The Coalition Agreement of the current German government contains some employment law projects of wide-reaching importance to companies in the event of their implementation. Although many details are left open, it is evident in which direction employment law will develop: more collective agreements, more digitalisation, more flexible working time models and targeted measures to secure skilled workers. This article provides an overview of the planned new developments.
Statutory minimum wage
The statutory minimum wage should continue to be determined by the independent Minimum Wage Commission in accordance with the German Minimum Wage Act. In doing so, the Commission will in the future be guided by the development of collective agreements as well as the gross median wage of full time employees (target statutory minimum wage value: 60 per cent of gross median wage) as part of an overall assessment.The minimum wage is currently EUR 12.84 gross per hour. The Coalition partners believe an hourly rate of EUR 15 gross is achievable by 2026 which would represent a significant raise. According to a statement made by Friedrich Merz, “no automatism” is envisaged and the decision-making powers of the Commission were emphasised; it remains to be seen whether such a significant increase will finally become reality as this would result in widespread shifts in the wage structure in many sectors.
Flexible working hours: from daily to weekly maximum limits
The Coalition plans to depart from the current maximum daily working hours in favour of a maximum limit on hours worked per week. This aims to provide both employers and employees with greater flexibility. The Coalition Agreement does not include specifics on this statutory working time model and refers to dialogue with social partners.
Recording working time
The general obligation to record working time accepted//assumed by the Court of Justice of the European Union (CJEU) and the German Federal Labour Court (Bundesarbeitsgericht, BAG) should be regulated by law and provided in electronic form. However, it should still be possible to allow trust-based working hours.
Strengthening collective agreements and access rights for trade unions
The future German government plans to strengthen collective agreements, in particular by way of a Collective Agreement Compliance Act (Tariftreuegesetz). In essence, the awarding of public contracts by the Federation from a contract value of EUR 50,000 (from EUR 100,000 for start-ups) should be linked to compliance with regulations in collective agreements. Similar legislation had already been initiated by the Traffic Light Coalition but this failed.
Making trade union membership more attractive through fiscal benefits is also planned. Based on the recent ruling of the BAG, trade unions would also be granted a digital access right to establishments that would correspond to previous “analogue” rights.
Digitalising co-determination
The Coalition Agreement states that it should be legally possible to hold Works Council meetings online. Currently Works Council meetings may only take place digitally in exceptional circumstances subject to the (strict) requirements of section 30 of the Works Council Constitution Act (BetrVG). Works Council elections may also not be carried out digitally. These plans are certainly welcome from a digitalisation viewpoint. At the same time, their implementation is accompanied by the employer’s obligation to prepare for new technical and organisational participation formats. The next regular Works Council elections will take place in 2026.
Overtime incentives and staying in the workforce for longer
The German government intends to remove the tax liability from overtime bonuses for work performed over and above the relevant full-time hours. Full time work would constitute a minimum of 34 hours per week if subject to a collective agreement, otherwise 40 hours per week. Employers should also be enabled to offer financial inducements for increasing part time hours to full time. The Coalition intends to thus face the strained employment market and better utilise the existing workforce potential.
Financial inducements should also help people stay in the workforce for longer: Anyone who is over retirement age but continues to work would be able to earn up to EUR 2,000 extra per month tax free in the future. In addition, the ban on previous employment for fixed term contracts in accordance with section 14 (2) sentence 2 of the Act on Part-Time Work and Fixed-Term Employment (Teilzeit- und Befristungsgesetz, TzBfG) would be relaxed, making it easier for pensioners to continue to work for their previous employer on a fixed term continued employment contract.
Strengthening occupational pension schemes
Occupational pension schemes would be made more attractive through digitalisation, simplification and greater transparency. It would be made easier to take existing pensions with you when changing employers (key word: portability, section 4 of the Occupational Pension Act (BetrAVG)). The Coalition Agreement does not contain any specific approaches to regulating this.
Securing skilled workers and employment-related migration
The Coalition has announced a reform of employment-related migration in light of the increasing lack of skilled workers. Work permits should be granted faster and bureaucratic barriers broken down. A planned new “Work and Stay Agency” would use a central digital platform to consolidate the entire process of recruiting and integrating skilled workers.
Dismantling bureaucracy and digitalisation
The Coalition Agreement also contains additional proposals aiming to modernise employment law. This would include relaxing written form requirements and preferably replacing these with digital solutions.
Finally, it is planned to replace the German Act on Corporate Due Diligence Obligations in Supply Chains (Lieferkettensorgfaltspflichtengesetz, LkSG) with a new Act on international corporate responsibility which implements the EU requirements with as little red tape as possible.
More legal certainty in social insurance law
A reform of employment status determination assessment under social insurance law is likewise planned to provide more legal certainty regarding the distinction between self-employed work and dependent employment.
Conclusion
From the employer’s point of view the Coalition Agreement contains some welcome approaches, primarily in relation to making working conditions more flexible and reducing cumbersome red tape. Unfortunately, there is no bold plan in the Coalition Agreement with regard to employment law. The German government remains vague regarding the specific implementation in many areas. However, companies are recommended to already prepare for the expected developments, in particular with regard to the expected increases to the statutory minimum wage, changes to working hours and recording working time, and Works Council constitution law.
