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WORKING IN GERMANY

Will German employers really have to monitor staff working hours?

An overhaul in the way working hours are tracked in Germany is on the cards following a recent court decision. But it remains unclear what it actually means for the world of work. The Local asked experts what's going on, and what happens next.

A woman demonstrates the method of recording working hours with a chip card.
A woman demonstrates the method of recording working hours with a chip card. Photo: picture alliance/dpa/PCS Systemtechnik | -

What’s happening?

Last week, the Federal Labour Court (BAG) declared that employers in Germany should be recording the working hours of all employees.

READ ALSO: Why German employers will soon have to record staff working hours

The decision brings into force a 2019 ruling by the European Court of Justice (ECJ), which stated that employers in member states should be implementing systems to record how many hours per week employees were working, which until now, has not been brought into law by the German government.

The main reason for this, according to the ECJ, is to protect staff from excessive working hours and unpaid overtime. 

What are the consequences of the ruling?

Labour Law specialist Dr. Michael Fuhlrott explained to The Local that the ruling has an immediate legal effect: the court decided that the ECJ ruling means that the German Occupational Health and Safety Act must now be interpreted in such a way that it includes an obligation to record working hours.

“In other words, the obligation applies directly, to every company with immediate effect,” Fuhlrott said.

Updating the German law book to include the original judgement of the European Court of Justice from 2019 had been on the coalition government’s agenda for some time, but was put on hold due to the pandemic. When a relevant case came to the Federal Labour Court, the judges took the opportunity to address this gap in the law.

An electronic clock for recording working hours on display in the Chemnitz Industrial Museum. Photo: picture alliance/dpa/dpa-Zentralbild | Jan Woitas

But in the absence of a written law, it’s unclear exactly how the new rules will be enforced. 

Dr. Fuhlrott said: “There is currently a high degree of uncertainty as to how the ruling is to be understood. We will have to wait for the court’s exact reasoning. In view of this current lack of clarity, companies should first wait for the exact reasoning behind the decision and then consider how to respond to it.”

It seems unlikely, for example, that the decision will give employees a right to take legal action against employers for not enforcing mandatory working time logs. But what could happen, is that authorities could start to check up on companies to see if they are keeping tabs on their staff’s working hours. Though in the absence of clear government regulations, this also seems unlikely. 

READ ALSO: Jobs in Germany: Should foreign workers join a union?

One thing that is clear, however, is that the federal government is now under pressure to define exactly how the law will work. 

Speaking to the Süddeutsche Zeitung, Labour Lawyer Philipp Byers said “it creates enormous legal uncertainty, which the German government must now urgently address.”

When it comes to bringing in new legislation to incorporate the ECJ decision, it’s likely that there will be a little bit more room for manoeuvre when it comes to defining exactly how the law will work. 

It may be possible that companies that operate on a “trust model” will be able to keep some degree of flexibility in the way time recording is carried out.

A spokesman for the German Labour Ministry told the Local that any further consequences of the ruling can only be fully assessed after the court publishes its reasoning for the decision. That is expected in the coming weeks. 

“The Federal Ministry of Labour and Social Affairs will examine this and is working on a corresponding draft law,” a spokesman said. 

What’s the reaction from people in Germany?

Following the decision, a survey conducted by the opinion research institute Civey for T-online, showed that the majority of Germans see the development as a good thing.

In answer to the question, “How do you view the fact that all employees will have to record their working hours in the future?” 61 percent of respondents answered either “very positively” or “positively” while only 22 percent responded with the answer “negatively” or “very negatively”. A total of 17 percent were undecided.

However, there is lots of disagreement on the ruling. On the one hand, it could strengthen workers’ rights and help prevent unpaid overtime, while on the other, it introduces a significant bureaucratic hurdle for workers and organisations which have previously operated on a  “trust model” of timekeeping. 

A woman works from home in her living room in Stuttgart. Photo: picture alliance / dpa | Daniel Naupold
A man sits with a laptop and a screen at a table in front of a window in his home office. Photo: picture alliance/dpa | Fabian Strauch

The shift towards working from home also throws up possible advantages and disadvantages for the new rule. On the one hand, it may mean that employees working from home will now have to document every minute they are not actually working, while on the other hand, those for whom working from home means more overtime will be fairly compensated. 

READ ALSO: Nearly a quarter of employees in Germany ‘continue to work from home’

North Rhine-Westphalia’s labour minister Karl-Josef Laumann (CDU), welcomed the decision and called for the ruling to be implemented quickly.

“Now the years of back and forth between the Federal Ministry of Economics and the Federal Ministry of Labor must come to an end and it must be clearly stated in the reform of the Working Hours Act that hours must be recorded,” he said.

However, the employers’ association BDA slammed the ruling from the court, calling it “hasty and not well thought out”.

BDA CEO Steffen Kampeter said in a statement last week that the decision “overburdens employees and companies” without anything legally being set in stone.

“This decision must not be allowed to call into question proven systems of trust-based working time that are desired by employees,” Kampeter said. 

Vocabulary

Working time recording – (die) Arbeitszeiterfassung

Federal Labour Court – (das) Bundesarbeitsgericht

Trust model – (das) Vertrauensmodell

We’re aiming to help our readers improve their German by translating vocabulary from some of our news stories. Did you find this article useful? Let us know.

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WORKING IN GERMANY

EXPLAINED: The legal steps for starting a business in Germany

Whether it's a small start-up or a much bigger venture, there's obviously legal steps to bear in mind when starting up a for-profit business in Germany.

EXPLAINED: The legal steps for starting a business in Germany

Starting up a for-profit company in Germany follows different procedures than either forming a non-profit foundation (a Verein) or registering as self-employed.

If you need to register as a corporation, the first step is to figure out which of two general company types your venture would fall into in Germany. The first is a Gesellschaft mit beschränkter Haftung (GmbH), which is a limited liability company. This is by far the most common option. Another is an Aktiengesellschaft (AG) – or a joint stock company or corporation. While these two tend to be the most common, there are a few others as well.

EXPLAINED: How to start up your own verein in Germany

Setting up a GmbH

A GmbH is very common in Germany – and under it shareholders in the company aren’t personally responsible for the firms debts. You can set up a GmbH with only one person or shareholder. If you have more than one, you’ll need to draw up a notarised agreement between them.

A GmbH must also appoint at least one Managing Director (Geschäftsführer). The Managing Director is allowed to have shares in the company and is entitled to represent the company legally, whereas other board members are ordinarily not able to.

Shares in a GmbH are ordinarily only represented in notarised documents. There are no certificates which confirm that you have shares and those shares cannot be listed on stock exchanges. Shares, however, can be transferred through notarised documents.

The minimum start-up capital needed to form a GmbH in Germany is €25,000. If founders don’t have this, they can start up as an Unternehmergesellschaft – or entrepreneurial company – for €1. However, these are considered as vehicles to get to the financial capital of a GmbH. As such, UG’s are expected to set aside at least 25 percent of any annual surplus as savings. Once they hit the €25,000 mark, they need to change to a GmbH.

A GmbH is generally the most common type of corporation in Germany because the capital and administrative requirements tend to be less onerous – making it suited for small enterprises, for example. As soon as a GmbH enters the Commercial Register (Handelsregister), it legally exists as a company.

READ ALSO: Everything you need to know about becoming a freelancer in Germany

Grounding an AG

A German AG is a company at a different level – and tends to be more for mid-sized to larger-sized business ventures.

In contrast to a GmbH – which needs only one member – an AG needs to have a minimum of five members.

The capital requirements are also twice as much as for setting up a GmbH. You’ll need €50,000 for an AG. These shares can be listed on stock exchanges – although they don’t have to be.

Choosing which legal model of company for your business in Germany depends on its size, your available capital – and how much liability you’re comfortable with. Photo: Getty Images

You’ll need articles of association, authenticated by a notary, to set one up too. As with a GmbH, an AG legally exists when it enters the commercial register.

An AG must also have a managing board (Vorstand). Members are officers of the company and make its day-to-day decisions. They do, however, answer to a supervisory board (Aufsichtsrat). They must also hold general meetings (Hauptversammlungen) to allow for shareholders to exercise control over overall policy.

READ ALSO: What’s the outlook for the German job market in 2024?

Other types of German companies

In general, GmbH and AG companies are the most common ones you’re going to see in Germany. But other – mostly more complex models – exist.

These include an Offene Handelsgesellschaft (OHG), or General Partnership. This would often be for a company of two partners who had each contributed half the capital. They would share in half the profits but also each be liable for the firm’s debts – to an unlimited amount. You may find that certain family-run businesses use this model. The risk here is that the partners would be personally liable – down to their own assets – for the firms debts.

A variation of this is a Kommanditgesellschaft (KG) – or a limited partnership. This happens when one partner is entirely liable for the firms debts – down to their personal assets, while the other one is not. The limited liability partner would still be liable for the firm’s debts up to and including the amount they had invested in the company itself though. This model might be common for family-owned businesses that bring in outside experts to run day-to-day administration – for example.

Another complex arrangement is a combination of a GmbH and a KG – to a GmbH & Co. KG. Essentially this joins a GmbH and a KG together in a partnership agreement. While very complex and not often used, this kind of partnership may serve as a way to limit the recourse a company creditor has to go after a company member’s personal assets – with more liabilities tied up in the GmbH, which has limited liability.

More complex arrangements are available too for companies that want to have a presence in Germany but their head office might be abroad. These include a subsidiary (Töchtergesellschaft) and Zweigniederlassung – or a branch office. If you’re dealing with these kinds of entities, it’s recommended you seek tax and compliance advice to confirm which one is necessary. In general though, a subsidiary will manage many of its own affairs apart from its parent company. A branch office is likely to have only a small presence in Germany while the bulk of administrative tasks are handled elsewhere.

Knowing which one is applicable is important as it helps establish whether you need to make an entry in the commercial register or not – and what taxes will have to be paid.

Articles in The Local are not meant to replace professional legal or tax advice. We recommend speaking to an appropriated professional in case of further questions.

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