As global pressures reshape German industry, businesses are rethinking their operations and workforce strategies in a way they haven't done before. We explore the practical considerations for German employers as they increasingly engage in 'footprint-led' restructuring exercises.
Germany's industrial sector is undergoing a profound transformation. With warnings of de-industrialisation and a steady stream of job cut announcements, many organisations are preparing for an economic and business landscape that could look very different by the end of the decade. While some fear a hollowing out of traditional industry however, others see an opportunity to rethink how and where their work gets done. Known as 'footprint conversations', we take a closer look at what they might mean for employers in Germany in the context of business restructuring, particularly with the fast-approaching 2026 works council elections.
'Footprint conversations' and why they matter
'Footprint conversations' relate to the strategic decisions organisations make about where to locate operations, how much to produce in-house versus outsourcing, and how to balance high-cost domestic operations with more cost-effective international alternatives. They have become increasingly important for German businesses in recent times as geopolitical, economic and technological changes have created a very different landscape within which to operate and, importantly, stay competitive.
This has resulted from various factors, but particularly critical has been technological change and significantly lower regulatory requirements in certain jurisdictions. For instance, the development and application of artificial intelligence (AI) is already taking place extensively in India, which shows that AI-based technologies both now and in the future will be less tied to traditional sites and locations. As a result, many firms in Germany are re-examining the 'mix' of their business operations in terms of how much is based in 'high-cost' countries (e.g. Germany), and how much is outsourced to 'best-cost' countries. For traditionally positioned German organisations, this means a shift away from the frequently used ratio of 60:40 (high cost: best cost) to a 30:70 ratio; a significant change in approach.
What emerges then is a completely different perspective to workforce restructuring and transformation. Whereas historically these exercises have primarily focused on reducing payroll costs, today's footprint-driven restructuring exercises are more about German business preserving the ability to invest and ensure long-term competitiveness.
To complicate matters further, running parallel to these developments has been Germany's re-militarisation efforts. As a consequence, in nearly every major restructuring in Germany today, there's at least some discussion, often where there is a lack of alternative investors, about repurposing divisions facing cuts for military use. These will almost certainly need to be factored into any review of footprint strategy.
The importance of social partners: the 2026 elections and beyond
Planning cycles are long, often 12–18 months or more, and while many German employers are still in the exploratory phase, these early footprint discussions are already shaping expectations around job security, site viability, and the role of social partners in managing change. There is no question that the co-determination partners (i.e. the works councils as joint stakeholders in workplace governance) must be fully engaged here, not only through economic committees, but also on the co-determined supervisory boards.
In this respect, the upcoming 2026 works council elections in Germany will play a pivotal role in shaping how organisations manage footprint-related restructuring in the years ahead. With widespread workforce adjustments already underway, early elections may occur in some organisations this autumn. These elections will influence not just representation, but the ability of works councils to engage constructively in complex industrial transitions. Fragmented or weak councils could hinder progress, while strong, cohesive ones will be essential for navigating the challenges ahead. To avoid mistrust and misinformation, employers must communicate clearly and take responsibility for difficult decisions, rather than leaving unions or employee representatives to manage these challenges alone.
Consulting with staff and works councils: practical considerations
The consequences of these footprint conversations, and the related options for consulting with works councils, are significant. Below, we set out some of the key practical considerations for employers when it comes to consulting with staff and works councils during footprint-driven restructuring:
- A focus on the process, not deadlines – Traditional restructuring models rely on fixed timelines and formal phases. But footprint decisions are often fluid and long-term. Instead of waiting for finalised plans, employers should embrace a more flexible, ongoing consultation process – one that evolves alongside strategic thinking and allows for early engagement with employee representatives.
- Investment capacity over cost-cutting – While cost savings still matter, the real driver behind footprint changes is the need to maintain investment capacity. With tight margins, employers must ensure they can fund innovation and transformation. Employer's must support this shift by aligning workforce planning with long-term competitiveness, not just short-term savings.
- Early impact on jobs and sites – Even preliminary footprint discussions can influence decisions about job locations and staffing levels. Employers should treat these early signals seriously, engaging with works councils and preparing for potential changes well before formal restructuring begins.
- Planning for the workforce of tomorrow – Rather than focusing solely on immediate job losses or relocations, employers should focus on the broader transformation strategy. This includes upskilling, demographic planning, and creating pathways for professional reorientation.
- Proactive use of social plans – Framework social welfare plans that cover retraining, job placement, and transition support might be an early focus for employers. Waiting until layoffs are imminent limits their effectiveness. Early planning allows for smoother transitions and better outcomes for both employees and the business.
- Communication as a strategic retention tool – In times of uncertainty, poor communication can drive talent away. Employers must lead with transparency, explaining the rationale behind footprint decisions and what they mean for employees. Clear, consistent messaging builds trust and helps retain key skills during periods of change.
- Legal considerations and co-determination – From a legal perspective, strategic decisions like footprint planning should be handled at the supervisory board level, while operational changes—such as site closures or workforce shifts— usually require co-determination with works councils. To bridge this gap, employers should agree on flexible framework agreements on transformation in advance.
Takeaways for employers
For employers operating in Germany, rethinking footprint strategy is becoming an urgent consideration. Unlike historic restructuring exercises, a footprint-driven restructuring programme is not just about cost, it's also about resilience, innovation, and social partnership. By adopting a process-oriented approach, engaging meaningfully with co-determination bodies, and planning for long-term investment, employers can navigate this transformation in a way that strengthens both their competitiveness and the relationship with their social partners.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
