Extended Permissibility of Fixed-Term Contracts Without Objective Grounds
For employees hired up to 31 December 2030, fixed-term contracts without objective grounds are to be permitted for a maximum duration of up to four years (previously two years), with the possibility of up to six extensions (previously three). In this regard, it is also to be possible to be re-hired for the first time by the same employer. This apparently implies the lifting of the prohibition on prior employment and the applicability of the above-mentioned relaxed rules on fixed-term contracts to employees who are re-hired on a fixed-term basis without objective grounds, even though they were previously employed by the same employer. Furthermore, from 1 January 2027, fixed-term contracts will no longer need to be agreed in writing.
Severance pay rather than continued employment
From 1 January 2027, employers are to have the option of applying to the employment tribunal for a severance payment to be set in the event that a notice of termination served on a so-called high earner is deemed invalid. No specific reason will then be required. This applies to employees whose annual income exceeds 1.75 times the contribution assessment ceiling for the statutory pension insurance scheme.
Furthermore, severance payments are generally set to enjoy greater tax relief in future the sooner a new job is taken up. The aim is to make a swift transition from one job to the next more attractive.
Medical certificate from the first day of sickness
No aspect of the proposed reforms has been the subject of more heated debate than the requirement to provide a certificate of incapacity for work from the first day of illness. However, employers can already demand proof of incapacity for work from the very first day. Furthermore, more favourable arrangements for employees are possible. Trade unions and works councils will press for this in collective bargaining or when negotiating works agreements.
Sick notes issued over the phone will be abolished (once again).
Mini-jobs – to be scrapped or not?
The Pension Commission recommends abolishing ‘minijobs’ – forms of marginal employment that enjoy tax and social security privileges. An exception is to apply to school pupils. Minijobs are said to pose a significant risk of poverty, particularly for women, and to undermine incentives to extend working hours once the need for childcare diminishes as children grow older. However, around 6.5 of the approximately 6.7 million people in minijobs (excluding minijobs in private households) are employees who take on the minijob as a secondary job, pensioners and students. The Pension Security Commission’s arguments are therefore not convincing.
Furthermore, according to the ‘Programme for Recovery and Employment’, the flat-rate tax on mini-jobs is to be raised from two to five per cent. This actually argues against their abolition.
Dynamic retirement age
The Pension Security Commission recommends linking the standard retirement age to life expectancy. The provision allowing those with particularly long insurance records to retire without a reduction in their pension is to be abolished.
Sunday and public holiday supplements
The upper limits for the tax-privileged Sunday and public holiday allowance are to be raised to an hourly wage of 75 euros with effect from 1 January 2027. Where covered by a collective agreement, the tax-free allowance is to be made entirely exempt from social security contributions.
Further information on this topic can be found here: https://www.haufe.de/personal/arbeitsrecht/arbeitsrecht-2026-reformvorhaben-der-bundesregierung_76_690982.html
Key points in brief
- The future of mini-jobs is unclear
- The rules on protection against dismissal are being slightly amended for high earners
- Submitting a doctor’s certificate from the first day of sickness is to become the norm
- Fixed-term contracts without objective grounds are to be made easier on a transitional basis
