Employment law: This is what the coalition agreement of the 21st legislative period provides for in terms of setting the course for employment law

Key Takeaways

1. More flexibility in working hours: introduction of a weekly instead of daily maximum working time to improve work-life balance.
2. Mandatory electronic time recording: unbureaucratic implementation with transitional arrangements planned for small and medium-sized companies.
3. Digitalization of co-determination by works councils: online works council meetings and digital works council elections are to be made possible and enshrined in law.
4. Measures to combat the shortage of skilled workers: tax incentives for more work, making it easier to stay in employment for longer and setting up a digital agency for the immigration of skilled workers.

On April 9, 2025, the coalition agreement for the 21st legislative period between the CDU, CSU and SPD was published under the title “Responsibility for Germany”. In over 140 pages, the new federal government formulates the central political course and its guidelines for the next four years. Employment law issues also play a central role - including working hours, co-determination in companies, digitalization, strengthening collective bargaining and securing skilled workers.

Below, we provide a brief overview of the key employment law issues and plans:

Working hours and time recording

"The world of work is changing. Employees and companies want more flexibility. That is why we want to create the possibility of weekly instead of daily maximum working hours in line with the European Working Time Directive - also and especially in the interests of a better work-life balance." (margin no. 557 et seq.)

“We will regulate the obligation to record working hours electronically in an unbureaucratic manner and provide for appropriate transitional rules for small and medium-sized companies.” (margin no. 561 et seq.)

• The CDU/CSU and SPD want to enable greater flexibility and personal responsibility for employers and employees when organizing working hours, which is why they are aiming to move away from a daily maximum working time to a weekly maximum working time. However, rest periods should still be observed.
  
  The planned orientation towards a maximum weekly working time is to be welcomed by both employees and employers: employers will gain greater freedom in the daily organization of working hours for their employees and have a wide range of opportunities to establish attractive working time models and thus attract sought-after skilled workers. For employees, more flexible options for organizing their daily working hours lead to a better work-life balance.
  
• The coalition agreement also provides for mandatory electronic time recording. The coalition parties are aiming for an unbureaucratic regulation. In order to avoid challenges, transitional provisions shall apply for small and medium-sized companies. Trust-based working hours are to remain possible without time recording in accordance with the EU Working Time Directive, although the coalition agreement leaves open what this means.
  
  With regard to the electronic recording of working time, the coalition agreement mainly sets out objectives that were already enshrined in the BMAS's draft law to amend the Working Time Act published last year. In view of the inclusion of the project in the coalition agreement, the classic paper timesheets will soon be obsolete. Employers are already advised to find out about possible ways of implementing electronic time recording and to establish a suitable system.

Digitalization of operational co-determination by works councils

"We will continue to develop co-determination. We will also enable online works council meetings and online works meetings as equivalent alternatives to face-to-face formats. In addition, the option to vote online is to be enshrined in the Works Constitution Act." (margin no. 579 et seq.)

• According to the plans of the coalition parties, digitalization is also to find its way into the Works Constitution Act: On the one hand, online works council meetings and online works meetings are to be made possible as equivalent alternatives to face-to-face formats, and on the other hand, the possibility of holding works council elections digitally is to be enshrined in law. The aim of these measures is to make co-determination in hybrid and decentralized working models practicable and legally secure.
• Trade unions should also be given digital access to companies in order to exercise their rights. The legal anchoring of such digital access rights is intended in particular to take account of the structural change towards remote workplaces and virtual teams.
  
  This establishment of virtual participation formats is long overdue in a working world that has been increasingly digitalized for years and is already being implemented in some companies without legal backing - and without definitive legal certainty. Against this backdrop, the efforts of the coalition parties are to be welcomed. At the same time, however, the plans may also present companies with new challenges: If the digital forms of participation are to be used, the corresponding technical requirements must be met. Furthermore, special attention must be paid to data protection aspects during implementation.

Tax incentives for more work

“To ensure that overtime pays off, bonuses for hours worked in addition to the full-time hours agreed in the collective bargaining agreement or based on a collective bargaining agreement shall be exempt from tax.” (margin no. 569 et seq.)

"We will create a new tax incentive for part-time employees to extend their working hours: If employers pay a bonus to extend working hours, we will give this bonus a tax advantage." (margin no. 574 et seq.)

"Instead of a further increase in the statutory retirement age, we want more flexibility in the transition from work to retirement. In doing so, we are focusing on voluntariness. We make working in old age attractive with an active pension." (margin no. 611 et seq.)

• Bonuses for overtime are to be exempt from tax if employees work more than the working hours of full-time employees. The benchmark for full-time work with collectively agreed weekly working hours is at least 34 hours and 40 hours for working hours that are not collectively agreed. In addition, it should be possible for employers to grant tax-privileged financial incentives for extending the working hours of part-time employees to full-time. The aim of these measures is to make greater use of existing manpower and thus counteract the shortage of skilled workers.
  
  It is still unclear how the coalition parties will actually implement these tax benefits. Difficulties are likely to arise here, particularly with regard to possible discrimination against part-time employees.

• Furthermore, there is to be an incentive to continue working after reaching the statutory retirement age. Those who voluntarily continue to work are to receive up to 2,000 euros a month tax-free. The aim of this measure is to prolong the employment of experienced skilled workers. In order to further promote this, the ban on previous employment is to be lifted in these cases, so that continued employment with the same employer is also possible for a limited period of time - without a legally defined objective reason for time limitation.
  
  The latter in particular is to be welcomed, as we often see in our day-to-day advisory practice that employers would like to continue to employ employees who have previously worked for them after reaching retirement age, but are prevented from entering into a further unlimited employment relationship with these employees after the employment relationship has ended due to them reaching retirement age. The proposed legislation thus removes existing uncertainties for employers and makes it easier for employees to remain in employment.

Collective bargaining agreement

"Our aim is to increase collective bargaining coverage. Collective wages must become the norm again and not remain the exception." (margin no. 552 et seq.)

“We are making trade union membership more attractive for members through tax incentives.” (margin no. 585)

• The coalition is aiming for greater collective bargaining coverage, which can be explained by the fact that collectively negotiated working conditions and wages are generally regarded as fair working conditions.
  
• In order to promote this goal, the Federal Act on Loyalty to Tariffs (Bundestariftreuegesetz) is to be introduced. The draft law provides for that public contracts at federal level above a threshold value of EUR 50,000 (or EUR 100,000 for start-ups) may only be awarded to companies that comply with the conditions of the relevant (industry) collective bargaining agreement for their employees.
  
  It remains to be seen whether this will ultimately serve as a model for the private market and contribute to the expansion of collective bargaining coverage there as well.

• In addition to the intended increase in collective bargaining coverage, the coalition wants to create incentives for employees to join a trade union. This is also a not insignificant instrument for increasing collective bargaining coverage and could further strengthen the importance of collective structures in the world of work.

Attracting and keeping skilled worker

“Securing a skilled workforce is a decisive factor for the economic success of our country.” (margin no. 404 et seq.)

“Increasing the participation of women in the workforce is a decisive factor in securing a skilled workforce.” (margin no. 406 et seq.)

"We need to tear down bureaucratic hurdles, for example through consistent digitalization, centralization of processes and accelerated recognition of professional qualifications. To this end, we are creating a digital agency for skilled worker immigration - a “work-and-stay agency” - with the involvement of the Federal Employment Agency, with a central IT platform as a single point of contact for foreign skilled workers. Among other things, the agency bundles and accelerates all processes relating to employment migration and the recognition of professional and academic qualifications and links these with the structures in the federal states. We facilitate the processes by improving employer involvement. We are committed to standardized approval procedures within eight weeks." (margin no. 419 et seq.)

• The coalition parties have recognized the constantly growing demand for skilled workers as a challenge for the labor market and the economy. For this reason, the sustainable securing of a qualified workforce is a central subject of regulation in the coalition agreement.
  
• On the one hand, the focus is on strengthening women's participation in the workforce - flanked by measures to legalize and promote household-related services.

• Secondly, a digital “work-and-stay agency” is to be set up to promote and accelerate the processes of labor migration and the recognition of professional and academic qualifications.

Minimum wage

“We stand by the statutory minimum wage.” (margin no. 546)

• The minimum wage is still to be set by an independent minimum wage commission. As part of an overall assessment, this is to be based both on the development of collective wage agreements and on 60 percent of the gross median wage of full-time employees.
  
• The CDU/CSU and SPD believe that a rise in the minimum wage to 15 euros in 2026 is achievable.
  
  An increased, poverty-proof minimum wage should strengthen purchasing power, reduce atypical employment and help to relieve the burden on the basic income support system. However, this further increase in the minimum wage could pose major financial challenges for companies in the low-wage sector in particular.

Company pension scheme

“In addition, we will strengthen company pension schemes and continue to promote their expansion, particularly in small and medium-sized companies and among low earners.” (margin no. 603 et seq.)

• The CDU/CSU and SPD are also addressing the expansion and strengthening of company pension schemes. Company pension models should also become attractive for small and medium-sized companies, in particular by digitizing, simplifying, reducing bureaucracy and making company pension schemes more transparent.
• The coalition partners also want to increase the portability of company pension schemes in the event of a change of employer.

Other

• The coalition parties have also agreed on measures to reduce bureaucracy. One example of this is the reduction of written form requirements, for example for fixed-term contracts.
• Furthermore, occupational health and safety is to be improved, especially for particularly stressed occupational groups such as professional drivers.
• The prevention of mental illness is to be improved and company integration management is to be made better known.
• In addition, the coalition agreement provides for a reform of the status determination procedure, which should lead to greater legal certainty for the self-employed and their clients.