4 minute read | July.08.2026
On July 2, 2026, the German Federal Government presented a reform package aimed at supporting economic growth and employment. The package includes 34 measures. Its overall goal is to make Germany a more competitive business location and to encourage investment.
Several of the planned measures would make German employment law more flexible. If implemented, they could make life easier for employers, especially start-ups and international companies. This applies in particular to fixed-term hiring and separations from senior employees and key employees.
In our three-part series, we look at the most important planned changes from an employer’s perspective:
Part I – More Flexibility for Employers: Planned Changes to Fixed-Term Employment and Terminations
Part II – Sick Leave and Pension Reform: What This Means for Workforce Planning and Restructurings
Part III – Co-Determination, Digitalization and Less Red Tape: The Planned Changes at a Glance
In addition to the planned changes to dismissal protection and fixed-term employment, the Government’s reform package of July 2, 2026 also includes important changes relating to sick leave and the statutory pension system.
The planned changes have two main goals. First, the Government wants to reduce misuse of sick notes and thereby reduce sickness absence levels. Second, it wants older employees to stay in employment for longer. The stricter rules on sick leave are likely to require adjustments to internal sickness reporting processes. The pension reform, in turn, is directly relevant for restructurings and workforce reductions, because traditional tools for socially responsible separations from older employees may become less important or less available in the future.
We explain the key changes below and what they could mean in practice.
The current possibility of obtaining a sick note by telephone is expected to be abolished again. In addition, employees may generally need to provide a medical certificate from the first day of sickness in order to continue receiving salary during sick leave. The reform package also provides for stricter criminal sanctions where incorrect medical certificates are issued.
Under current law, employees can obtain a medical certificate of incapacity for work by telephone for certain illnesses. Employees generally only need to provide a medical certificate from the fourth day of sickness, unless the employer requires it earlier.
Employers should be prepared to adjust their internal sickness reporting processes. A mandatory certificate from the first day of sickness could increase the administrative workload for HR teams. At the same time, the planned first-day certificate requirement has already attracted significant criticism. Changes during the legislative process therefore cannot be ruled out.
For employers with flexible working models or teams across several locations, the new rule could create additional challenges. This may include the need to implement consistent sickness reporting processes. Possible collective bargaining or works agreement-based deviations could also create room for tailored solutions.
As expected, the recommendations of the Pension Commission shall be implemented in a legislative package. The aim is to keep older employees in employment for longer. The legislative process is expected to be completed during 2026.
Traditional tools used to reduce older employee populations are likely to become less important or less available. This applies in particular to early retirement tools such as “retirement at 63” and block-model partial retirement arrangements. At the same time, alternative tools such as working time account models and transfer companies are likely to become more important.
For employers, this could have a significant impact on restructurings and workforce reduction projects. Employers currently considering these tools in restructuring projects should closely follow further developments and, where appropriate, review available structuring options in the short term.
The planned changes to sick leave and pensions could have significant practical consequences for employers. The first-day certificate requirement may still change, given the criticism it has already received. The pension reform, however, is likely to be implemented largely as announced.
Companies should already consider how the announced changes could affect existing sickness reporting processes and ongoing restructuring projects.