Tax Rewards for Quick Re-Employment Anchor Germany’s 34-Point Labour Reforms
Published on 07/04/2026 at 22:53 | Redaktion boerse-global.de
Workers in Germany who jump straight into a new job after being dismissed will see a tax break under a wide-ranging coalition deal struck in early July 2026. The principle is simple: the shorter the gap between roles, the larger the tax advantage on any severance payment. Exact deadlines and the precise amount of relief have yet to be fixed, but the government says the incentive is meant to keep people off unemployment benefits altogether.
The package, agreed by the CDU, CSU and SPD, contains 34 individual measures spanning labour law and taxation. One of the most controversial elements takes effect on 1 January 2027 and applies exclusively to employees earning more than €177,450 in gross annual salary — 1.75 times the social security contribution ceiling. For those top earners, the existing protection against unfair dismissal will be converted into a pure severance guarantee.
Under the new model, employers who sack a high earner without social justification can request to terminate the contract in exchange for a payout. The system borrows from rules already in place for risk-takers in the financial sector. The compensation can reach up to 12 months’ salary, rising to 15 or even 18 months for older workers with long tenure at the company.
The change is initially meant to cover only new employment contracts. How existing agreements will be treated remains undecided. Germany’s IG Metall union has already attacked the plan as an infringement on established workers’ rights.
Alongside those labour reforms, the government is advancing several other adjustments. Fixed-term contracts without a specific reason can be extended for up to 48 months until the end of 2030, with as many as six renewals allowed. From the start of 2027, the written-form requirement for such extensions will be dropped.
Sick notes will become mandatory from the first day of illness, and the telephone-based sick-note procedure is to be scrapped. On the tax side, the flat-rate tax on minijobs rises from 2 to 5 percent. At the same time, tax-free supplements for Sunday and public-holiday work will be permissible for hourly wages up to €75; within collective-bargaining frameworks these supplements also remain exempt from social contributions.
In parallel, courts have been delivering rulings on stock-related cash compensations that fall outside the labour-law overhaul. At the end of June 2026, the Nuremberg-Fürth regional court confirmed a cash settlement of €23.50 per share for minority shareholders squeezed out of VEDES AG. On 6 July, the Stuttgart regional court hears a dispute over the control agreement between msg systems ag and msg life ag, with an offered payout of €2.48 per share and a guarantee dividend under scrutiny. A squeeze-out at Vectron Systems AG appears imminent after Arrow HoldCo GmbH raised its stake above 95 percent, while at Gruschwitz Textilwerke the cash compensation for minority shareholders has been set at €89.08 per ordinary share.
All legislative proposals still need to pass the regular law-making process. Parts of the package are scheduled to take effect from the beginning of 2027. The broader deal also includes tax relief for the general population and a pension reform that the government aims to flesh out by the end of 2026.
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