No more sick leaves for German workers without medical certificate in Merz's new labour reforms

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 sick leaves without a medical certificate.

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 affordable housing 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.