A client of WFA’s, a division president at a Frankfurt-based industrial group, comfortably north of €300,000 a year called me in late July, two weeks after the news broke. He wasn’t panicked. He’s not the panicking type. But he asked a question I hadn’t heard from a German executive in fifteen years of doing this work: “Should I be planning my own exit before someone else plans it for me?”
That question he asked is very un-German. For decades, senior earners in Germany operated inside one of the most protective dismissal regimes in the industrialized world. “Kündigungsschutz” wasn’t just law, it was psychology. It told an entire generation of leaders that seniority and salary bought you time, due process, and leverage. That assumption just cracked.
Under the coalition’s new 34-point reform package, employers will gain the ability to end employment relationships with very high earners — those making above roughly €177,450 a year in exchange for a severance payment, without needing a court to first validate the dismissal as justified. The mechanism, borrowed from a rule that has applied only to bank “risk-takers” since 2019, is now headed toward every industry, starting January 2027.
I want to be clear about what this is and isn’t. It is not the end of German job security as a concept. The broader “Kündigungsschutzgesetz” remains intact for the vast majority of the workforce. But for the exact population our clients come from, division heads, C-suite executives, senior technical leaders earning well above the new threshold. It is a structural shift in bargaining position. Structural shifts in bargaining position have a way of arriving quietly and then mattering enormously the day you’re sitting across from HR.
Why This Reform Is a Bigger Deal for Senior Leaders Than It Looks
Most coverage of the Merz coalition’s package has focused on the headline items: the top tax rate rising to 47% above €280,000, the end of phone-based sick notes, the extension of fixed-term contracts to 48 months. Those matter, but they’re not what should occupy a senior executive’s attention. The dismissal provision does, for one specific reason: it changes who holds the timing advantage in a separation conversation.
Under the old regime, a company that wanted to exit a senior earner without airtight cause faced a genuinely difficult, often years-long legal process, and that difficulty was itself a form of executive protection. Companies preferred negotiated exits with generous terms over protracted litigation risk. Remove that friction, and the calculus changes.
A severance-for-certainty trade that used to favour the executive (because litigation was expensive and slow for the employer) starts to favour the employer, because the exit path is now faster and cleaner for them too. I’ve watched this exact dynamic play out in the UK and the US for years, where at-will and quasi-at-will norms mean executives who don’t manage their own narrative and network proactively get managed out of the conversation entirely.
Here’s the reframe I would like to offer that I haven’t seen elsewhere: this reform doesn’t just make it easier for companies to let senior earners go. It makes it more rational for senior earners to go on their own terms, earlier, and with better positioning. A leader who waits for the environment to force the question has already lost the best card in the negotiation, which is choice. One who initiates their own transition by quietly building board relationships, advisory positioning, or a next chapter before the threshold becomes relevant to their own employer walks into any eventual conversation from strength rather than surprise.
The Compensation Cap Nobody’s Talking About
Buried in the legal analysis is a detail with real financial teeth: the expected severance cap under the new mechanism runs 12 to 18 months of salary, calibrated to tenure and age, mirroring the existing banking-sector rule PwC Germany. For a 58-year-old executive earning €400,000, that’s a meaningful number, but it is also a “ceiling”, not a starting point for negotiation the way many exits have historically been structured in Germany, where settlements could stretch well beyond statutory guidance depending on litigation leverage. That leverage is precisely what’s being dialled back.
This is where I tend to disagree with the more alarmist reads of this reform circulating among some legal commentators. The cap isn’t inherently punitive for a leader who has already built optionality outside their current employer, a defined, faster severance path can actually be preferable to years of uncertainty. The problem isn’t the cap. The problem is discovering the cap applies to you the same week you learn your role is being restructured, with no board relationships, no advisory pipeline, and no clarity on what you actually want next. That’s not a legal problem. That’s a preparation problem, and it’s the one we spend most of our time on.
What This Actually Demands of You Between Now and January 2027
The reform doesn’t take effect until January 1, 2027, and even then, the exact income definition and whether it applies retroactively to existing contracts remains unsettled National Law Review That ambiguity is itself useful — it’s an eighteen-month window, not a cliff edge.
I’d use it for three things, though not as a checklist to complete mechanically. First, get an honest read from your own network, not HR, not your manager, but two or three peers who’d tell you the truth about how your role is actually perceived at the moment, separate from how you perceive it.
Second, if a board seat, advisory role, or portfolio career has ever crossed your mind as a “someday” idea, move it into “now” territory; governance relationships take twelve to eighteen months to mature from first coffee to first offer, which is almost exactly the runway this reform just handed you. Third, resist the urge to treat this purely as a defensive exercise. The executives I’ve watched navigate transitions best over the past two decades weren’t the ones who braced hardest against change they were the ones who used the early warning to redesign what came next before anyone forced their hand.
Germany just imported a piece of Anglo-American labor flexibility into a system built on the opposite premise. For senior earners, that’s not really a story about employment law. It’s a story about who controls the timeline of their own next chapter — and whether they decide that answer, or let a 34-point reform package decide it for them.
This isn’t retreat. It’s the moment to reinvent on your own schedule, while you still have one.
Don’t wait for a restructuring conversation to start thinking about what comes next.
WiseForce Advisors works with senior leaders navigating pivotal career moments—whether that means strengthening their position, preparing for a transition, or building a credible path into board, advisory, or portfolio work.
