Germany: 2026, Looking Ahead

Authors: Verena Braeckeler-Kogel, MAES (Basel), and Meike Christine Rehner

 

In Looking Ahead 2026, the most important trends and developments related to labour and employment law in Germany are explored.

1. Amendment to the German Transparency in Wage Structures Act (Entgelttransparenzgesetz – EntgTranspG)

The European Pay Transparency Directive came into force on 6 June 2023. Compared to the German Transparency in Wage Structures Act, it introduces a number of additional requirements, such as extended rights to information and reporting obligations as well as compensation claims in the event of gender-based pay discrimination. The directive applies to employers in both public and private sectors. The provisions of the directive must be transposed into national law by the member states by 7 June 2026. In Germany, this is expected to be done through a legislative revision of the German Transparency in Wage Structures Act. The German government has therefore set up a commission with the aim of implementing the directive with as little bureaucracy as possible. This commission submitted its final report to the responsible minister in November 2025. The plan is to initiate a legislative process in early 2026 after the report has been reviewed.

In the future, equal pay will have to be ensured not only for equal work, but also for work of equal value, considering criteria such as competence, responsibility and working conditions. Applicants must receive information on starting salaries and possible collective agreements before being hired, and the employer may not ask questions about previous pay trends. Regardless of the company’s size, employees have the right to know the salary of their colleagues who complete equivalent work and/or work of equal value. Employers with more than 100 employees must prepare regular reports on the pay gap, and if there is a difference of more than 5% without objective justification, they must carry out a joint pay assessment with the employee representatives. A reversal of the burden of proof makes it easier to prove wage discrimination. If found, employees can claim compensation for lost pay and non-material damages. In addition, member states must impose effective sanctions, such as fines, for violations. Although the exact details of how the directive will be implemented are currently still unclear, all employers should prepare for changes to their remuneration systems. It is strongly recommended to assess possible impacts across EU states and to work on developing or implementing a plan to fulfil the future requirements.

2. Increase in minimum wage and contribution assessment ceiling

The statutory minimum wage in Germany will be raised from €12.82 to €13.90 per hour on 1 January 2026. This increase follows the decision of the independent Minimum Wage Commission, which reviews the minimum wage level every two years while also regarding the current economic situation. With some exceptions, the statutory minimum wage applies to all employees aged 18 and over, regardless of their working hours or the scope of their employment. Mini-jobbers, therefore, also benefit from this regulation. Another increase is already planned: on 1 January 2027, the minimum wage is set to rise to €14.60 per hour.

The Federal Cabinet has decided on the new social security calculation parameters for 2026 and, as in previous years, based them on wage and income trends. Accordingly, the contribution assessment ceilings will rise significantly in the coming year. The general ceiling for pension and unemployment insurance will climb to €8,450 per month (or €101,400 per year). For statutory health and long-term care insurance, the contribution assessment ceiling for 2026 will be set at €5,812.50 per month or €69,750 per year (2025: €5,512.50 per month or €66,150 per year). The goal of this annual adjustment is to secure the contribution base for social security while maintaining a stable level of benefits.

3. Changes to the German Working Hours Act (Arbeitszeitgesetz – ArbZG)

In its coalition agreement, the German government plans to restructure the current maximum daily working hours of 8 (or 10 in exceptional cases) to a maximum number of hours (48) accumulated within a week. This is intended to give both employers and employees more flexibility in the distribution of working hours, while rest periods and health protection continue to be guaranteed. At the same time, the government is planning to introduce a binding obligation to record working hours electronically, requiring employers to record the start, end, and duration of their employees’ daily working hours. Handwritten lists will generally no longer be sufficient. However, the coalition agreement stipulates that trust-based working hours, in principle, will remain possible. In addition, appropriate transitional arrangements are planned for small and medium-sized enterprises.

As there is currently no legislative bill for a new Working Hours Act in the German parliament, it is unclear how and when the changes can be expected. Employers should, however, review their working time models and introduce electronic time recording systems to be better prepared for the expected changes.

4. Works council elections 2026

Germany has a Works Constitution Act (Betriebsverfassungsgesetz – BetrVG) that regulates employee co-determination within companies. Employees can elect a works council to represent the interests of the workforce in relation to the employer. A works council can be elected as soon as the company hires at least five employees who are eligible to vote (including at least three who are eligible for election). The allowed number of members depends on the size of the company. The works council is responsible for ensuring that employees’ rights are protected – for example, co-determination in working conditions, working time regulations, social benefits, job security, and health protection. In certain matters, the employer must involve the works council or obtain its consent, making it a central instrument of co-determination and social balance in the company.

The next regular works council elections are scheduled for 2026, meaning most companies with a works council will be holding elections. Regular works council elections take place every four years, and the statutory election period extends over the spring; voting must take place between 1 March and 31 May 2026. Preparations (e.g., appointing an election committee), however, can begin much earlier. In many companies, it is advisable to start planning early so that formalities, candidate nominations, and voter lists are ready in time. Simplified election procedures apply to smaller companies while larger companies use regular or more complex procedures.

The works council election is an important opportunity for employees to influence company policy and working conditions. A correctly conducted, democratic election strengthens the legitimacy of employee representation. However, the formal requirements are strict. Errors in voter lists, candidate nominations, or election rules can lead to challenges.

5. Applicability of most provisions of the European Artificial Intelligence Act

The European AI Act establishes, for the first time, a comprehensive, Europe-wide set of rules for the development, marketing, and use of AI systems. The aim is to address risks to health, safety, and fundamental rights while creating reliable regulations to ensure that AI is used responsibly. The act applies not only to providers based in the EU, but also to companies outside the EU whose AI products or services are used within the EU market.

The European AI Act came into force on August 1, 2024, with its provisions being introduced in stages over the following years. Most of the regulations, especially those relating to high-risk AI systems in sensitive application areas, are scheduled to fully apply from August 2, 2026.

Companies should carefully assess the intended use of their AI systems to determine whether they fall into the categories of “low,” “limited,” or “high” risk. High-risk systems must meet extensive requirements related to safety, documentation, monitoring, and quality control. Some AI practices are prohibited altogether, such as applications that may result in discriminatory profiling. In addition, many AI systems are subject to transparency obligations, documentation standards, and internal governance measures. Businesses should therefore review and, where necessary, adapt their processes and policies to ensure compliance. Non-compliance can result in significant sanctions and substantial fines.