Overtime compensation in Germany: Staying compliant to avoid legal challenges

During vacation periods or times of high project workloads and tight deadlines, working overtime may be necessary to cover for absent colleagues or manage increased workload. These situations can lead to legal challenges, especially when disputes arise regarding overtime performance and compensation. Such conflicts are often the result of uncertainties in employment contracts.

Overtime limits under German law

Overtime is defined as work performed beyond the agreed working hours. The required working hours for an employee are usually specified in the employment contract or applicable collective agreements. The German Working Hours Act (Arbeitszeitgesetz, ArbZG) limits the maximum number of possible over-time hours. In principle, the maximum working time is eight hours per day, assuming a six-day workweek, which results in a limit of 48 hours per week. However, exceptions allow up to ten hours per day or 60 hours per week, provided that an average of eight hours per day is maintained over six months or 24 weeks.

Employee obligation to work overtime

Employers cannot unilaterally request employees to work overtime unless an unforeseen circumstance threatens the company’s existence. However, employers can include clauses in employment contracts reserving the right to order overtime. To be effective, such a clause must outline the rights and obligations of the employee clearly and understandably, specifying the maximum number of overtime hours required and listing possible reasons for the requirement to work overtime, such as staff shortages.

Overtime compensation

Disputes often arise over whether overtime hours should be compensated. The general rule applies that overtime hours must generally be compensated either through financial payment or time off. However, the conditions for compensation can be modified in the employment contract. For employees with a high base salary, overtime may be considered compensated by the regular salary payment. Regardless of the base salary, according German case law, at least ten percent of regular working hours can be compen-sated with the base salary. Clear contract language is crucial to specify how many overtime hours are included in the base salary. The employer is also free to compensate overtime with time off.

Legal action for overtime compensation

In the event of a legal dispute related to overtime compensation, employees must prove that the over-time was instructed or acknowledged by the employer. To meet this burden of proof, employees need to provide evidence of the times they worked or were on standby as instructed by the employer. This re-quires maintaining accurate records of the hours worked. The employer’s duty to record working hours, as decided by the European Court of Justice on May 14, 2019 (C-55/18), and the Federal Labor Court on Sep-tember 13, 2022 (1 ABR 22/21), does not shift the burden of proof to the employer. However, according to German case law, employers cannot easily deny overtime claims, especially if they had access to rec-ords verifying the overtime. This means that claims for overtime compensation are more likely to succeed if employers sign timesheets that clearly detail the overtime worked.

Works council and collective agreements

If a works council exists, employers need to observe its co-determination rights in matters relating to overtime. In addition, collective agreements (if applicable) often regulate conditions under which over-time can be ordered, the number of overtime hours allowed, and how they are compensated.

Practical tips

To avoid legal disputes, employers should draft clear and precise employment contracts, differentiating between the instruction to work overtime and the obligation to compensate it. In addition, the inclusion of valid exclusion periods in contracts can limit claims for overtime to the last three months. Employers should also be aware that, besides the general obligation to keep records of working hours, they must also maintain accurate records of overtime worked by employees. Compliance with this obligation can also be advantageous in legal disputes, as it provides a clear record of whether and to what ex-tent employees have worked overtime.