The German government is moving to crack down on illegal employment and black market labor in the beauty and grooming industry. A new legislative proposal aims to bring stricter regulations for barbershops, hair salons, and nail studios, sectors that have increasingly become hotspots for undeclared work and other illicit activities.
On Wednesday, Federal Finance Minister Lars Klingbeil is expected to present the draft law, officially titled the Law for the Modernization and Digitalization of Black Market Labor Enforcement, to the Cabinet for approval. The bill would add the hairdressing and cosmetic sectors to the list of industries deemed particularly vulnerable to illegal work, a list that already includes construction and taxi services.
If the proposal becomes law, employees in barbershops, hair salons, and nail studios will be required to carry valid identification at all times while at work. Employers, in turn, will face a “same-day reporting obligation,” meaning they must notify the pension insurance system of a new hire no later than the employee’s first working day.
Failure to comply could be costly. Workers who cannot produce valid ID during inspections by customs officers, or who refuse to show it, could face fines of up to €5,000.
According to government sources, these industries have seen a surge in undeclared labor, wage violations, and exploitative working conditions. In some barbershops, authorities have identified links to money laundering and organized clan-related criminal networks. Nail salons, in particular, have been flagged as centers of illegal employment practices, sometimes involving exploitative labor arrangements.
The customs enforcement unit, Finanzkontrolle Schwarzarbeit (FKS), will focus its investigations on these sectors in the coming years. The aim is to protect workers, ensure fair competition, and safeguard the integrity of Germany’s social welfare system.
The proposal has already drawn criticism from within the beauty sector. The German Association of Nail Designers (VNDD) strongly opposes the plan, arguing that it unfairly places an entire industry under suspicion and increases bureaucratic burdens. VNDD Managing Director Terri Malon told the Redaktionsnetzwerk Deutschland that small business owners, especially in the nail salon sector, are already overwhelmed by administrative requirements, and the new law would only add to their difficulties.
The draft law also includes measures to make the work of the FKS more efficient and technologically advanced. Customs inspectors will be granted direct access to the national police information network, eliminating the need to request police assistance for verifying the identity of workers suspected of being illegally employed.
Additionally, the FKS will gain the authority to independently conduct fraud investigations, easing the burden on the judiciary. Inspections will also be streamlined through increased use of digital tools, enabling more targeted action against non-compliant employers while reducing checks for businesses that follow the law.
The government expects the new measures to bring in significant additional revenue by reducing black market activity. For 2026 alone, the Finance Ministry projects over €1.26 billion in additional income. By 2029, these annual gains are expected to exceed €2 billion.
Klingbeil has emphasized that the fight against black market labor is both a matter of fairness and a crucial step toward strengthening public finances. With Germany facing a looming budget shortfall in the hundreds of billions of euros in the coming years, tackling illegal work is seen as an important source of additional funding for the state.
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