In 2026, new legislation will be introduced into German employment law bringing significant changes for Human Resources Managers to be aware of.
New legislation coming into force
Social insurance calculation factors
The factors for calculating the levels in the social insurance system were updated on 1 January 2026. The updated rates and limits can be found here and the updated contribution assessment ceilings for statutory health and pension insurance can be found here. The statutory minimum wage was increased to € 13.90 per hour worked. The annual earnings limit for “mini-jobs” (a form of part-time employment allowing workers to earn a limited income without being subject to the usual full social security contributions) has been raised for 2026 to € 7,236 (€ 603/month). Further information and guidance can be found here.
Removal of Post-Retirement Employment Restriction
The restriction on consecutive fixed-term employment without objective justification (sachgrundlose Befristung) has been removed for individuals who have reached the statutory retirement age (Regelaltersgrenze). Previously, employees could continue working after reaching this age only by entering into either a fixed-term contract without objective justification with a different employer, a fixed-term contract with objective justification, or an indefinite employment contract. This change aims to simplify the process of re-employment, particularly for individuals seeking to return to work with their former employer.
Extension of Short-Time Work Allowance
The maximum period for entitlement to short-time work allowance (Kurzarbeitergeld) has been extended from 12 months to 24 months, until 31 December 2026 at the latest. This measure provides employers with enhanced planning certainty through the end of 2026.
Revision of the EU Directive on European Works Councils enters into force
On 31 December 2025, the revised EU Directive 2025/2450 on European Works Councils (EWCs) came into force. This significantly increases both the obligations of companies and the rights of EWCs. Companies employing more than 1,000 workers in at least two EU or EEA countries now face stricter consultation requirements. Before making any major decisions, they must consult the EWC and provide a written opinion. The Directive also further clarifies what constitutes “transnational matters.” A consultation obligation arises in this respect whenever a decision taken in one Member State has a substantial impact on employees in at least one other Member State. EWCs are also entitled to engage external experts and legal counsel, with all associated costs borne by the employer. Furthermore, the Directive mandates that there must be at least two in-person meetings per year; virtual meetings are permissible only with the EWC’s consent. Confidentiality rules have also been tightened: Information may only be classified as confidential under objective criteria, which must be reviewed regularly and the confidentiality lifted when no longer justified. The previous grandfathering of older EWC agreements has been abolished, requiring companies to update their agreements to meet the new minimum standards. Member States must transpose these provisions into national law by the end of 2028.
Legal initiatives
Implementation of the EU Pay Transparency Directive
The EU Pay Transparency Directive must be transposed into national law by 7 June 2026. In November 2025, the independent expert commission (Bürokratiearme Umsetzung der Entgelttransparenzrichtlinie) published its final report. Key recommendations included referencing actual pay rather than target pay, requiring employers to determine whether the conditions for implementing remedial procedures are met, and introducing a definitive list of justifications for unequal treatment based on existing case law of the European Court of Justice.
Where a collective agreement complies with the Directive, the commission recommends excluding works council co-determination rights. Employees should be permitted to exercise their right to receive information only once per year. It remains to be seen which recommendations the legislator will adopt, with a draft bill expected in the first quarter of 2026.
To establish the salary structures mandated by the Directive, employers should begin addressing these requirements now to ensure legally compliant implementation, regardless of any changes in national government.
Modernization Agenda
The federal government and the Länder have agreed on a modernization agenda to streamline various areas, such as public services and benefit applications. Faster procedures, more efficient structures, and uniform digital standards are intended to reduce administrative burdens for businesses and citizens. Among other measures if authorities fail to act within three months, administrative decisions will be deemed granted.
Reform of EU Digital Regulations
On 19 November 2025, the European Commission published its proposal for a Digital Omnibus Directive. The initiative aims to simplify the fragmented regulatory framework in the digital sector (the “data legislative acquis”).
A key element concerns artificial intelligence regulation. Instead of the current legal requirement for providers and operators to ensure adequate AI competence among employees, this will become a recommendation. The Commission and Member States will encourage training initiatives without imposing statutory obligations. Nevertheless, maintaining records of training and qualification measures will remain relevant, as they may be considered mitigating factors during regulatory audits.
For companies deploying AI systems, the Digital Omnibus Directive offers greater flexibility in planning AI projects while requiring proactive internal organization. Transparency in classifying AI systems, regular updates of risk assessments, and alignment of governance structures with future EU-wide oversight will be essential. Businesses should also closely monitor the development of technical standards, as their completion will determine when new obligations take effect.
The proposal also introduces fundamental changes to data protection law. Personal data will only be considered as such where the processing entity has reasonable means to identify individuals, introducing the concept of “relative personal data,” in line with the ECJ decision of 4 September 2025 (Case C‑413/23 P). Guidelines and criteria will be published to clarify when pseudonymization removes the personal nature of data. Furthermore, automated decision-making will be expressly permitted where it is based on contract, law, or consent, even if manual decision-making would theoretically be possible. The European Data Protection Supervisor had previously issued practical guidance on implementing ADM systems in TechDispatch #2/2025. In addition, a new ground for refusing data access requests will be introduced where individuals misuse the right to information for improper purposes.
What comes next? Initial reactions from supervisory authorities, such as the resolution adopted by the German Conference of Independent Data Protection Authorities (DSK) on 12 December 2025, indicates that several aspects may undergo intensive scrutiny during parliamentary negotiations. For employers, this draft serves as an important indicator of future regulatory direction. It is advisable to review existing compliance structures, adapt AI governance and data protection processes, and closely monitor further developments.
Works Council Elections 2026
The next regular works council elections will take place from 1 March to 31 May 2026. Employers should be aware of several recent legal developments and changes in preparation.
A decision of the Federal Labor Court (BAG, 22 May 2025 – 7 ABR 28/24), held that managers in matrix organizations may be eligible to vote in multiple establishments. This increases the complexity of electoral rolls and highlights the importance of integration into the respective operational structure. As a result, larger works councils and additional employee releases may become necessary.
Since the enactment of the Self-Determination Act (Gesetz über die Selbstbestimmung in Bezug auf den Geschlechtseintrag – SBGG), individuals may freely choose their gender designation (“male,” “female,” “diverse,” or “unspecified”). Election committees must reflect these categories in the voter list to correctly implement gender quota requirements under Sec. 15(2) Works Constitution Act (Betriebsverfassungsgesetz – BetrVG).
Employees taking concrete steps to establish a works council (“pre-initiative organizers”) are protected against ordinary dismissal under Sec. 15(3b) Protection Against Dismissal Act (Kündigungsschutzgesetz – KSchG) for up to three months prior to the invitation to the works meeting. However, this protection does not apply during the initial waiting period, i.e. the first six months of employment (LAG Munich, 20 August 2025 – 10 SLa 2/25).
The 2026 works council election will be conducted by in-person and postal voting. Although a draft bill for supplementary online voting (Sec. 18b BetrVG) was discussed, it was not adopted. Election committee meetings may, however, be held via video or teleconference if a resolution permits. For establishments with 5–100 employees, the simplified election procedure is mandatory; for those with 101–200 employees, it may be agreed upon.