Germany Implements Stricter Laws and Controls to Combat Black Labor

Germany's new law to combat black labor, known as SchwarzArbMoDiG, came into effect on January 1, 2026, following approval by the Bundestag and Bundesrat in late 2025. The law significantly strengthens enforcement powers of the Zoll (customs authority), enabling unannounced inspections, document reviews, and direct employee interviews — roles previously under the public prosecutor's office. The law targets sectors now considered high-risk, including hairdressers and beauticians, while removing others like butchers and forestry from this scope.

Businesses must now fully digitize their records and submit specific data electronically to social security agencies. The introduction of a system called OIDA will allow automated, cross-authority data comparisons to detect violations more effectively. Employers are required to ensure employees carry and present official identification upon request.

Violations will face harsher penalties, with administrative offenses escalating to criminal charges that can lead to fines or imprisonment up to five years, particularly for document falsification. Financial institutions have also intensified obligations regarding document retention.

Companies are advised to review their internal digital processes and compliance strategies to meet these new regulations and mitigate risks of sanctions. Overall, this legislation marks a significant reinforcement in Germany’s fight against undeclared work, aiming for greater transparency and accountability across affected industries.