Germany's 2027 Labour Reforms: Tax Bonuses for Quick Job Switches as O2 Telefónica Cuts Over 1,000 Roles

O2 Telefónica is shedding more than 1,000 of its roughly 6,820 positions, a restructuring driven by a transformation programme and the loss of a major client who shifted a substantial portion of its customer base to a rival. Union representatives have slammed the move as a pure cost-cutting exercise, arguing that management has failed to present a clear vision for the remaining workforce. Most of the cuts are expected to be completed before the end of 2026, with voluntary redundancy schemes and severance packages already on offer in affected departments.

Against this backdrop of real-world job reductions, the federal government has unveiled plans to reward workers who quickly find new roles after leaving a company. A coalition paper dated 2 July 2026 outlines a tax bonus for severance payments that rises the sooner an employee secures a new position. The incentive is designed to complement the existing "fifth rule" (Fünftelregelung) and to boost labour mobility.

New rules for high earners and fixed-term contracts

Starting 1 January 2027, the government will also ease the process of terminating employment contracts for high earners — those with an annual income above €177,450. Another change: the maximum duration of fixed-term contracts without a specific cause (sachgrundlose Befristung) will be extended to 48 months, a temporary measure running until 31 December 2030. Additionally, supplements for Sunday and public holiday work will remain tax-free up to an hourly rate of €75.

The pitfalls of "golden handcuffs"

When companies restructure or close plants, they often dangle extra bonuses for quick acceptances. Experts say these can be €30,000 to €40,000 above the standard severance. But caution is warranted: signing a settlement agreement (Aufhebungsvertrag) can trigger a block on unemployment benefits. The Federal Employment Agency regularly imposes a waiting period of up to 12 weeks. Lawyers advise younger employees with short tenure to prioritise finding a new job quickly rather than gambling on lengthy social-plan negotiations.

Federal Labour Court clarifies protections

Several recent rulings from the Federal Labour Court (Bundesarbeitsgericht) have sharpened employee rights:

• Parental leave: Special protection against dismissal arises anew before each individual parental-leave period — even when multiple periods are applied for at once. Employers must check whether a future leave period falls within the eight-week pre-effect window before issuing a notice.

• Severe disability: During the first six months of employment, no formal prevention procedure is required. The Integration Office's consent only becomes necessary after this waiting period, though the disability representatives must be involved from day one.

• Illness-related dismissal: A registered letter with confirmation of posting is insufficient to prove receipt of a return-to-work management (betriebliches Eingliederungsmanagement) invitation. The court demands a seamless technical record of the delivery process.

Deadlines that matter

Anyone challenging a dismissal must file a lawsuit within three weeks of receiving the notice. Settlement agreements should never be signed without legal review. Equally important: even while a court case is pending, employees remain obliged to look for work. Refusing a reasonable offer can reduce compensation for acceptance default. Lower labour courts have issued differing rulings on this point, so actively applying during proceedings is the safest way to avoid financial penalties.

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