Germany: draft legislation being prepared to limit fixed-term employment contracts

In an interview with RedaktionsNetzwerk Deutschland (RND), Federal Minister of Labour and Social Affairs, Hubertus Heil detailed the contours of a future bill that is set to limit the use of fixed-term employment contracts, both those with and without specified grounds. The current legal framework allows employers to hire employees on fixed-term contracts without giving any specified reason for a maximum of 2 years. During this 2-year period, employers may offer the same employee a maximum of three such fixed-term contracts. There is no set time limit for fixed-term contracts drawn up with specified reasons. Cases of employees migrating from one fixed-term contract to another over periods of years are therefore commonplace. Among other things, Minister Heil believes that there are “too many fixed-term contracts concluded with no specified reasons, which leaves young workers with a great deal of insecurity in terms of their life planning.” The minister also believes that too many companies use such contracts to better circumvent the current employment dismissal protections: “That is why we have decided, as negotiated in the coalition contract, to reduce fixed-term employment. The main measures of the bill therefore concern reducing the maximum duration for fixed-term contracts without specific reasons down from the current 24 months to 18 months. In addition, companies with more than 75 employees will not be able to hire more than 2.5% of their headcount under the ‘unmotivated’ fixed-term contract system. Fixed-term contracts with specified reasons will be limited to 5 years per person, regardless of whether these contracts were signed directly with the company or as part of an interim agency work framework. The unions have warmly welcomed the arrival of this text. According to a study by the German Federation of Trade Unions (DGB) Hans Böckler Foundation research and studies institute, 39.4 % of all new hires in the first half of 2020 were on fixed-term employment contracts (+2.5% compared to the first half of 2019). On the other hand, major employers’ federations such as the BDA (German employers’ association) and the conservative parties believe that even if the initiative is included in the coalition agreement, altering the framework for fixed-term contracts is not welcome amid the pandemic, when the economy is sluggish and companies need flexibility. The text is currently at the inter-ministerial consultation level and as such modifications to it cannot be ruled out.