Germany: Employment & Benefits – 2024 Highlights and 2025 Outlook

Over the course of 2024, employee rights have once again been strengthened. This trend is expected to continue in 2025, forcing employers to implement new internal systems, and to rethink their corporate strategies for the years ahead. This article deals with the most important changes in 2024 and provides a brief outlook for 2025.

2024: HIGHLIGHTS

• Changes to the Works Constitution Act around works council remuneration. In 2024, important adjustments were made to the Works Constitution Act (Betriebsverfassungsgesetz – BetrVG), with a particular emphasis on the remuneration of works council members and their right to be released from work. These reforms aim to strengthen the role of works councils and to prevent abuse. They significantly reduce the risk of managers granting excessive remuneration to works council members and exposing themselves to criminal charges.
  
  The new legislation requires that works council members receive remuneration commensurate with their position and activities. In particular, remuneration must now be based on the salary of similar positions in the company. Under the new law, it is expressly permitted to define the process of identifying "similar positions" in works agreements and even to agree on specific individuals as being comparable. Such an agreement can only be reviewed in court proceedings for gross error. This should minimize—or even completely eliminate—the potential for abuse, while preventing embezzlement. These changes underscore the need to protect the role of the works council as an independent employee representative body, while also curbing economic excesses.
  
  
• Training and Education Act to combat the shortage of skilled workers. The shortage of skilled workers prompted the German government to update the Training and Education Act encouraging companies to provide better opportunities for employee training and retraining. The aim is to adapt the labour market to changes in technology and demographics.
  
  The law provides for financial incentives and state subsidies for advanced training measures. Small and medium-sized enterprises may also benefit from these subsidies to allow their employees to obtain and retain qualifications in the long term.
  
  Employees will be entitled to advanced training, obliging employers to ensure access to training measures. These measures can range from paid educational leave to financially supported programs.
  
  The introduction of the new Training and Education Act is intended to improve access to qualifications and alleviate the shortage of skilled workers in the long term.
  
  
• Whistleblower Protection Act and implementation of regulations. The Whistleblower Protection Act protects individuals who expose violations of the law, such as acts of corruption or discrimination. The law is an implementation of the EU Whistleblower Directive, and aims to expose wrongdoing within companies and public authorities safely and without fear of reprisal.
  
  Employees who report abuse are protected by law from retaliation such as dismissal or bullying. Companies are obliged to set up internal reporting systems that ensure whistleblower protection and guarantee anonymity.
  
  Companies above a certain size must set up reporting channels to collect reports of compliance violations in a secure, privacy-compliant manner. In cases where no such channel exists, or where there are privacy or security concerns, whistleblowers may use external reporting offices.
  
  The Whistleblower Protection Act strengthens integrity and transparency in companies, and makes it easier for employees to report unethical behaviour without fear of retaliation.
  
  

2025: OUTLOOK

• Bureaucracy Relief Act IV. The Bureaucracy Relief Act IV will come into force in January 2025, providing a range of measures to reduce administrative burdens on companies. This includes, among other things, shortening retention periods for certain types of documents, as well as the long-awaited option to provide employees with documentation of relevant working conditions electronically, not just in writing.
  
  This legislation is intended to facilitate the completion of purely digital employment contracts in the future, and represents a significant simplification in cases of location-independent work. However, employers still need to observe the written form requirement in connection with fixed-term employment agreements and terminations or separation agreements.
  
  
• Pay Transparency Act. The existing Pay Transparency Act will have to be updated no later than 2026, when the new EU Pay Transparency Directive is to be implemented at national level. The aim of this update is to achieve improved salary transparency and wage fairness. The new law will be based broadly on the existing Pay Transparency Act of 2017, which has proven relatively ineffective. The new law strengthens the individual right of employees to pay-related information, and obliges companies of a certain size to provide regular salary reports, including gender-differentiated information on salaries and remuneration structures to make the gender pay gap transparent. Large companies must make such information publicly available. Severe sanctions may be imposed for violations of the law, in order to ensure compliance, with the ultimate goals of ensuring that unequal pay is no longer an issue after the failed attempt in 2017, and establishing equal pay for equal work.
  
  
• Staff reductions in 2025 and employer obligations. It is expected that many companies will have to cut jobs in 2025 due to economic challenges. German law already defines clear rules regarding employee rights and the obligations of employers in such a scenario.
  
  Companies planning layoffs on a larger scale must negotiate a social plan and reconciliation of interests with the works council in advance, in order to protect employees from social hardship and help mitigate negative consequences that may result from job loss. In addition to the works council, the union may also demand separate consultations and call for more favourable solutions for organized employees.
  
  Employers would be wise to prepare for such consultations, and to diligently assess the potential consequences and implications in advance. It is crucial to develop a solid consultation strategy in order to protect existing business relationships throughout the process, while keeping financial repercussions under control.
  
  

While 2024 has brought some new laws, 2025 will not only make life easier for employers but may also see bring new challenges, especially as federal elections loom on the horizon.