Germany Eyes Tax-Free Overtime as Business Lobby Pushes for Weekly Working-Hour Limit

Germany considers tax-free overtime for full-timers and a shift from daily to weekly hour limits, sparking fierce opposition from unions.

While the federal government readies tax incentives for extra work, a parallel debate over the structure of working time itself is intensifying. The planned Arbeitsmarktstärkungsgesetz (Labour Market Strengthening Act) would make overtime surcharges of up to 25 percent of the base wage tax-free – but only for full-time employees who exceed the collective-bargaining norm of typically 34 or 40 hours per week. Part-time workers, who make up around 30 percent of the workforce, are excluded. The measure, originally slated to take effect in early 2026, has not yet been enacted.

Behind the scenes, business leaders are pressing for a far more fundamental change: replacing Germany's daily maximum working hours with a weekly limit. The current law caps daily work at eight hours, extendable to ten if compensated within six months. Jörg Dittrich, president of the German Confederation of Skilled Crafts (ZDH), called the existing rule a "rigid corset that is no longer fit for purpose" and proposed a multi-year trial of a weekly maximum. If negative effects appeared, he said, adjustments could be made during the test phase.

Steffen Kampeter, managing director of the Confederation of German Employers' Associations (BDA), backs the shift, arguing that greater flexibility would make jobs more competitive and protect employment in an era of digitalisation and artificial intelligence. The Mittelhessen business association also pushed for a weekly model to better manage order peaks. Under European Union law, the upper limit stands at 48 hours per week.

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Opposition is fierce from unions and social associations. Michaela Engelmeier of the Social Association of Germany (SoVD) rejected any watering down of the eight-hour day, warning that a potential 13-hour day did not square with people's real lives and would weaken worker protection – especially for those without collective agreements. She appealed to Labour Minister Bärbel Bas to hold the line. Frank Werneke, head of the ver.di service workers' union, cautioned against overburdening employees. A draft reform bill is expected in the coming weeks, according to industry reports.

The legal landscape around overtime remains complex, independent of political plans. A landmark 2010 ruling by the Federal Labour Court (Bundesarbeitsgericht, case no. 5 AZR 517/09) established that blanket overtime compensation clauses are generally invalid unless a specific number of hours – for example, 15 per month – is stated in the contract. The state labour court of Mecklenburg-Western Pomerania in 2021 (case no. 2 Sa 26/21) deemed compensation for up to ten hours per month permissible. Exceptions apply to high earners: those earning more than €7,300 gross per month in the West or €7,100 in the East, as well as professionals such as doctors and architects in higher-grade positions.

Sector-specific contrasts further illustrate the tensions. In Baden-Württemberg, the interior ministry rejected a reduction of the 41-hour workweek for police officers, calculating that a cut to 40 hours would cost roughly €56 million annually and require more than 600 extra positions. Meanwhile, in agriculture, the window for social-insurance-free seasonal work was extended from 70 to 90 days.

The debate over working-time reform looks set to run alongside the government's tax-incentive push. Employers see a weekly cap as long-overdue modernisation; unions see a slide toward unprotected 13-hour days. With a legislative proposal on the horizon, the shape of Germany's future working hours remains unresolved.