Germany
The German Federal Collective Bargaining Compliance Act – “Bundestariftreuegesetz” (BTTG)
Impact date: 1 May 2026
The German Federal Collective Bargaining Compliance Act (“Bundestariftreuegesetz” – BTTG) entered into force on 1 May 2026 and constitutes a key interface between public procurement and employment law.
It regulates the compliance with mandatory employment conditions in the award and performance of public construction and service contracts as well as concessions of the German federal government with an estimated contract value of at least EUR 50,000. These conditions are determined by statutory instruments and are based on collective agreements, in particular with regard to remuneration, minimum annual leave, and working time (including maximum working hours, minimum rest periods and rest breaks).
The Act applies to companies acting as contractors in federal public contracts, as well as to their subcontractors and any temporary work agencies involved in the performance of the contract. Employers are required to grant the specified employment conditions to the employees deployed in the execution of the contract – including agency workers – irrespective of whether they are bound by a collective agreement.
Compliance is secured through a multi‑layered framework, including a “clearing body” set up by the “Federal Ministry of Labour and Social Affairs” to prepare statutory instruments, a central “Federal Collective Bargaining Compliance Authority” (“Prüfstelle Bundestariftreue”) at the “German Pension Insurance Knappschaft-Bahn-See” (“Deutschen Rentenversicherung Knappschaft-Bahn-See”) with extensive monitoring powers, as well as comprehensive documentation and reporting obligations for contractors. A certification procedure may facilitate proof of compliance.
The determination of the applicable employment conditions is made by the “Federal Ministry of Labour and Social Affairs” (“Bundesministerium für Arbeit und Soziales”), taking into account stakeholder submissions and the recommendations of the “clearing body”. The penalties are generally capped at 1% of the contract value and may, in cases of repeated or multiple breaches, amount cumulatively to up to 10% of the contract value. In addition, a right to terminate the contract for cause without notice must be contractually provided for.
Employer implications/action needed Contractors must assess whether the Act applies and ensure compliance with the prescribed collective employment conditions. This includes passing on the relevant obligations contractually to subcontractors and temporary work agencies and monitoring their compliance. Employees deployed in the performance of the contract must be informed of their rights. Compliance must be properly documented and demonstrated upon request. Companies should adapt their internal processes accordingly and prepare for potential audits by the “Federal Collective Bargaining Compliance Authority”.
Employer risk Significant compliance and liability risks in connection with public contracts, in particular due to the combination of monitoring mechanisms, sanctions and extensive liability rules.
In particular:
- contractual penalties for breaches of collective bargaining compliance obligations (generally up to 1% and cumulatively up to 10% of the contract value in the event of repeated breaches)
- exclusion from procurement procedures for up to three years where violations are established
- entry in the competition register, resulting in reputational and procurement risks
- liability for remuneration obligations of subcontractors and temporary work agencies as a guarantor; liability is excluded only where compliance with the applicable employment conditions is demonstrated by certification and no insolvency event has occurred
EU Pay Transparency Directive
Impact date: 7 June 2026 (transposition deadline; national implementation outstanding) The implementation of the EU Pay Transparency Directive ((EU) 2023/970) into German law remains pending.
The transposition deadline of 7 June 2026 will almost certainly be missed, as no concrete draft legislation has been presented to date. Germany is therefore expected to be in breach of its EU obligations under Art. 34 of the Directive. This creates a period of legal uncertainty, during which individual provisions of the Directive that are sufficiently clear and unconditional may have direct effect against emanations of the State (i.e. public sector employers) based on established CJEU case law. The Directive will significantly reshape remuneration systems and HR processes and goes well beyond the current German Pay Transparency Act (“Entgelttransparenzgesetz” – EntgTranspG). It requires structured, transparent and gender neutral pay systems, based on the concept of “work of equal value”, assessed using objective criteria (in particular skills, effort, responsibility and working conditions) and enabling comparisons across different roles. It also introduces enhanced employee information rights, salary transparency in recruitment (incl. disclosure obligations and a ban on pay history questions) and, depending on employer size, gender pay gap reporting obligations. The Directive is also accompanied by significantly strengthened enforcement mechanisms.
Employer implications/action needed
- review and adjust remuneration structures to ensure transparency and gender‑neutral criteria – even in the absence of national legislation, employers should align their pay systems with the Directive’s requirements to avoid retrospective compliance gaps
- implement processes for assessing work of equal value
- adapt recruitment processes (in particular salary disclosure and removal of pay history questions)
- prepare for enhanced information and reporting obligations
- involve the works council as required
- public sector employers should assess which provisions of the Directive may already have direct effect and take corresponding compliance measures
- private sector employers should monitor legislative developments closely and prepare for potentially short implementation timelines once the national law is enacted
Employer risk Significant legal and operational risks, particularly in connection with remuneration structures, transparency requirements and strengthened enforcement mechanisms. These risks are heightened by the delayed national implementation, which creates legal uncertainty and the prospect of compressed compliance timelines.
In particular:
- increased risk of equal pay and discrimination claims – employees may invoke directly effective provisions of the Directive before national courts (public sector) or rely on the Directive as an interpretive reference (private sector)
- damages and compensation claims in case of non‑compliance
- shift of the burden of proof to the employer
- higher documentation and justification requirements
- reputational risks linked to pay disparities
- risk of retroactive or short-notice compliance obligations once national legislation is enacted, potentially with limited transitional periods
- infringement proceedings by the European Commission against Germany, which may accelerate legislative action and reduce implementation timelines for employers
Planned reform of the Working Time Act - (“Arbeitszeitgesetz” – ArbZG)
Impact date: Expected in 2026 (draft Bill announced for June 2026) A comprehensive reform of the “German Working Time Act” (“Arbeitszeitgesetz” – ArbZG) is expected in 2026. Federal Minister of Labour Bärbel Bas has announced a corresponding draft Bill. The reform aims in particular to introduce more flexible working time arrangements, including a shift from a daily to a weekly maximum working time, as envisaged in the coalition agreement.
At the same time, the introduction of mandatory electronic working time recording is to be regulated by statute. This is intended, in particular, to prevent excessive working hours and to implement existing EU law and case law requirements.
However, the statutory implementation of the working time recording obligation remains outstanding, leaving the current legal framework uncertain.
Employer implications/action needed Working time recording systems and working time models should be reviewed and adapted to potential new legal requirements. Preparations should be made for electronic time recording. Accurate and reliable documentation of working time must be ensured.
Employer risk Legal uncertainty and increasing compliance risks persist. Non‑compliance with case law requirements may occur. There is a risk of fines and liability exposure in cases of insufficient time recording. Documentation requirements are increasing, and short‑term legislative changes may require further adjustments.
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