Less bureaucracy: Bundestag enables fully digital employment contracts

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The Bundestag has passed the 4th Bureaucracy Relief Act with a large majority. According to estimates by the German government, this will save citizens, administration and companies 3.5 billion euros a year. With this initiative, parliament is paving the way for the digital conclusion of employment contracts, among other things: In future, employers will also be able to provide information on the key terms of their employment contracts in text form, for example by email, as well as agreements on age limits. The previous requirement for written form in the Evidence Act will no longer apply. The traffic light coalition agreed on this approach back in March.

However, according to the Legal Affairs Committee's amendment to the government draft, employees can still request written proof of their working conditions. Employers must then continue to provide them with the information on paper. In general, the plan is intended to allow companies to digitize their HR administration processes. Only in sectors of the economy that are particularly at risk of undeclared work and illegal employment will paper-based proof remain mandatory.

"Using the text form saves printing costs," explains the government: With an estimated printing time of 0.5 minutes and a wage rate of 23.60 euros, there would be a potential annual saving of around 1.7 million euros here alone for around 35.2 million upcoming employees.

New reset procedure for the PIN for the online ID card

The package also provides an alternative for the "free" PIN reset and activation service (PRSD) for the electronic identity (eID) in the ID card. The executive was forced to discontinue the service at the end of 2023 due to "incalculable costs". According to the resolution , it should be possible to change the six-digit secret number online.

According to the MPs, the Federal Ministry of the Interior should be able to transfer the sovereign powers "to perform the task of electronically requested PIN resetting" to legal entities under private law by means of a "loan". The aim is to reduce the burden on the state through deregulation and privatization. In the current case, "a certain flexibility" is to be created in relation to changing the PIN number, according to the explanatory memorandum.

The new online procedure is expected to save citizens around 105,000 hours per year. This is based on the assumption that around 140,000 people have their PIN reset electronically every year. Compared to going to the office, 45 minutes could be saved per case. The coalition still assumes costs of around 15 euros per reset –, i.e. roughly the same as sending a new PIN by letter and Postident procedure. However, the time saved compared to going to the authorities could save 1.10 euros.

"A drop in the ocean"

Parliament also wants to use the law to reduce formal requirements in civil law, shorten retention obligations and abolish the hotel registration requirement for German nationals. Furthermore, a central database of tax advisors for powers of attorney in the area of social security is to be introduced. In future, authorities could also make tax assessments and other tax administration files available digitally.

In addition to the traffic light coalition, the CDU/CSU parliamentary group also voted in favor of the revised draft. However, the measures fall far short of what is possible and necessary, they said. The conservatives also criticized the fact that the option to digitally read passports, which had initially been considered, had been removed for data protection reasons. The Left Party, which voted against the initiative together with the BSW, spoke of a drop in the ocean that would not lead to any noticeable cost reductions.

Fight against "bureaucracy burnout"

With this decision, Germany is initiating a turnaround in the "bureaucracy burnout", emphasized Federal Minister of Justice Marco Buschmann (FDP). However, this is only one step that must be followed by further – such as an annual bureaucracy relief act 2025 – "Less paper and more digital processes in HR departments" is what the IT association Bitkom is hoping for. However, some incomprehensible exceptions remain. For example, the strict written form still applies to contracts with interns, even though they "should have no reservations about using digital tools".

The package still has to go through the Federal Council. There could be trouble ahead. The stumbling block: in future, tax and accounting documents will only have to be kept for eight – instead of ten – years. The North Rhine-Westphalian Finance Minister Marcus Optendrenk (CDU) considers this to be a mistake. Tax evasion and crime can only be effectively combated if all relevant data is available in full and in good time. However, the shortened retention period should only apply to persons and companies subject to the Bafin supervisory authority with a delay of one year. According to the explanatory memorandum, this is to ensure that ongoing investigations are not impaired.

(mki)