The German federal government’s “Program for Economic Growth and Employment,” presented on July 2, 2026, introduces significant proposed changes to German employment law. Among other measures, the government plans to extend the maximum duration of fixed-term employment contracts without objective justification from 24 to 48 months and increase the number of permitted contract extensions from three to six. In addition, the restrictions on prior employment with the same employer are expected to be relaxed.
For nonprofit organizations (NPOs) in Germany, these proposed changes would represent a major advantage. They would allow organizations to respond more flexibly to uncertain funding and project durations exceeding two years, without having to either continue employing valuable staff under legally riskier fixed-term arrangements or terminate their employment after only two years.
Why the fixed-term employment reform is a milestone for nonprofit organizations
WINHELLER advises charitable organizations, foundations, and associations on employment law matters every day and understands the practical challenges they face. Many nonprofit projects depend on temporary grant funding, donations, or other time-limited public funding. These projects are frequently designed to run for three or four years, creating significant legal uncertainty under the current rules governing fixed-term employment without objective justification.
Once the current two-year limit expires, nonprofit organizations have generally been forced to:
- terminate the employee,
- convert the employment relationship into a permanent position, or
- continue employment under a fixed-term contract requiring an objective statutory justification – a solution that is often expensive, difficult to justify legally, and therefore particularly risky.
The federal government’s proposed amendments to the German Part-Time and Fixed-Term Employment Act (TzBfG), intended to make the labor market more flexible, would provide substantial benefits for nonprofit organizations and, if enacted, would resolve many of these longstanding challenges.
Doubling the maximum contract duration
Many nonprofit organizations rely on temporary grants, public funding, or time-limited fundraising campaigns. Under current law, employees may generally be hired on a fixed-term basis without objective justification for no more than two years. If a major grant-funded project runs for three years, organizations have often had little choice but to rely on more expensive and legally difficult fixed-term contracts based on statutory justification.
The proposed extension to 48 months, together with the ability to extend contracts up to six times, aligns well with the duration of many grant-funded projects. It would allow nonprofit organizations to employ staff under fixed-term contracts without objective justification for the entire life of a project, without being forced to terminate employment, convert contracts into permanent positions, or rely on legally uncertain fixed-term arrangements requiring statutory justification.
Doubling the number of permitted contract extensions
The proposed increase to six permitted contract extensions would also provide the flexibility that nonprofit organizations have long needed for project planning. Organizations would gain significantly greater planning certainty and would be better able to align staffing needs with actual project timelines without creating unnecessary employment law risks.
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Rehiring former employees becomes easier
Under current law, a fixed-term contract without objective justification is generally prohibited if the employee has previously worked for the same employer. This restriction has been particularly problematic for nonprofit organizations whenever experienced project staff wished to return after a break to work on the same or a similar project. The proposed legislation would permit what lawmakers describe as a “new initial hiring with the same employer.” This would make it much easier for organizations to rehire experienced, fully trained, and highly motivated professionals.
Advantages of fixed-term employment without objective justification for associations, foundations, and other nonprofits
The proposed reforms would offer nonprofit organizations in Germany numerous practical benefits.
- Better alignment with project timelines
Many grant programs, foundation initiatives, and EU-funded projects extend well beyond two years. The proposed maximum term of four years would closely match the duration of most project cycles. In addition, the increased number of permitted contract extensions would enable organizations to respond much more flexibly to funding approvals that are granted only for limited periods without entering legally uncertain territory. - Greater continuity in project work
The proposed rules would also strengthen project execution itself by allowing the same project team to remain in place throughout longer project periods. This would eliminate costly and time-consuming staff turnover, lengthy handover processes, and onboarding periods that are often not fully covered by grant funding. Greater team continuity would significantly improve collaboration and benefit everyone involved. - Reduced financial risk
Longer permissible contract terms would also provide greater certainty regarding the duration of employment relationships, since contracts could be validly structured beyond the current 24-month limit. Organizations would therefore be less likely to rely on legally uncertain terminations for operational reasons or face costly litigation before the German labor courts, proceedings that frequently result in unintended permanent employment relationships with significant financial consequences. - Improved ability to attract and retain qualified professionals
The proposed reforms are also likely to improve nonprofit organizations’ ability to recruit qualified professionals. Many highly skilled candidates are reluctant to accept employment limited to only two years and instead seek greater job security and longer contract terms. From the employees’ perspective as well, the proposed reforms would therefore represent a significant improvement.
The reform has not yet been enacted: Caution when drafting employment contracts
The proposed reform would create entirely new opportunities for nonprofit organizations in Germany, including nonprofit limited liability companies (gGmbHs), foundations, and associations. Strategic use of longer fixed-term employment contracts could help ensure greater stability for both projects and teams in the years ahead. However, employers should keep in mind that these changes are currently only part of a legislative package that must still pass through the German parliamentary process before becoming law. Nonprofit organizations should therefore carefully review their existing employment agreements and should not enter into longer fixed-term contracts until the legislation has been formally enacted.
Our attorneys specializing in German employment law are closely monitoring the legislative process and will keep you informed of further developments.
