Germany to Scrap Dismissal Protection for Workers Earning Over €177,450 Under 2026 Labor Law Overhaul
Published on 07/06/2026 at 23:45 | Redaktion boerse-global.de
A broad set of labor law reforms moving through Germany’s legislative pipeline will reshape protections for high earners, tighten sickness documentation rules, and expand fixed-term contracting options. Employers are being urged to review contracts and internal processes well ahead of implementation, even as one major EU-mandated piece of legislation faces delays.
High-Earning Employees Face Loss of General Dismissal Protection
From mid-2026, workers earning an annual gross salary of approximately €177,450 will no longer qualify for the general dismissal protection that applies to most employees under German law. That threshold effectively removes a long-standing safety net for senior and executive staff. In the event of a separation, any severance would be capped by statute—usually at 12 gross monthly salaries. Employees with extended tenure near retirement could receive up to 18 or even 20 months’ pay.
Legal experts caution that the change represents a sharp departure from current practice, where settlements often far exceed those levels—commonly 1.5 to 2 monthly salaries per year of service. The reform is seen as an attempt to give employers more flexibility when parting with top earners, but critics warn it leaves individuals exposed to significant financial loss.
Stricter Rules for Sick Leave and the End of Remote Sick Notes
Alongside the income-based overhaul, the government plans to stiffen requirements for reporting illness. Under the new regime, workers must provide a doctor’s certificate (Arbeitsunfähigkeitsbescheinigung, or AU) from the very first day of sickness. At the same time, the option to obtain a sick note by telephone—introduced during the pandemic—would be eliminated entirely.
Labor law specialists note that existing employment contracts are protected by the GĂĽnstigkeitsprinzip (favourability principle), meaning any agreement that gives workers better terms than the new law would remain valid. However, employers can still negotiate stricter proof obligations individually.
Some experts worry that a mandatory AU on day one could paradoxically extend sick leave. According to an OECD study, Germany already ranks seventh internationally for time lost to illness, with 6.8 percent of working hours affected—a figure well above countries such as Norway or Finland.
EU Pay Transparency Directive Delayed but Not Forgotten
The transposition of the EU Pay Transparency Directive into German national law has slipped behind schedule. Despite the postponement, the topic remains urgent for businesses. Industry associations such as DEHOGA Hamburg have flagged that hospitality and hotel sectors will be particularly affected by future disclosure requirements aimed at exposing gender pay gaps. Companies are advised to use the extra time to audit their compensation structures for compliance.
Fixed-Term Contracts Doubled in Length
Another pillar of the reform package will double the maximum duration of fixed-term contracts without a specific cause (sachgrundlose Befristungen) from 24 to 48 months. Employer representatives argue this is necessary to adapt to a fast-changing economy. Trade unions and worker advocacy groups counter that the change weakens job security and opens the door to prolonged precarious employment.
Court Rulings Tighten Vacation and Time-Tracking Rules
Case law continues to sharpen the legal environment for HR departments. The Federal Labor Court (Bundesarbeitsgericht) has confirmed that statutory leave entitlement is calculated based on working days. In a separate ruling, the Thuringia State Labor Court found that internal policies limiting consecutive vacation to two weeks are legally risky when applied across the board.
Since a landmark Federal Labor Court decision in September 2022, employers have been obliged to systematically record employees’ working hours. That requirement is already enforceable, regardless of the pending update to the Working Time Act (Arbeitszeitgesetz).
Sectoral Minimum Wages and Social Benefit Changes Take Effect
Come July 2026, several targeted financial adjustments kick in. In the care sector, minimum wages will rise in tiers: to €16.52 for unskilled aides, €17.80 for qualified assistants, and €21.03 for skilled professionals.
Simultaneously, the Bürgergeld (citizen’s income) system will be replaced by a new basic income scheme with tougher sanctions. Fuel subsidies will expire—estimates suggest pump prices could climb by around 17 cents per litre. Pensioners, however, can expect a 4.24 percent increase in their benefits.
On the digital front, the tax authority’s online portal MeinELSTER+ will launch, and crypto exchanges will immediately fall under the EU’s MiCA licensing regime.
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