Developments in German Employment Law for 2026

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Quick Hits

• In 2026 in Germany, the prohibition on prior employment by the same employer for concluding fixed-term contracts without objective justification for employees who have reached the statutory retirement age will be eliminated, allowing for up to eight years and twelve contracts.
• The EU Regulation on AI will impose core obligations for high-risk AI systems starting August 2, 2026, affecting HR processes like candidate pre-screening and performance analytics, requiring traceable documentation and transparency.
• The Second Company Pensions Strengthening Act will facilitate access to occupational pensions through company-level collective agreements and individual agreements with union consent, including opt-out arrangements and additional measures like a dynamic low-income subsidy.

General Adjustments

At the beginning of the year, the following key thresholds will be adjusted:

• Contribution assessment ceiling for health and long-term care insurance: monthly €5,812.50 / annually €69,750
• Annual earnings threshold (JAEG) for statutory health insurance: €77,400 annually / €6,450 monthly
• Contribution assessment ceiling for pension insurance: monthly €8,450 / annually €101,400
• Reference amount West/East: monthly €3,955 / annually €47,460
• Minimum wage as of January 1, 2026: €13.90 per hour
• Mini-job earnings threshold: €603 per month (based on a minimum wage of €13.90)

Social insurance contribution rates will remain largely unchanged in 2026:

• Health insurance: General contribution rate 14.6 percent; reduced rate (without sick pay) 14.0 percent; average supplemental contribution 2.9 percent (up from 2.5 percent in 2025)
• Long-term care insurance: Base contribution 3.6 percent; for childless persons over age 23: 4.2 percent; reduction: 0.25 percent per child from the second child onward
• Pension insurance: Contribution rate 18.6 percent
• Unemployment insurance: Contribution rate 2.6 percent

Maternity Protection Amendment Act

The legislature has expanded the scope of protective rules to include mothers who suffer miscarriages. Since June 1, 2025, graduated protection periods apply following miscarriages from the thirteenth week of pregnancy. Affected employees may expressly declare their willingness to work, but may revoke this declaration at any time. The existing protection against dismissal for four months after a miscarriage following the twelfth week of pregnancy remains unaffected. Employers may want to align processes and communications with the statutory requirements.

Entry Into Force of Core Provisions of the AI Act

The EU Artificial Intelligence Act (Regulation (EU) 2024/1689) applies directly and will take effect in phases: prohibitions on impermissible practices since February 2, 2025; governance and sanctions since August 2, 2025; core obligations for high-risk artificial intelligence (AI) as of August 2, 2026; additional individual deadlines run through 2027. In HR, this particularly affects candidate pre-screening, ranking tools, and performance analytics. Required measures include traceable documentation and transparency; fundamental rights impact assessments for high-risk systems; registration where applicable; logging; a data protection impact assessments that comply with the General Data Protection Regulation (GDPR); and effective human oversight and training. Works council participation and information rights must be respected.

Second Company Pensions Strengthening Act

The legislation aims to strengthen occupational pensions and the social partner model (SPM)—including employers not bound by collective agreements. Access will be facilitated via company-level collective agreements (including linkage to out-of-sector SPMs with union consent) as well as under individual agreements, likewise only with union consent. Going forward, opt-out arrangements will also be possible by works agreement; in that case, non-union employers would be required to provide a 20 percent contribution. Additional measures include relief for pension funds, a dynamic low-income subsidy (maximum eligible amount €1,200; subsidy €360), and early drawdown of occupational pensions when receiving a statutory partial pension.

Fixed-Term Employment for Pensioners

After reaching the standard retirement age, the prohibition on prior employment by the same employer for purposes of concluding fixed-term contracts without objective justification is to be eliminated. The plan focuses on fixed terms without objective justification despite prior employment for a total of up to eight years and a maximum of twelve contracts; each individual contract remains capped at two years. Only periods of fixed-term employment without objective justification count toward the eight-year limit; fixed terms with objective justification remain unaffected. This increases flexibility for the continued employment of experienced personnel on a fixed term and is combined with privileged additional earnings opportunities. The easing of fixed-term hiring for employers is accompanied by financial incentives for retirees who, after reaching the statutory retirement age, take up employment subject to social insurance contributions. They may earn up to €2,000 per month tax-free.

Outlook 2026: Potential Changes

• More flexible models are being discussed regarding the daily maximum working time, such as broader exceptions where adequate compensatory rest periods are provided.
• An amendment of working time recording has been announced; a draft bill could be presented in 2026.
• For fixed-term contracts, a loosening of form requirements toward allowing text form is under consideration to facilitate digital agreements.
• Further digitization of works council operations is planned, particularly with respect to hybrid and digital meetings and resolutions.
• In the context of “digitizing union rights,” easier digital access channels are being discussed; the Federal Labor Court (BAG) (1 AZR 33/24) rejected a claim by trade unions to be provided with official email addresses.

Pay Transparency Directive—Outlook

The EU Pay Transparency Directive (Directive (EU) 2023/970) must be transposed into German law by June 7, 2026. Companies may want to begin reviewing pay structures and internal processes for future transparency and reporting obligations. In 2026, the primary focus areas will be AI compliance, reforms to occupational pensions, and more flexible employment models. Employers may want to align compliance structures, documentation, and participation procedures accordingly.

Ogletree Deakins’ Berlin and Munich offices and Cross-Border Practice Group will continue to monitor developments and will post updates on the Cross-Border, Cybersecurity and Privacy, Germany, Leaves of Absence, Pay Equity, and Technology blogs as additional information becomes available.

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