Germany | Publication | July 2025
The coalition parties will maintain the statutory minimum wage which will continue to be set by an independent commission. The commission will base its proposal both on the development of collective wage agreements and 60 percent of the gross median wage of full-time employees. Recently, the coalition partners agreed to set the minimum wage at EUR 13.90 per hour in 2026 and EUR 14.60 per hour in 2027.
The coalition aims to strengthen collective bargaining and plans to introduce a federal law on collective bargaining public contracts worth EUR 50,000 or more will only be awarded to companies that pay their employees in accordance with a sector-specific collective bargaining agreement. Start-ups providing innovative services, will have a EUR 100,000 cap during the first four years after launch. The act aims to reduce bureaucracy, documentation requirements and controls. However, the details regarding implementation are yet to be determine as the coalition agreement allows for higher contract values than those set out in earlier proposals.
The coalition partners aim to align working time regulations with the European Working Time Directive. for the intention is to implement a weekly maximum working time as opposed to the current daily maximum working time. A consultation with the social partners will take place before any legislative changes are enacted. To date, the German Working Time Act (Arbeitszeitgesetz) has not been amended in this context. In addition, the coalition agreement stipulates that the obligation to electronically record working time should be as unbureaucratic as possible, allowing for transitional arrangements for small and medium-sized entities.
The coalition partners propose tax incentives to encourage overtime work. Overtime pay exceeding the standard full-time hours set out in collective agreements would be tax-free. The benchmark for full-time work is 34 hours per week for employees covered by collective agreements, and 40 hours per week for those not covered. Tax-benefiting bonuses may encourage part-time employees to increase their working time. Working beyond retirement age is also to be incentivised. Anyone continuing to work can earn up to EUR 2,000 per month tax-free. In addition, trade union membership is to be promoted through tax incentives.
The coalition agreement aims to provide that digitisation will facilitate co-determination in the workplace by legalising virtual works council meetings, assemblies and elections. To achieve this, the German Works Constitution Act (Betriebsverfassungsgesetz – BetrVG) is to be amended accordingly. Additionally, trade unions will be granted digital access to businesses, a right not previously specifically provided for. Many of these initiatives build on earlier approaches that were temporarily permitted during the COVID pandemic.
The coalition agreement aims to facilitate the immigration of foreign skilled workers by reducing bureaucracy and introducing digital processes. A central “work and stay agency” will act as a digital platform to streamline procedures and expedite the recognition of foreign professional qualifications. This agency will be a central point of contact for skilled workers, closely aligning labour migration with the structures established by the federal states. The aim is to complete the recognition process within eight weeks. These measures are intended to make the immigration of skilled workers more efficient and faster.
The coalition partners want to further develop the state-funded parental allowance, in particular by increasing the minimum and maximum amounts, raising the income limit and introducing “end-to-end digitisation”. In practice, this could lead to more employees opting to take parental leave.
In terms of digitisation, the coalition partners are committed to reducing requirements for written formats. The written form requirement for fixed-term contracts is explicitly mentioned in this context.
Germany plans to transpose the EU Pay Transparency Directive to combat wage discrimination and gender-specific pay gaps. A commission is tasked with drawing up proposals by the end of 2025, allowing the Directive to be transposed into national law by June 2026. The goal of achieving equal pay for equal work by 2030 has also been agreed upon.
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Following a relatively promising start to the year for mergers and acquisitions (M&A) activity, the US tariff announcements shook dealmaker confidence, triggering global trade uncertainty and stalling M&A deals across the global M&A landscape.
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