Implementation of the EU Pay Transparency Directive
The EU Pay Transparency Directive (RL (EU) 2023/970) must be implemented by June 2026 at the latest. It introduces expanded transparency obligations regarding compensation (see also our previous blog posts: BMFSFJ Commission presents proposals for implementing the EU Pay Transparency Directive and Information and reporting obligations under the Pay Transparency Directive). How the legislator will specifically implement these requirements remains to be seen.
What companies can do now to prepare:
- Early analysis of pay structures and, if necessary, adjustment to meet new requirements
- Review and optimization of reporting processes
Assessment of how HR systems can be digitized
Working Time Recording
There is already a binding obligation to record working hours. The legal basis is § 3 para. 2 no. 1 of the Occupational Safety and Health Act (German ArbSchG). Employers are required to implement a system that records the working hours of their employees. The Federal Labor Court (BAG) clarified this general obligation in its decision of September 13, 2022 (file no. 1 ABR 22/21). The BAG derives this obligation in conformity with EU law from the Working Time Directive 2003/88/EC and the case law of the European Court of Justice (ECJ, judgment of May 14, 2019 – C-55/18) (see also Whether they have a works council or not: Companies are required to systematically record working hours). Although there is no explicit regulation in the Working Time Act, the obligation is already legally binding.
For 2026, a legal specification of these obligations is expected. The legislator will likely introduce a general obligation for electronic time recording and a weekly maximum working time instead of a daily maximum. However, many detailed aspects of the planned legislative changes, especially regarding the design of trust-based working hours, remain open and are yet to be clarified. Employers should therefore not only record their employees’ working hours now but also be prepared to adjust their models according to future legal requirements.
Labor Market Strengthening Act
Key points of the planned Labor Market Strengthening Act for 2026 include tax-free overtime pay up to 25% of the base salary and the so-called active pension, which allows retirees to earn up to €2,000 per month tax-free. These measures aim to incentivize additional work and longer employment, while tax relief makes the labor market more flexible.
Minimum Wage and Mini-Jobs
The statutory minimum wage continues to be regularly adjusted based on § 1 MiLoG – from January 1, 2026, it will be €13.90 per hour. The earnings limits for mini-jobs are directly linked to these adjustments, as their maximum income dynamically follows the applicable minimum wage. Rising wage floors affect not only payroll but also working time models and personnel cost planning. Even small deviations in working hours can quickly lead to exceeding the mini-job limit, which may have social security consequences. Employers are therefore advised to regularly review employment contracts and actual working hours and closely coordinate HR and payroll processes. Managers should also be made aware of the cost and compliance implications of minimum wage adjustments to identify and mitigate risks early.
What We Can Do for You
We support you in legally compliant implementation of all changes in labor law in 2026. Feel free to contact us!
The most important points summarized briefly:
In 2026, important changes in labor law will take effect for employers. Implementing the EU Pay Transparency Directive will pose challenges regarding pay transparency. The obligation to objectively record working hours will remain central, while minimum wage adjustments and mini-job regulations will require updates to employment contracts and payroll. Employers should review and implement these changes early to avoid legal risks.
