Labour Minister Alexander Schweitzer (SPD) wants to boost new hires with easier fixed-term contracts and looser dismissal protection for high earners – his first draft bill has been in departmental consultation since Tuesday. According to the Süddeutsche Zeitung, the paper went into internal consultation with the other ministries on Tuesday, 10 November; the “Tagesspiegel” and tagesschau.de report on the 32-page draft, citing the Deutsche Presse-Agentur. The Süddeutsche Zeitung and the dpa news agency had first reported on it.
The draft implements the decisions of the coalition leaders of the Union and SPD from the beginning of July, with which Germany is to be led out of the economic crisis. “These adjustments are intended above all to make it easier for companies to hire employees,” the paper says, according to the “Tagesspiegel”. The government is now deliberating on it, the cabinet is to decide in December, followed by the Bundestag. The changes are to take effect at the beginning of 2027.
Four years of fixed-term contracts, six extensions
The core of the draft is an expanded fixed-term employment without objective grounds – for hires up to 31 December 2030. “Up to this total duration of four years, an extension of at most six times is to be permissible,” tagesschau.de quotes from the draft bill available to the ARD capital studio. Exceptions are to be possible for the current ban on such fixed-term contracts following another one. According to tagesschau.de, the ministry says that fixed-term employment relationships bring considerable uncertainty, especially in life planning. That is why the rule is time-limited and expressly serves only to bridge economically challenging times – as stated in an internal negotiation paper available in excerpts to the ARD capital studio. Fixed-term contracts are typically concluded for career starters.
Dismissal protection only from just under 180,000 euros
Employees with high annual incomes are to enjoy only limited dismissal protection. Employers could dismiss them with a severance payment from a gross annual income of just under 180,000 euros, because they are treated as equivalent to senior executives, for whom a severance payment without justification is sufficient. According to the IAB wage monitor, this affects around 0.27 per cent of employees. After entry into force, a transitional period of 15 months is to apply. Here too, the aim is to create incentives for hiring highly qualified workers.
The Working Hours Act is to be relaxed for public libraries, bakeries and confectioneries. Libraries are to be allowed to employ staff on Sundays and public holidays for up to six hours. Bakeries and confectioneries are to be allowed to have employees work longer than before when it comes to the production and delivery of goods that are sold on the same day.
Co-determination in certain large companies is also to be strengthened. According to the “Tagesspiegel”, the draft is directed against the “misuse” of the legal form of the European Company (SE). Five of six large SEs had no parity co-determination, affecting 480,000 employees. A simplified procedure is to make it easier for trade unions and works councils to have co-determination established; stricter rules are to apply to employers in negotiations.
Reiche considers further relaxations
There have so far been hardly any reactions to the concrete rules. Economics Minister Katherina Reiche recently stressed that Germany could only be competitive if labour productivity rises – it is also about “working a little more and a little longer per day”. She also hinted that the loosened dismissal protection for high earners could be expanded: “We need to talk about the issue of dismissal protection.” She does not forget employees’ fears, but a “very strong, rigid, inflexible dismissal protection” blocks change.
Annika von Mutius, CEO of Empion and a member of the Economics Ministry’s SME advisory board, told Table.Briefings that dismissal protection tied up enormous resources in her company. “When dismissals regularly end up before the labour court and additional legal costs arise, we think twice about whether to hire new employees,” said von Mutius.
The German Trade Union Confederation criticises the debate. “This does not contribute to the hoped-for easing of the economy,” Isabell Eder, head of the law and diversity department at the DGB, told WDR. If politicians now also tackle protection against dismissal, that would worsen the situation: “Then people will hold on to all their money in case of doubt and ‘farewell economic growth’, because then no one will spend money any more.”
Further reforms are planned, including a flexibilisation of the eight-hour day via a weekly maximum working time, as the Union and SPD announced in the coalition agreement. Changes to statutory pensions, with restrictions on early retirement and a further rising retirement age, are regarded as the biggest social reform; according to announcements by Chancellor Friedrich Merz, the cabinet is to consider this before Christmas, along with key points for a new pension capital pillar.
Editor’s note: Whether the draft will actually be adopted in December as planned depends on further deliberations in the coalition – the sources describe a timetable, not a decision.
