Coalition agreement signed: What the new government plans with regard to employment law

At a glance

• The coalition partners have signed the coalition agreement which indicates their direction for the upcoming legislative period.
• The agreement contains several specific propositions with regards to employment regulations.
• In particular, the coalition agreement includes a commitment to a federal law on compliance with collective agreements, a promised reform of the Working Hours Act, and an announced reduction of written form requirements.

On 5 May 2025, representatives of the German parties CDU, CSU, and SPD signed the coalition agreement for the upcoming legislative period. From an employment law perspective, this agreement contains several propositions, some of which are very specific. The following commitments are likely to be of particular interest to employers.

Minimum wage

The coalition partners are committed to the minimum wage and will maintain the Minimum Wage Commission as an independent body. The Minimum Wage Commission, consisting of representatives of employers and employees as well as advisory members, regularly submits a proposal for adjusting the minimum wage every two years, which is implemented by the federal government by means of a statutory order. According to the coalition agreement, when determining a proposal, the commission must base its decision on both wage developments and 60% of the gross median wage of full-time employees. The coalition partners consider a minimum wage of EUR15 per hour in 2026 to be 'achievable' in this way. However, it is not certain whether the Minimum Wage Commission will follow this assessment.

Collective bargaining

The coalition explicitly states that greater collective bargaining coverage is one of its goals. To this end, a federal law on compliance with collective agreements will be proposed. According to this law, federal contracts above a certain value may only be awarded to companies that pay their employees in accordance with a representative collective agreement for the respective industry. A corresponding draft proposed by the previous government under Chancellor Scholz did not come to fruition before the new Bundestag was formed in March. Compared to the draft presented at the time, the coalition agreement refers to higher contract values as a requirement for application. It remains to be seen whether the draft will otherwise be adopted. In any case, the coalition partners have set themselves the goal of limiting 'bureaucracy, documentation requirements, and checks' to an 'absolute minimum'.

Working hours

In line with the European Working Time Directive, the 'option of a weekly instead of a daily maximum working time' is to be created. To this end, the coalition partners first want to engage in dialogue with the social partners. Reform is also needed in other areas, at least since a decision by the Federal Labor Court (Bundesarbeitsgericht) in 2022 (docket no. 1 ABR 22/21). Following a decision by the European Court of Justice (Case 55/18 CCOO), the Court clarified that employers must introduce a system that records all working hours. The Working Hours Act has not yet been amended accordingly. According to the coalition agreement, the coalition partners want to 'regulate' the obligation to record working hours electronically in an 'unbureaucratic' manner, while providing 'appropriate transitional provisions' for small and medium-sized enterprises.

Digitalisation and artificial intelligence

The coalition agreement remains somewhat unclear regarding collective bargaining law. It specifically mentions the possibility of online works council meetings and online works meetings as 'equivalent alternatives to face-to-face formats' and the option of electing the works council online. Beyond this, the coalition partners recognise digitalisation and artificial intelligence in the workplace as significant challenges and aim to create the 'the right framework conditions' so that these can be resolved through social partnership. In addition, there is a vaguely defined digital right of access for trade unions to companies. The Federal Labor Court rejected this in January 2025 (docket no. 1 AZR 33/24) due to the legislature's failure to take action.

Parental allowance

Employers may also be interested to know that the coalition partners want to further develop state-funded parental allowance, in particular by increasing the minimum and maximum amounts, raising the income limit, and introducing 'end-to-end digitisation'. In practice, this could lead to more employees taking advantage of parental leave.

Reduction of written form requirements

In terms of digitisation, the coalition partners intend to reduce written form requirements. Explicitly mentioned is the written form requirement for fixed-term contracts.

Practical implications

A commitment to reducing bureaucracy is mentioned more than once in the coalition agreement. This also applies to various employment law propositions. The extent to which the coalition will live up to this claim will probably not become clear until the relevant draft legislation is presented. Until then, employers should keep themselves regularly informed about the status of developments.