Coalition tightens sick note rules and plans to relax dismissal protection

One of the key changes concerns sick notes. In future, the statutory default will be that a doctor's sick note must be presented from the very first day of absence. Until now, the standard rule has been that a sick note only has to be presented if the absence lasts longer than three days, as set out in Section 5 of the Continued Pay Act: Dauert die Arbeitsunfähigkeit länger als drei Kalendertage, hat der Arbeitnehmer eine ärztliche Bescheinigung über das Bestehen der Arbeitsunfähigkeit sowie deren voraussichtliche Dauer spätestens an dem darauffolgenden Arbeitstag vorzulegen. Der Arbeitgeber ist berechtigt, die Vorlage der ärztlichen Bescheinigung früher zu verlangen.

Stricter rules for sick notes

Chancellor Merz justified the tightening with what he sees as an excessively high number of sick notes in Germany. He spoke of exorbitant increases in sickness rates after the Corona pandemic. The change to sick notes was a tough decision, said the CDU leader according to the report of 02/07/2026, but stressed: Die Betriebe können davon abweichen und über Einzelfall, Betriebsvereinbarung oder Tarifvertrag eigene Regeln treffen. In addition, the incorrect issuance of a certificate of incapacity for work under Section 278 of the Criminal Code is to be punished more harshly.

At the same time, the option of obtaining a sick note by phone, which has existed since the end of 2023, is to be abolished completely. Patients will therefore no longer be able to have incapacity for work certified without visiting a practice. Until now, the arrangement applied on condition that the patient was known to the practice and had no severe symptoms. Nicole Blumenthal-Beier sharply criticized the decision: Union und SPD nähmen eine Überlastung der Praxen billigend in Kauf, Blumenthal-Beier told the Redaktionsnetzwerk Deutschland. All statistics proved beyond doubt that telephone sick notes had not led to more sick notes.

In addition to the changes in sick note law, the reform package envisages substantial interventions in labor law. At its center is a relaxation of dismissal protection for so-called high earners, start-ups and small businesses. The Dismissal Protection Act is an important principle in German labor law. Dismissals in Germany are only permitted if they fall under one of three defined grounds. They must be based on reasons related to the person, the conduct or operational requirements.

Dismissal protection: three grounds, three thresholds

In the case of employee misconduct, repeated breaches of duty and warnings must have occurred. Typical examples include serious misconduct toward colleagues or customers. Employers can issue dismissals on personal grounds if the employee lacks the personal suitability or ability. A typical reason for dismissal is long-term illness. A massive drop in orders or a structural reorganization of the company can also constitute an operational ground.

For operational grounds, employees receive special protection. When making dismissals, the company must conduct a so-called social selection. This includes factors such as length of service and age. Under the planned reforms, this is no longer to apply to the same extent for a certain group.

The benchmark for the group of high earners: according to the paper, this concerns individuals who earn more than 1.75 times the contribution assessment ceiling in the statutory pension insurance. This currently stands at 101,400 euros in income per year. Individuals with an annual income of more than 177,450 euros therefore fall under the new rule. The Union had previously proposed a significantly lower threshold; 100,000 euros was mentioned ahead of the summit. That was evidently not doable with the SPD. For those affected, dismissal protection is not simply to be dropped, but termination of the employment relationship with a severance option is to be made possible.

The plans are intended to motivate entrepreneurs to try out new business models. The relaxations of dismissal protection are meant, for example, to give start-ups more flexibility in their personnel decisions and thus make founding a company less risky. The current debate initially only concerns top earners with a gross annual income of 100,000 euros or more, start-ups and small businesses. What exactly the relaxations will look like has not yet been determined. Germany is currently not exactly considered founder-friendly. The current paper does not explicitly state that the reform plan of the commission is to be implemented one-to-one and without cuts. That could mean leaving the door open to revisiting individual points.

Relaxations on fixed-term contracts and Sunday bonuses

The coalition is also planning significant changes to the rules on fixed-term employment contracts. Overall, up to 48 months and six extensions are to be permitted. Previously, the limit was only 24 months and three extensions. The whole arrangement is to apply on a temporary basis until the end of 2030. It is to become easier in future to hire employees on a fixed-term basis, even without a specific reason such as a parental leave replacement. It will also become possible to hire the same employee again at the same employer.

In addition, severance payments are to receive preferential tax treatment if a new gainful employment is taken up quickly. The tax benefit is to be greater the faster a new job is taken up. Adjustments are also planned for Sunday and holiday bonuses. For those covered by a collective agreement, the tax-free bonus is to be made fully exempt from contributions in future. For work on Sundays and public holidays, these upper limits are to be raised from January 2027 if the hourly wage does not exceed 75 euros. Currently, for example, a Sunday bonus is tax-free if it does not exceed 50 percent of the regular pay for the day.

Further points concern shop opening hours: bakeries and confectioneries are to be allowed to open longer than before. How much longer is not yet known. Libraries are to be fundamentally allowed to open on Sundays. The pension package is to be transposed into law by the end of the year. Companies are to benefit from deregulation, with small and medium incomes being relieved through tax cuts among other measures.

Reactions from business and trade unions

On the topic of the eight-hour day, Merz said: Noch keine endgültige Entscheidung ist laut Merz bei der Flexibilisierung des Acht-Stunden-Tags gefallen. Labor Minister Bärbel Bas (SPD) wants to restrict the opening to companies bound by collective agreements. The abolition of mini-jobs proposed by the commission could also still make it onto the agenda, as Chancellor Merz and CSU leader Markus Söder suggested at the press conference on Thursday.

Reactions to the reform package are divided. While the plans are welcomed from the employers' side, union representatives criticize them. Oliver Stettes, head of the "Working World and Collective Bargaining Policy" cluster at the employer-affiliated German Economic Institute (IW) in Cologne, said: Es geht darum, den Kündigungsschutz gegebenenfalls ganz neu zu organisieren, sodass er auf der einen Seite den Interessen der Beschäftigten gerecht wird und gleichermaßen den Flexibilitätsanforderungen von Unternehmen. Stettes, who describes German dismissal law as lacking efficiency orientation, added: Wir haben uns lange nicht mit dem Kündigungsschutz auseinandersetzen müssen, weil wir ja insbesondere in den 2010er-Jahren einen anhaltenden Aufschwung hatten. In einem Umfeld, in dem wir uns heute bewegen, wo wir grundlegende strukturelle Veränderungen in der Wirtschaft haben, ganze Geschäftsmodelle auf dem Prüfstand stehen oder neu gedacht werden müssen, ist der Flexibilisierungsbedarf wieder angestiegen.

There was, however, sharp criticism from the union side. Isabell Eder, head of the Law and Diversity department at the German Trade Union Confederation (DGB), warned: Denn die Debatten würden Arbeitnehmerinnen und Arbeitnehmer zunehmend verunsichern. Das trägt nicht zu der erhofften Entspannung der Wirtschaft bei. Eder also fears a brain drain of skilled workers: Wenn die Politik die Attraktivität unserer Arbeitsbedingungen absenkt, riskiert sie, dass sich Fachkräfte auf anderen Arbeitsmärkten umschauen und abwandern. Diese entscheidenden Kräfte fehlen dann hier, um Transformation und Zukunftsprozesse zu gestalten. On the planned relaxation of dismissal protection, Eder added: Und wenn die Politik nun auch noch an den Kündigungsschutz rangeht, also an den Bestandsschutz für das Arbeitsverhältnis, dann verschärft dies die Lage zusätzlich. Dann halten die Menschen im Zweifel alles Geld zusammen und Adieu Wirtschaftswachstum, weil dann keiner mehr