Germany: Fourth Bureaucracy Reduction Act – Simplifications for HR Practice?

On 29 October 2024, the Fourth Bureaucracy Reduction Act was announced in the Federal Law Gazette. Most of it will come into force on 1 January 2025. The law contains numerous measures to reduce the current excessive bureaucracy in Germany, which is particularly relevant for employers. This is because the Fourth Bureaucracy Reduction Act contains, among other things, changes to the German Evidence Act, the Social Code Book VI, the Federal Parental Allowance and Parental Leave Act, the Act on Temporary Agency Work and the Trade Regulation Act.

The amendments made by the Fourth Bureaucracy Reduction Act will make it easier to fulfil the formal requirements of the Evidence Act. The Evidence Act provides for an extensive catalogue of essential employment conditions that must be handed over to the employee at the beginning of the contract. Until now and especially since a change to the law in 2022 this was only possible in wet ink and non-compliance could result in an administrative fine of EUR 2,000 per case. From 1 January 2025, the essential contractual conditions can be drafted in text form and sent electronically to the employee. However, this only applies if the document can be accessed, stored and printed by the employee and the employer requests the employee to provide proof of receipt when the document is sent.

Until now, the age limit (a clause stipulating the automatic end of employment upon reaching retirement age), like all fixed-term agreements, had to be agreed in writing. Accordingly, it was previously only possible to effectively agree an age limit in the employment contract if it was signed in wet ink. This formal requirement also will be relaxed by the Fourth Bureaucracy Reduction Act, which provides that text form is now sufficient for such age limits. Other fixed-term employment contracts, however, still require wet ink signatures prior to the start of employment. Wet ink also still applies to post-contractual non-competes.

There will also be simplifications for employees, in allowing them to request parental leave and part-time work during parental leave in text form. Further, an amendment to the German Temporary Employment Act means that the written form requirement for temporary employment contracts between the lender and the borrower will no longer apply in the future; text form will now suffice. This means that temporary employment contracts can be concluded by email or text message, for example. In addition, from 1 January 2025, reference letters can be issued in digital form and the formality of sending a wet ink document in an unbent form no longer applies.

Practical Point

• In 2022 the changes to the Verification Act had resulted in an uproar in the HR world due to massively increased bureaucracy resulting from the wet ink requirement for employment contracts. The Government now – after more than two years- finally managed to withdraw this unfortunate change and made a change to the better: e-signatures will now be possible for almost every employment contract, making life much easier for employers.
• If the employer sends the essential working conditions to the employee, for example by email, the employer must equip the email with the confirmation of receipt function. This is intended to provide additional security for the employee’s receipt of the confirmation in view of possible uncertainties associated with sending it electronically.