Outlook: Labor law reforms in 2026

The German labor market will reach a crucial turning point in 2026. While demographic trends are significantly increasing the pressure on companies , legislators are responding with a dynamic mix of relief packages, stricter regulations, and far-reaching reform plans. Will we work more flexibly in the future, or will new EU directives bind us more closely to bureaucratic processes? The decisions currently being made by the cabinet under Chancellor Friedrich Merz and the European institutions directly affect every company in Germany. As a law firm, we are examining this year's legal framework and highlighting where employers urgently need to take action .

Financial adjustments: Minimum wage and mini-jobs on the rise

The beginning of 2026 marked a significant turning point for payroll accounting. Since January 1, 2026, a statutory minimum wage of €13.90 gross per hour has been in effect. However, this increase is only the first stage of a two-stage adjustment, as a further increase to €14.60 is already scheduled for January 1, 2027. This development has a direct impact on the marginal employment threshold. We regularly inform our clients that the threshold for mini-jobs has risen in tandem with the minimum wage and now stands at €603.00. At the same time, the minimum apprenticeship allowance has been increased, now amounting to €724.00 in the first year of training. While these adjustments aim to boost purchasing power, they require companies to precisely calculate their personnel costs to maintain profitability.

Actively securing skilled workers: New incentives for the 67+ generation

A particularly exciting aspect of 2026 is the legal framework for the so-called "active retirement" program. To counteract the shortage of skilled workers , legislators have created incentives to keep retirees in the workforce longer. Those who have reached the standard retirement age can now receive up to €2,000 per month tax-free as earned income, provided they are in employment subject to social security contributions. Of particular relevance for contract practice is the addition of a new paragraph 2 to Section 41 of the German Social Code, Book VI (SGB VI). This provision significantly simplifies the conclusion of fixed-term employment contracts without objective justification for employees beyond the retirement age. We see this as an important tool for companies to retain valuable expertise within their organizations without incurring long-term redundancy risks .

Transparency and social standards: The influence from Brussels

Looking ahead to June 2026 reveals one of the biggest regulatory challenges: the implementation of the EU Pay Transparency Directive (Directive (EU) 2023/970) . Even though a national draft bill is still pending, the requirements from Brussels are unambiguous and go far beyond the existing Pay Transparency Act. Article 7(1) of the Directive establishes a comprehensive individual right to information , which employers must proactively inform their workforce about annually. Companies with more than 100 employees will also face reporting obligations regarding the gender pay gap. If differences of more than five percent are found that are not objectively justified, mandatory pay reviews involving employee representatives may be imposed. We strongly recommend conducting an internal review of pay structures now to prepare for the upcoming right of associations to bring legal action under Article 15 of the Directive.

The reform of the Working Time Act: Farewell to rigid limits?

The political agenda in 2026 is dominated by the desire to modernize working time legislation . Chancellor Friedrich Merz has repeatedly called for greater willingness to work, which is now resulting in concrete reform plans . The Federal Ministry for Economic Affairs and Energy plans to replace the current rigid daily maximum working hours with a model of weekly maximum working hours . This would finally provide models like the four-day week with the legally secure framework that many companies and employees are demanding. This increased flexibility is accompanied by the draft Labor Market Strengthening Act, which, through an amendment to Section 3 of the Income Tax Act, provides tax incentives for overtime as well as a part-time supplement bonus. The latter is intended to allow employers to grant bonuses of up to €4,500 tax-free and exempt from social security contributions if part-time employees increase their hours for at least 24 months.

Digitalization and AI: Platform work and labeling requirements

The digital world of work will also undergo a transformation in 2026. The EU Platform Work Directive must be implemented by December 2, 2026. This directive focuses on introducing a rebuttable presumption of an employment relationship if the platform exercises control and management. This will require significant adjustments from providers of digital services. Simultaneously, the EU AI Regulation, with its labeling requirements, will come into effect on August 2, 2026. If content is generated by AI, this must be clearly identifiable to the end user. While a deferral has been granted for high-risk AI systems, general AI applications in companies must already be designed to comply with the directive in order to avoid sanctions.

Conclusion of our law firm

The year 2026 demands a high level of vigilance from employers and HR departments . While tax incentives for overtime and the simplified regulations for employing retirees offer opportunities to compensate for the skills shortage, EU directives on pay transparency and platform work increase administrative pressure. The planned flexibilization of working hours could be a game-changer for modern work models, but it requires sound legal implementation within the company. We would be pleased to support you in integrating these innovations into your business processes in a legally compliant manner.