Germany’s growing financial burden from sick leave payments has reached new heights, with the cost doubling over the past 15 years. According to a recent study by the Cologne-based German Economic Institute (IW), German companies spent a record €85.6 billion on wages for employees on sick or maternity leave in 2026. That figure marks a sharp increase from €36.9 billion in 2010. Of the total, €72.5 billion went toward gross wages, while €13.1 billion was allocated for social security contributions. The IW attributed the surge to multiple factors, including rising wages, inflation-driven increases in employee-related expenses, and a larger workforce since 2010. Additionally, the institute noted a “significant” rise in reported sick leave following the introduction of electronic medical certificates in 2022. Separate data from the Berlin-based IGES Institute revealed that German workers now take an average of 19.5 sick days per year, up from around 13 days in 2018. Chancellor Friedrich Merz’s government has responded to the trend by introducing measures aimed at curbing the rise in sick leave claims. Starting in January, the administration will prohibit physicians from issuing sick notes via telephone, a move intended to reduce fraudulent or unnecessary claims. In Germany, employers typically cover up to six weeks of sick pay before the statutory health insurance system steps in. These changes come amid broader concerns about the sustainability of current labor practices and the increasing economic pressures on businesses. Meanwhile, the automotive sector faces its own set of challenges. Volkswagen, one of Germany’s largest employers, is grappling with a potential mass layoff of up to 100,000 workers and the possible closure of several plants. The company’s supervisory board is scheduled to meet on September 4 to discuss a turnaround strategy. State Premier Olaf Lies of Lower Saxony, which holds 18% of Volkswagen’s voting shares, has urged all stakeholders to find a “viable solution.” He emphasized the need for a balanced approach, acknowledging both the urgent need for cost-cutting and the importance of preserving the company’s role in Germany’s industrial landscape. Lies highlighted the economic and social impact of Volkswagen’s operations, noting the employment of tens of thousands of workers and their families, along with a vast network of suppliers and service providers. Volkswagen’s CEO, Oliver Blume, has outlined a comprehensive restructuring plan, aiming to reduce complexity and streamline operations. He acknowledged the immense pressure facing the automotive industry, citing high tariffs, declining demand, and fierce competition from Chinese manufacturers. Blume stressed that the company has already taken early action to realign its structure and improve competitiveness. However, he admitted that even the planned reduction of 50,000 jobs by 2030 may not be sufficient. The company is now considering further cuts, particularly in non-production areas such as corporate offices, development, and sales. Blume warned that these measures would affect all departments and require collective effort to succeed. Despite these efforts, key aspects of the restructuring remain unresolved. The supervisory board initially rejected Blume’s proposal in July, prompting ongoing discussions. Blume has clarified that the target of 50,000 additional job losses is not a fixed goal but rather a theoretical calculation based on cost considerations. He pointed out that labor costs in Germany are more than double those of comparable European locations, and some production sites remain significantly cheaper. While closures are viewed as a last resort, Blume expressed a desire to avoid them wherever possible. For certain plants, such as those in Emden, Zwickau, Neckarsulm, and Hannover, no “competitive positioning” has yet been identified for the 2030 timeframe. Potential solutions under discussion include temporarily repurposing facilities for defense manufacturing and producing Chinese-designed models within Germany. As negotiations continue, the focus shifts to the upcoming meeting of Volkswagen’s supervisory board. While immediate decisions are unlikely, Blume has indicated his intention to finalize the cost-reduction plan by year-end. Further proposals are expected to be presented, potentially leading to more detailed strategies for managing the company’s future. The outcome of these deliberations will likely shape not only Volkswagen’s trajectory but also the broader economic implications for Germany’s industrial sector.
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