The traffic-light coalition’s plans for the new legislative period – employment and social security law

The SPD, Bündnis 90/the Greens and the FDP kept us on the edge of our seats right up to the very end, with the coalition agreement finally being published on 24 November 2021. This blog post summarises the key plans around employment and social security law.

Enabling more flexible working hours

While the eight-hour day as currently provided for in the Working Hours Act (Arbeitszeitgesetz) remains the standard, a temporary regulation will be introduced in 2022 that allows flexible working hours for employees to be included in collective agreements on a trial basis for the first time. This suggests that maximum daily working hours may also be varied.

In addition, the traffic-light coalition intends to address implementation of the ECJ ruling of 14 May 2019 (Case Ref. C-55/18 - CCOO). This stipulates that working hours in EU Member States must be recorded by an objective, reliable and accessible system. There are no details in the coalition agreement as to precisely how this is to be accomplished. The coalition partners are nonetheless committed to trust-based working hours remaining possible in the future.

A proper legal framework for working from home and a right to discuss

The coalition intends to make a legal distinction between working from home as a form of mobile working and teleworking, and to make it clear that workplace regulations do not apply. Occupational health and safety, however, will apply to mobile working.

Employees should be entitled to raise the issue of mobile working and home working insofar as their role is suitable. Employers will only be permitted to reject employee requests if there is a conflict with operational interests. A refusal may not be for irrelevant or arbitrary reasons. There will be provision to diverge from the new rules through collective bargaining.

Another aim is that mobile working should be possible throughout the EU without obstacles.

Restrictions on fixed-term contracts based on an objective reason, but not on fixed-term contracts without an objective reason

In order to avoid a chain of fixed-term contracts, fixed-term employment contracts with the same employer that are based on an objective reason will be limited to six years, with exceptions only possible in rare cases.

In the public sector, fixed-term contracts concluded due to budgetary constraints, a type of contract which does not exist in the private sector, will be abolished.

However, fixed-term contracts without an objective reason will apparently remain possible and not be modified. This is to be welcomed from the employer’s viewpoint.

No plans to restrict temporary employment

There are no changes to the options for contracts for services or with regard to temporary hiring of employment; the coalition recognises them as “necessary instruments”. Having said that, amendments may be triggered by the upcoming ECJ rulings on the principle of equality and on the maximum duration of temporary employment. The coalition agreement states that any response can be included in a reassessment of the German Temporary Employment Act (Arbeitnehmerüberlassungsgesetz, AÜG).

Protection of employees on cross-border postings will also be improved.

Collective bargaining autonomy: requiring compliance with collective agreements and making it more difficult to escape collective bargaining

In future, public contracts at federal level will only be awarded to companies that are required to comply with a representative collective agreement for the relevant sector. This move is intended to strengthen commitment to collective agreements and puts a law on compliance with collective agreements (Tariftreuegesetz) on the agenda.

The coalition agreement aims to prevent companies from abandoning collective agreements through spinning off a company without any change of owner. The existing collective agreement will continue to apply in such cases. Section 613a of the German Civil Code (BGB) remains unaffected.

More digitalisation for co-determination 

Works councils are to be free to decide whether they wish to use analogue or digital work methods. Online works council elections will be trialled in a pilot project. Since the legislative period ends in September 2025 and works council elections will be held in spring 2022 and then not until 2026, it’s possible that the relevant regulations will be implemented very quickly in order to be in place for the elections in a few months’ time.

Trade unions will be entitled to digital access to the workplace.

Obstructing co-determination will be classified as an official offence that requires prosecution.

Another issue mentioned is examining to what extent church employment law can be aligned with the corresponding state law.

Fewer opportunities to avoid co-determination

The European stock corporation (SE, Societas Europaea) faces changes, with an amendment to the law to prevent co-determination being avoided completely. 

The rules on membership of a corporate group contained in the Co-Determination Act (Mitbestimmungsgesetz) will be carried over to the One-Third Participation Act (Drittelbeteiligungsgesetz) if there is actual de facto control.

Representative actions to achieve equal pay

The coalition is planning to drive progress on this front by amending the Pay Transparency Act (Entgelttransparenzgesetz) such that workers can assert their individual rights through representative action.

Minimum wage to be increased

The statutory minimum wage, which currently stands at EUR 9.60 an hour (rising to EUR 9.82 from 1 January 2022), will be increased to EUR 12.00 an hour. The independent Minimum Wage Commission will then decide on any further increases.

More pay for mini-jobbers and midi-jobbers

In future, the mini-job limit will be based on a working week of 10 hours on the minimum wage. Accordingly, it will be increased to EUR 520 when the minimum wage is raised, with the midi-job limit rising to EUR 1,600.

Better funding to maintain pension level without increasing contributions

The coalition wants to maintain the minimum pension level of 48%, along with a commitment that the contribution rate will not exceed 20%. To help achieve this, the statutory pension insurance scheme is to be partially capital-backed. An initial fund of EUR 10 billion will be made available for this purpose.

A scheme will be introduced for self-employed persons who are not covered by a compulsory retirement insurance system. They will be obliged to provide for their retirement, with the freedom to choose between different options. If they fail to show evidence of personal pension provision, they will be insured under the statutory pension insurance scheme.

Bolstering company pension schemes

Company pension schemes will be strengthened by gaining the ability to invest in assets that deliver higher returns. 

The social partner model introduced during the last legislative period, which for the first time allows defined contribution plans, will now be implemented.  

More rights for severely disabled employees and parents

A fourth level of compensation levy on companies that do not employ anyone with disabilities despite having a legal duty to do so will be added to Section 160 Social Security Code IX (SGB IX). 

Applications submitted in full to the Integration Office which are presumed to be for ordinary termination will be deemed to be approved after six weeks without notification (constructive approval).

Further changes are proposed for families. These include parental entitlements (child sick pay, special protection against dismissal, parental leave, partner months) and child sickness days. The latter will be increased to 15 days per child and parent, and to 30 days for single parents. Parents are also to have greater rights around the birth of a child:

Protection against dismissal during parental leave is set to be extended by three months after returning to work. The intention is also to give partners the option of taking two weeks’ paid leave following the birth of a child, to coincide with the mother’s maternity leave. This will also apply to single parents. There are plans to grant maternity leave and partner leave in the event of miscarriage or stillbirth after the 20th week of pregnancy. The partner months included in the basic parental allowance will be extended by one month, including for single parents. The parental allowance entitlement of foster parents, self-employed persons and parents whose children are born before the 37th week of pregnancy will be extended, with the cost-of-living adjustment also being made more flexible.

Basic income instead of Hartz IV and other proposals

A basic income – or “citizen’s income” – will be introduced to replace the existing basic income support system (Hartz IV social welfare payments). Notably, recipients will still be required to meet certain obligations.

Vocational education and training is to be expanded, in particular with more part-time options being made available. This will include “training (part-) time” based on the Austrian model; employees will be given financial support for training intended to improve their chances in the job market. This requires an agreement between the employer and the employees. 

A “qualification budget” modelled on the short-time working allowance will enable companies undergoing structural change to hold on to their employees by improving their qualifications, thereby ensuring the availability of skilled workers. The short-time working allowance for employees moved to a transfer company will also be extended.

Our blog series on the impact of the coalition agreement provides information on how the coalition agreement will affect businesses across a range of sectors.