly bans the nationalisation of private rental housing — a gesture meant to shore up investment confidence.
Cheers and Jeers
Reaction has been predictably mixed. Employer associations called it a long?overdue course correction. The Federation of German Employers’ Associations (BDA) welcomed the flexibility, while the German Chambers of Commerce and Industry (DIHK) applauded the deregulation but voiced discomfort with higher top?rate taxes.
Trade unions are pushing back. The German Trade Union Federation (DGB) warns that longer fixed?term contracts will weaken workers’ rights and create uncertainty. Ver.di, the services union, condemned the stricter sick?leave rules as a sign of distrust. Economists, meanwhile, are divided: some see necessary adjustment, others dismiss parts of the package as symbolic gestures that won’t generate enough growth to move the needle.
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