Growth initiative of the Federal Government: Labour law measures

11 July 2024 4 min read

By Barbara Angene

At a glance

  • The federal government has adopted a growth initiative with 49 measures, a number of which have labour law implications.
  • The measures concern, ie, flexible working hours, supplements for overtime, continued employment at retirement age, and recruitment of foreign employees.
  • The federal government has announced that the measures contained in initiative will be implemented quickly.

In the draft budget for 2025, the federal government has adopted a growth initiative that includes 49 measures. The measures which were announced on 5 July, have several implications for labour law.

Currently, none of the following measures are in place however, the federal government announced a quick implementation. 

Working hours, overtime and incapacity for work: 'Rewarding overtime and enabling flexibility'

  • Tax and contribution exemptions will be granted for overtime supplements that exceed the agreed full-time working hours. Full-time employment is characterized by a minimum of 34 hours per week for agreed working hours and 40 hours for non-agreed working hours.
  • If employees pay part-time employees a bonus for working extended hours, the federal government will favour this bonus from a tax perspective.
  • A temporary and limited exception to deviate from the current regulations of the Working Hours Act with regard to maximum daily working hours will be implemented if collective agreements or company agreements based on collective agreements provide for this.
  • Trust-based working hours should continue to be permitted. This is in reference to the amendment to the Working Hours Act with regard to the recording of working hours.
  • The Federal Government states that in recent years, an immense potential of the labour market has remained unused, partly due to the increased sickness rate of employees. For this reason, it will review the telephonic sick leave notification introduced during the coronavirus pandemic and adapt it if necessary.

Fixed-term employment law, social security law: 'Expanding work opportunities and incentives to employ older workers'

  • Continued employment at retirement age will be modernised. The automatic termination of the employment relationship on reaching the standard retirement age, which is included in many employment contracts, is to be countered by an exception to the ban on pre-employment for this group. The prohibition of prior employment (Section 14 (2) sentence 2 of the Part-Time and Fixed-Term Employment Act) is the inadmissibility of fixed-term employment without objective grounds if an employment relationship has already existed with the same employer. The ban on previous employment should not apply if the employee is entitled to a retirement pension and the fixed-term contract, without objective grounds, does not exceed a total duration of eight years or 12 fixed-term contracts. For civil servants, the Federal Government will endeavour to achieve a regulation with the same effect.
  • For employees who have reached the statutory retirement age, the Federal Government will cancel the employer's contribution (i) to unemployment insurance and have it paid out to the employee and (ii) to pension insurance and have it paid out to the employee if the employee decides not to make voluntary contributions to the pension insurance scheme.

Federal Act on Wage Loyalty (Tariftreuegesetz): 'Simplify public procurement law and strengthen loyalty to collective bargaining'

The Federal Act on Wage Loyalty makes collective agreements a condition for public tenders.

Revision of company pension schemes: 'Make private pension schemes more attractive'

The company pension scheme is to be revised so that more companies offer a company pension scheme in the future, and employees on low incomes are incentivised.

Relaxed protection against dismissal for risk takers: Making the framework conditions for top earners in the financial sector more flexible'

  • The current regulations on protection against dismissal for risk takers in systemically important banks are also to be extended to non-systemically important banks, insurance companies, securities institutions and investment companies.
  • These measures refer to Section 25 (5a) of the German Banking Act, according to which Section 9 (1) sentence 2 of the German Protection against Dismissal Act applies to risk takers of significant institutions above a certain income threshold with the proviso that the employer's application to terminate the employment relationship does not require any justification.

Data protection officer from 50 employees: 'Reduce the application of data protection requirements'

The threshold above which companies must appoint a data protection officer will be increased from the current 20 employees to 50 employees.

Recruitment of foreigners: 'Tax incentives for taking up employment in Germany and removing barriers to refugees taking up employment'

  • Foreign employees commencing work in Germany will be eligible for tax benefits. In the first three years, tax exemptions of 30%, 20%, and 10% of their gross income will be granted to skilled workers. This exemption will have a specified minimum and maximum gross wage limit.
  • When an employment permit is issued by the local immigration authority, a fictitious authorisation is introduced. This means that the permit is deemed to have been granted if the foreigners authority does not inform the applicant otherwise within two weeks after involving the Federal Employment Agency.

Conclusion and outlook

The federal government has announced that the measures contained in the package will be implemented quickly. If possible, the regulatory proposals for the legal changes should be adopted promptly. At the same time, some of the announced measures have been in the legislative process for a long time and / or have already been criticised heavily (ie Federal Act on Wage Loyalty, Working Time Act, tax incentives for foreigners). 

Against this background, it is not possible to determine when exactly the above-mentioned measures will be implemented in detail. We will continue to update on this.