German Chancellor Friedrich Merz outlined a 34-point package of pension, tax and labour reforms on Thursday to “cut red tape” and boost growth, jobs and competitiveness.
“We are working to cut red tape. We are working to protect our welfare state, and we are working to ease the burden on employees and companies by lowering taxes,” Merz said, adding that the government aimed to pass the main elements of the package through parliament by the end of the year.
However, for the German workers, it means no more without a medical certificate.
Quick answers to key questions
What are the key changes in sick leave policy under Merz’s reform package?⌵
Under Merz’s new labour reforms, German workers must provide a medical certificate from the first day of their sick leave, eliminating sick days without such documentation.
Why is a medical certificate now mandatory for sick leave in Germany?⌵
The requirement for a medical certificate aims to reduce the number of sick leave days taken by employees, thereby increasing workplace productivity and participation.
How long will the new sick leave rules apply to German workers?⌵
The changes to sick leave, requiring medical certificates from day one, are part of a broader 34-point labour reform package proposed by Merz, expected to be enacted by the end of the year.
Should employees be concerned about potential abuses of sick leave under the new rules?⌵
Yes, the reforms are partly aimed at preventing welfare abuse, which includes tightening measures against fraudulent sick leave claims.
What are the broader implications of Merz’s labour reforms beyond sick leave?⌵
Merz’s reforms include provisions for fixed-term contracts, easier dismissal of high earners, and tax relief for families, all designed to boost growth, jobs, and competitiveness.
In an effort to reduce days lost through sick leave, under the new labour market reforms, German workers would not be able to call in sick by telephone, according to Reuters. They would require medical certificates from day one of their sick leave.
Reuters reported that companies would be given greater scope to offer fixed-term contracts of up to 48 months to new hires through to 2030. They would also be offered greater freedom for dismissal-with-compensation arrangements for very high earners.
Pensions
In the 34-point package, Merz suggested implementing the pension commission’s recommendations to introduce an additional capital markets-based element to the state pension system, along with a gradual increase in the retirement age over the coming decades.
Tax relief for households
Income tax relief for households of more than €600 ($685) for a working family with two children through higher allowances is also in the cards, with an easing of progression for middle incomes.
The measures would reportedly provide an estimated €10 billion in relief annually. It would be financed in part by raising the top tax rate to 47% from 45% for the highest earners with an annual taxable income of €280,000 or more.
Industry and Technology
The package also seeks to support key sectors including automotive, chemicals and pharmaceuticals, clean technology, machinery, batteries, semiconductors, and artificial intelligence.
The Deutschlandfonds investment funding framework would be expanded into a strategic investment vehicle focused on resilience, energy and raw materials, Reuters reported.
Crackdown on welfare abuse
Measures against benefits fraud to be tightened with more data sharing among authorities and improved enforcement.
Energy & Infra
Expansion of the electricity distribution grid to be accelerated with the aim of cutting network project implementation times by half. Industry to get clearer guarantees about grid connection timelines.
Trade
Strengthen EU anti-dumping and anti-subsidy measures and EU preference rules. Technology-transfer requirements to be considered in certain strategic sectors involving non-European investments.
Housing
Create a federal housing company to build and ease requirements on property lending to stimulate mortgage financing. Pass legislation to prevent conversion to public control of private rental housing by regional authorities.
Deregulation and Bureaucracy Cutting Measures
Cut reporting and documentation requirements and reduce corporate compliance burdens, including by limiting supply chain due diligence obligations to very large companies.
The measures would include automatic approval of applications after four months unless authorities intervene, and a target 8% reduction in staffing across much of the federal administration.
