Germany’s 2026 Workplace Overhaul: Digital Time Logs, Flexible Hours, and a Sick-Note Revolution

A sweeping reform of German labour law is taking shape, driven by a draft bill from Labour Minister Bärbel Bas that would scrap the rigid eight-hour day and mandate electronic time tracking. The proposed changes, unveiled in June 2026, aim to modernise the Arbeitszeitgesetz (Working Time Act) after years of debate, but they have already drawn sharp opposition from unions and employer groups alike.

Under the plan, the traditional cap of eight hours per day could become flexible—but only if a collective bargaining agreement or works council arrangement explicitly allows it. At the same time, employers would be required to record working hours electronically on the same day the work is performed. That provision, if enacted, would effectively end models based on trust-based working time (Vertrauensarbeitszeit), where employees manage their own schedules without formal tracking.

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Reactions are polarised. Yasmin Fahimi, chair of the German Trade Union Federation (DGB), warned that longer hours could harm workers’ health. Employer associations, including Gesamtmetall, labelled the draft as backwards. The centre-right Union also rejected the proposal. The government expects the law to take effect before the end of 2026.

Record Sickness Levels and a Push for Partial Sick Notes

The reform push comes against a backdrop of soaring sick leave. A 2025 analysis by the DAK health insurance fund found that insured employees missed an average of 19.5 calendar days last year. The overall sickness rate stayed at 5.4 percent. Respiratory infections were the leading cause, but mental health diagnoses rose sharply—by 6.9 percent—making them the second-most common category. The healthcare sector was hit hardest, with 22.5 sick days and a sickness rate of 6.2 percent.

DAK CEO Andreas Storm has called for a national summit on absenteeism at the Chancellery. His proposal: introducing Teilkrankschreibungen (partial sick notes), which would allow workers to stay on the job for part of their hours while recovering. Chancellor Friedrich Merz, by contrast, has questioned the continued use of telephone-based sick notes, a practice expanded during the pandemic. Unions warn that any tightening could put additional pressure on employees.

Electronic Sick Notes Become the Norm—But Not for Everyone

Since January 2023, the electronic sick note (eAU) has been standard in Germany. Doctors transmit data digitally to health insurers, and employers retrieve it from there. For most workers, that eliminates the need to hand in a paper certificate. The duty to report illness to the employer, however, remains.

Important exceptions persist: anyone receiving Bürgergeld (the basic income support for jobseekers, soon to be replaced), those with private insurance, and employees who stay home to care for a sick child must still submit paper documents. As of January 2024, the eAU also applies to unemployed people—insurers forward the data directly to the Federal Employment Agency.

Welfare Overhaul: Grundsicherungsgeld Replaces Bürgergeld

Come 1 July 2026, the Bürgergeld system will be replaced by a new benefit called Grundsicherungsgeld. Recipients remain subject to strict reporting rules when ill. Violations can trigger sanctions ranging from 10 to 30 percent of the standard benefit amount.

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Sick Pay Caps, Tax Rules, and a Court Clarification

For longer illnesses, employees receive sickness benefit (Krankengeld). In 2026, the maximum daily rate is €135.63. The payment is tax-free, but falls under the progressivity proviso (Progressionsvorbehalt), meaning it can raise the marginal tax rate on other income. Anyone receiving more than €410 per year in replacement benefits must file a tax return.

A recent ruling by the Social Court of Darmstadt (case number S 8 AL 348/21) closes a practical loophole: health insurers must pay sickness benefit retroactively if two medical certificates with different diagnoses are separated only by a weekend, provided a prior assessment was objectively impossible. Social welfare organisations also point out that insured individuals do not have to actively push for earlier rehab clinic appointments, even if the insurer threatens to stop payments.

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