Germany: Liberalisation of the Labour Market

The German Government has announced a series of reforms intended to enhance German economic growth and competitiveness. These include measures to increase the flexibility of the German labour market. 

Much of the detail is still awaited and there will be considerable political debate before the measures become law. Nevertheless, the Government’s intentions are already clear.

Some of the Headlines

Dismissal protection: the proposals include a new dismissal approach for high earning employees. Employers may be given an easier way to terminate the employment of employees who earn more than EUR177,450.

Fixed term hiring: fixed term contracts that have no objective justification would be permitted for up to 48 months, double the current level.  In addition, there could be up to 6 contract extensions within the extended period.

Wet ink signatures: this requirement would be abolished for fixed term contracts.  

Sick leave: possible changes here include the mandatory requirement to provide a medical certificate from the first day of absence (instead of after day 3), the end to telephone based sick notes and stricter sanctions for inaccurate certificates. 

Retirement: there is consideration of an increase of the statutory retirement age.

Administrative burdens on business:  the government wants to reduce administrative complexity and compliance obligations on business generally; details of these proposals are not yet clear.

Tax and benefits: other proposals relate to tax incentives to encourage dismissed employees to return to work more quickly, and various tax allowances and benefits for lower and mid-tier income taxpayers.   

These changes remain stated Government intentions only. Nevertheless, for employers in Germany, they should be closely watched. They may prove very helpful to business.                                  

This is a high-level general update only. Legal advice should be obtained on specific circumstances.