Germany’s 2026 Labor Law Reforms: A Program for Growth and Employment?

Short summary

Germany's governing coalition agreed on a 34-point labor reform package on July 1, 2026, including relaxed dismissal protections for top earners earning above ~EUR 177,450, expanded fixed-term contracts up to 48 months, and elimination of telephone-based sick leave certifications. The reforms also propose tax benefits on severance payments for employees who quickly take up new employment. Concrete legislative implementation is still pending, with key provisions targeted to take effect January 1, 2027.

• •Relaxed dismissal protections for top earners (above ~EUR 177,450) with court-ordered severance capped at 12 months' earnings
• •Fixed-term contracts without objective grounds extended from 24 to 48 months with up to 6 extensions
• •Tax benefits on severance pay for employees who promptly start new employment

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