Pension package 2025:  What to consider now and in the future when concluding fixed-term employment contracts with pensioners in Germany

This circumstance, combined with a growing interest among pensioners in continuing to work beyond the regular retirement age is compelling more companies operating in Germany to deal with the legal requirements for the (continued) employment of pensioners. In a process initiated on 06 August 2025, the German federal government intends to amend an important labour law restriction on the (continued) employment of pensioners under the Act on the Stabilisation of Pension Levels and Full Equal Treatment of Child-Rearing Periods (the 2025 Pension Package). To understand the implications of the planned legislative amendment, it is necessary to take a brief look at the current legal situation and the proposed adjustment.

In employment contracts today, a fixed term is typically included based on the employee's age. This means that an employment relationship ends when the employee reaches the standard retirement age. Employers generally prefer this structure, as it is not possible to predict at the time of concluding the employment contract if the employee will be capable of working at the standard retirement age in such a way that continued employment can be considered. 

Furthermore, as the risk of an employee's performance declining unexpectedly increases with increasing age, and rises significantly if the employee continues to work after reaching the standard retirement age, employers are usually only willing to offer fixed-term contracts to employees who have reached the standard retirement age. This interest of employers has already been partially considered. Section 41 of the Sixth Book of the Social Code (SGB VI) allows employees and employers to mutually agree to postpone the fixed term date in the event of a previously agreed termination of the employment relationship upon reaching the standard retirement age. This existing code already gives the employer a certain degree of flexibility.

However, under current law, it is not possible to enter a new fixed term employment contract if a fixed-term or permanent employment contract already existed with the same employer (§ 14 of the Part-Time and Fixed-Term Employment Act (TzBfG)). To avoid the restriction on subsequent employment, currently the only available option is for a temporary employment agency to hire the pensioner, which then assigns the employee to their former employer.

This currently necessary workaround to make the fixed term (continued) employment of a pensioner legally effective should be simplified by the current legislative process for the 2025 Pension Package. It is intended to remove the prohibition on subsequent employment for pensioners in the case that: (i) the total duration of fixed-term contracts with the same employer does not exceed eight years; and (ii) a maximum of twelve fixed-term contracts are concluded with the same employer.

Considering the current complex and changing legal situation, it is important to proceed with caution if pensioners should continue in employment.

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Pascal Verma is an attorney-at-law specialising in labour law and a partner of the law firm nbs partners in Hamburg. He specialises in providing labour law advice to employers, with a particular focus on small and medium-sized companies and corporate groups.

Charlotte Thiede is an attorney-at-law at nbs partners, focused on advising employers on all matters of labour law.