Germany’s Labor Overhaul: Dismissal Protection Threshold to Jump from 10 to 50 Workers
Veröffentlicht: 07.07.2026 um 21:06 Uhr, Redaktion boerse-global.de
Millions of employees across Germany’s service, craft and mid-sized sectors could soon lose their automatic right to social justification before being fired, under a sweeping reform package that emerged in early July 2026. The coalition government plans to raise the threshold for general dismissal protection from 10 to 50 staff, effectively exempting a broad swath of small and medium enterprises from having to prove the social fairness of a termination.
The change—dubbed an expansion of the “small business clause”—would apply to all companies that stay below the 50-employee mark. Protected groups such as pregnant women and severely disabled workers remain outside the scope of the looser rules. For everyone else, a dismissal could proceed without the employer needing to demonstrate grounds like redundancy or misconduct.
High Earners Get a Separate Fast Track
Alongside the threshold shift, the government has detailed a parallel mechanism for top earners. Employees with a gross annual salary of roughly €177,450—1.75 times the social security contribution ceiling—would become eligible for a court-ordered dissolution of the employment relationship without any social justification. The employer would simply file a termination request with the labour court.
In such cases, severance would be capped at 12 gross monthly salaries. For workers aged 55 or older with at least 20 years of company tenure, the cap rises to 18 monthly salaries. The provisions could take effect on 1 January 2027.
Executives Face Stricter Standards as Court Upholds Instant Dismissal
While the reforms ease conditions for employers, recent jurisprudence underlines that top managers remain under heightened scrutiny. In late May 2026, the Berlin-Brandenburg Regional Labour Court upheld the summary dismissal of a manager at public broadcaster RBB. The executive had approved consultant invoices totalling roughly €14,000 without proper verification.
The court ruled that for senior staff carrying special responsibility, a single act of gross negligence—even a first offence—can justify immediate termination without a prior warning. The decision sets a clear marker: looser general rules do not dilute the duty of care expected from leadership.
Termination Agreements: Avoiding the Unemployment Trap
With job cuts already announced—German AI firm DeepL said in May 2026 it would shed 250 positions—many employees are looking at severance agreements. Lawyers warn that poorly drafted contracts can trigger a 12-week block on unemployment benefits.
To avoid a sanction, the agreement must state a compelling reason for the end of employment, for example that a lawful redundancy dismissal was imminent and that the statutory notice period was respected. Severance should not exceed half a monthly salary for each year of service, according to specialist attorneys. In cases of conduct-related conflicts, a written warning remains a prerequisite before any ordinary dismissal; in practice, most dismissal protection lawsuits end in a settlement because employers fear flaws in the social selection process.
Other Elements of the Reform Package
The coalition has bundled further measures aimed at flexibility. Fixed-term contracts without a material reason would become permissible for up to 48 months, with as many as six renewals. A mandatory sick note from the first day of illness would come into force, ending the current digital phone-in option. Tax incentives for severance payments and premium rates for Sunday and holiday work are also part of the plan.
Legal experts caution that several provisions are still draft language without final legislation. Employers should review their contracts but avoid rushing into premature changes until the precise statutory texts are published.
