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A Legal Duty, Not a Choice: Germany's Electronic Time-Tracking Mandate(ArbZG Reform)
What the 2026 ArbZG reform means and a compliance checklist for companies operating in Germany
Key Takeaways(ArbZG Reform)
The duty to record already exists today. On 13 September 2022, the Federal Labour Court (Bundesarbeitsgericht, BAG) ruled (1 ABR 22/21) that every employer in Germany must already record employees' full working time, based on Section 3(2) No. 1 of the Occupational Health and Safety Act (ArbSchG). This duty is in force right now.
The 2026 reform spells out how to record it. On 18 June 2026, the Federal Ministry of Labour and Social Affairs (BMAS) published a draft bill (Referentenentwurf) that sets out electronic recording, same-day entry, two-year retention, employee access rights, and fines of up to 50,000 euros.
Transition periods vary by company size. Companies with 250 or more employees get one year, those with 50 to 249 get two years, and those with up to 49 get five years to move to electronic recording. Businesses with 10 or fewer employees are permanently exempt from the electronic-form requirement, though the duty to record at all remains.
It is not yet final law. The draft still needs approval from the Bundesrat and may change during the legislative process. But the underlying principle, that working time must be recorded, is already settled case law, so waiting carries real risk.
Why This Matters Now
ArbZG Reform
For years, the common practice in Germany was to record only overtime and work on Sundays or public holidays. That practice was overturned first by the Court of Justice of the European Union's 2019 CCOO ruling and then by the BAG's 2022 decision. In June 2026, the BMAS followed up with concrete electronic-recording rules, turning what many HR teams at companies operating in Germany had treated as a someday task into a compliance issue with real deadlines and real fines.
Most manufacturing and sales entities operating in the DACH region fall into the 50-to-249-employee band. Under the draft, that band gets only a two-year transition window, which makes starting the system build now anything but premature.
The Legal Foundation: Two Rulings That Set the Stage
1) CJEU, Case C-55/18, 14 May 2019 (the CCOO ruling)
The Court of Justice of the European Union held that employers must set up an objective, reliable, and accessible system to measure each worker's daily working time. The basis was the right to a limit on maximum working hours and to rest periods under the EU Charter of Fundamental Rights. The Court left the specific design of such a system to individual member states.
2) BAG, 1 ABR 22/21, 13 September 2022
Germany's Federal Labour Court grounded the recording duty not in the Working Time Act (ArbZG) but in Section 3(2) No. 1 of the Occupational Health and Safety Act (ArbSchG), interpreting the employer's duty to maintain "suitable organisation" and provide "necessary means" in line with EU law. The ruling did not specify the recording method (paper, electronic, or app-based) or whether trust-based working time arrangements remain permissible. The 2026 draft bill is the government's attempt to close exactly that gap.
What the June 2026 Draft Bill Actually Says
Same-day entry. Start time, end time, and total working time must generally be recorded on the same day. Retroactive entry is not permitted. Collective agreements may extend this to up to seven calendar days, and non-unionized employers can apply the same extension through a works agreement or a written individual agreement.
Electronic form required. Records must be kept electronically, though the law does not mandate a specific system (terminal, app, or even a spreadsheet qualifies). Responsibility for recording stays with the employer, even where the actual data entry is delegated to employees or supervisors.
Trust-based working time survives. Vertrauensarbeitszeit remains permitted. Even where an employer does not actively control hours, it must still have a system in place to detect breaches of maximum working time and rest period rules.
Two-year retention and access rights. Records must be kept for at least two years, and employees may request access to and copies of their own records. Works councils retain inspection rights under Section 80(2) of the Works Constitution Act (BetrVG) to the extent necessary.
Applies to minors too. The same recording duty extends to employees under 18.
Fines. Failing to record, inaccurate or incomplete records, non-compliant format, late entry, retention under two years, and refusing access or copy requests are all fineable. The ceiling is 50,000 euros.
Transition Timeline by Company Size
Employees | Transition period for electronic recording | Note |
10 or fewer | Permanently exempt | Only the electronic-form requirement is waived. The duty to record at all (including on paper) still applies. |
Up to 49 | 5 years | Counted from the law's effective date. The longest transition period. |
Up to 249 | 2 years | Where most mid-size companies operating in Germany fall. |
250 or more | 1 year | Shortest transition period. Large entities should act immediately. |
Employee counts include part-time and mini-job staff without full-time conversion. Paper records remain permitted during the transition period, but failing to record at all is already unlawful today.
A Checklist for Companies Operating in Germany
Audit current practice. If your entity records only overtime and holiday work, it already falls short of the 2022 BAG standard. Move to daily clock-in and clock-out records for every employee without waiting for the draft bill to pass.
Confirm your transition window. Check your headcount against the table above and treat the resulting window as a build-out schedule, not a reason to delay.
Review trust-based arrangements. If managers or R&D staff work under Vertrauensarbeitszeit, put a minimal monitoring mechanism in place (such as self-reporting with automated alerts) so violations of maximum hours or rest periods can actually be detected.
Loop in the works council. Where a Betriebsrat exists, introducing a new time-tracking system is likely subject to co-determination under Section 87 BetrVG, so plan for a consultation step.
Fix retention and access processes. Set up storage, a responsible owner, and a GDPR-compliant basis for retaining records for at least two years and responding to employee access or copy requests.
Brief headquarters accurately. If headquarters sits in another country, frame this not as a brand-new obligation but as the formalization of a duty that already exists, and report both the fine exposure (up to 50,000 euros) and the transition timeline together.
What's Next
This draft bill is not yet law. The Bundesrat's approval and the broader legislative process could still change specific figures such as the transition periods or the fine ceiling. Separately, in July 2026 Chancellor Merz proposed folding a shift from the daily eight-hour cap to the EU directive’s weekly average cap (48 hours) into the same reform package, with a revised draft announced for autumn but not yet published as of this writing. That said, the core obligation to record working time is already settled law under the 2022 BAG decision, so regardless of how the draft fares, any company operating in Germany without a recording system in place already carries legal exposure today. PEOPLEGRIP will continue tracking this legislative process and issue a follow-up once the bill is finalized.
References
Court of Justice of the European Union, Judgment of 14 May 2019, Case C-55/18 (Federación de Servicios de Comisiones Obreras, CCOO)
Bundesarbeitsgericht, Beschluss vom 13. September 2022, 1 ABR 22/21
Arbeitsschutzgesetz (ArbSchG) Section 3(2) No. 1
Federal Ministry of Labour and Social Affairs (BMAS), Referentenentwurf zur Änderung des Arbeitszeitgesetzes, 18 June 2026
Osborne Clarke Arbeitsrecht, "Neues zum Arbeitszeitgesetz – Was der Referentenentwurf des BMAS vom 18. Juni 2026 für die HR-Praxis bedeutet" (2026)
Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) Sections 80(2), 87
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