Mandatory time tracking has applied in Germany since September 2022: employers are legally required to fully document their employees' working hours. The Federal Labour Court (Bundesarbeitsgericht, BAG) put the obligation into effect at the time without a transition period.
For professional services firms, the topic is doubly relevant: if you record time data incompletely for compliance purposes, you usually also lack a reliable basis for project billing, margin and forecast.
The key facts at a glance:
- Employers must record the start, end and duration of daily working time
- The obligation applies to all employers regardless of company size and industry
- Legal basis: CJEU ruling C-55/18 (2019) and BAG decision 1 ABR 22/21 (September 2022)
- Violations can lead to fines of up to €30,000 per violation
- Draft bill by Federal Labour Minister Bas: electronic recording is to become the mandatory standard; the law has not yet been passed
- Companies bound by collective agreements are to get a flexibility option: a weekly instead of a daily maximum working time (max. 48 hours on an annual average)
- Trust-based working time remains permitted, but time documentation becomes mandatory
- The obligation lies with the employer, even if recording is delegated to employees
What economic problem arises when time tracking is missing?
Many professional services firms underestimate how directly the quality of their time data affects the profitability of individual projects and of the business as a whole. Missing or incorrect time tracking creates three concrete management problems.
An incomplete basis for billing
Project time that was not recorded cannot be billed. For IT consultancies and management consultancies that bill on a time & material basis, this is a direct loss of revenue. Studies show that consultants fail to record 10 to 15 percent of the time they actually work on average, because bookings are made after the fact or from memory.
Distorted margin and forecast
If time data is incomplete, project controlling is wrong too. Plan vs. actual comparisons are based on incomplete bookings. Follow-up projects are estimated on the basis of guesswork. The effect on the project margin only becomes visible once the damage has been done.
Legal liability in audits and disputes
Without an objective time recording system, the employer bears the burden of proof in disputes over overtime pay. In official inspections, fines of up to €30,000 per violation are possible. The risk therefore arises on two levels: economic and legal.
What does German law require in 2026?
The 2019 CJEU ruling and its consequences
On 14 May 2019, the Court of Justice of the European Union (CJEU, EuGH in German) ruled (case C-55/18) that employers in the EU must introduce an objective, reliable and accessible system for recording their employees' daily working time. The aim is to protect workers' rights and ensure compliance with maximum working hours and rest periods.
The 2022 BAG ruling: the obligation applies today
On 13 September 2022 (1 ABR 22/21), the Federal Labour Court clarified that this obligation is already anchored in the German Occupational Safety and Health Act (Arbeitsschutzgesetz, ArbSchG, § 3). Mandatory time recording is therefore applicable law, without the legislator having to pass a new act. It applies directly and without a transition period to all employers.
What must be documented: the start, end and duration of daily net working time, including overtime and work on Sundays and public holidays. This applies to all places of work: office, home office, field service and business travel.
The 2026 draft bill: reform of the Working Hours Act
Federal Labour Minister Bärbel Bas (SPD) has presented a draft bill (Referentenentwurf) to reform the Working Hours Act (Arbeitszeitgesetz, ArbZG). The draft combines two areas of regulation.
Mandatory electronic time recording: Employers must record the start, end and duration of daily working time electronically. This replaces manual records on paper or in Excel spreadsheets as a permanent solution. Transition periods are staggered by company size.
More flexible maximum working time: In future, companies bound by collective agreements will be able to agree a weekly maximum working time of no more than 48 hours on an annual average instead of a daily one. Companies without a collective agreement remain with the existing eight-hour day as the daily maximum.
The law is thus intended to create the statutory basis that the 2019 CJEU ruling and the 2022 BAG ruling had already established legally, but without concrete implementation rules.
What about trust-based working time?
Trust-based working time (Vertrauensarbeitszeit) remains permitted as a model. What goes away is doing without time documentation altogether. Even with trust-based working time, working hours must be recorded in a traceable way. Employees' freedom to organise their own working time is not affected.
Why Excel and timesheets fail: the operational problem
Most mid-sized professional services firms still work with a mix of Excel spreadsheets, email-based time reports and paper-based approval processes. Formally, this still meets the minimum requirements of current law. Structurally, it is a problem.
Where time gets lost
Delayed bookings are the most common pattern: employees enter their hours retroactively, often at the end of the week or at month-end close. What this produces is not time data but reconstructions. That may still be enough for compliance purposes. For project billing and project controlling, this data is structurally unreliable.
Where blind spots arise
Excel systems do not provide a cross-project view of utilization. If you manage five client projects in parallel, you cannot see how heavily individual employees are actually loaded. Bottlenecks only become visible once they have escalated into delivery delays or overtime. Project reporting is based on manually merged data, not on integrated management logic.
Where profitability becomes invisible
Non-billable time is rarely recorded separately and consistently in Excel systems. Internal activities, change requests and rework end up unstructured in the same pot as billable project time. The result: margins are not reliable because the data does not allow it. For engineering firms that bill by hourly rates, this has a direct effect on liquidity.
The scaling problem
With 10 employees, an Excel system is tedious but manageable. With 50 employees and 20 parallel projects, it becomes an operational risk. Consolidation takes time, errors multiply, and the month-end close turns into weeks of reconciliation between HR, finance and project management.
Mandatory time tracking: systematic implementation in day-to-day business
The requirements of the BAG ruling are clear: the system must be objective, reliable and accessible. What that means in practice depends on the company's structure.
What a legally compliant system must do
- Complete recording of the start, end and duration of working time for all employees
- Including all places of work: office, home office, field service, business travel
- Tamper-proof and traceable documentation
- Retention of records for at least two years (according to the current draft bill)
- Accessibility for authorities in the event of an inspection
What professional services firms need in addition
If you bill projects on a time & material basis, at a fixed price with change request logic or as a mixed model, you need more differentiated time tracking beyond the pure compliance requirement. Legal obligation and business management go hand in hand here:
Working time and project time must be linked. If an IT consultant works eight hours, six of them on client project A and two on building internal know-how, the system needs both dimensions at the same time. Systems that only record attendance provide no basis for project billing.
Billable and non-billable time must be recorded with a clear distinction. Change requests, travel time and internal coordination have different relevance for billing. Only if they are categorised cleanly are plan vs. actual comparisons reliable.
Mobile recording is not a convenience feature for professional services firms. According to the ifo Institute, 76.4 percent of employees in IT services worked remotely at least part of the time in February 2026. If you do not offer a mobile solution, you get hours late and incomplete.
Which software helps with implementation?
Legally compliant time tracking for professional services firms has to cover three layers: compliance, project billing and operational management. These are different sets of requirements.
Compliance layer: Complete working time recording with start, end, breaks, overtime and absences. Digital documentation that is audit-proof and tamper-proof.
Billing layer: Assignment to projects and clients, distinction between billable and non-billable time, hourly rate and cost centre logic.
Management layer: Plan vs. actual comparisons at project level, resource utilization, budget burn, forecast.
ZEP Clock covers the compliance layer: working time recording, absence management, employee file and mobile booking via app, with hardware terminals and Travel Expense Management as add-ons. If you also want to book hours to projects, you will find Project Time Tracking in ZEP Track, compliant for Germany, Austria and Switzerland from day one. For organisations that run several legal entities under one roof, ZEP Business maps multiple companies.
ZEP Control combines Project Time Tracking with project management and project controlling. Plan vs. actual comparisons and budget evaluations come from the same booked hours, without manual export; Resource Planning is available as an add-on. Project leads see budget burn, billable hours and capacity utilization in real time. If you want to bring project management and compliance together in one integrated system, this is your operational basis.
ZEP Operations closes the loop to commercial management: Proposals and Invoicing. The data for forecasting sits in ZEP on the same basis. ZEP covers liquidity management partly through Invoicing and project costs, and beyond that via integrations such as Tidely. The path from the booked hour to the outgoing invoice runs without breaks between systems. For professional services firms where the CFO or COO joins the buying process and asks for commercial KPIs, this is the relevant product line.
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Time tracking in day-to-day projects: three scenarios and their consequences
In most professional services firms, the operational reality looks like this: time data exists, but it is scattered. Some runs through Excel, some through the project management tool, travel time is reported by email, and absences are kept in a separate HR spreadsheet. Consolidation happens manually, once a month, shortly before billing.
IT consulting: work packages and change requests not cleanly separated
An IT consultancy with 60 employees runs five ERP implementations in parallel. Each project has work packages, milestones and change requests. The problem: all time bookings land on the main project, with no distinction by booking type. Billable change request hours are mixed with internal coordination time. The project lead cannot give the client reliable proof of performance. The actual project margin only becomes visible after time-consuming manual analysis, not during the project.
At the same time, there is a legal risk: if the system does not document when employees start and finish work, it does not meet the requirements of the BAG ruling.
Management consulting: utilization based on estimates
A management consultancy with 40 consultants manages its utilization through monthly status calls. Project hours are entered retroactively every week. Travel time is recorded separately but not linked to project time. The utilization rate, the consultancy's most important management metric, is based on estimates. Staffing decisions are made on the basis of data that is structurally unreliable.
At the same time, travel time and ancillary services are not consistently checked for billability. Some of these hours could be invoiced but disappear in unstructured recording.
Engineering firm: milestones without transparency on effort
An engineering firm with 35 employees runs three large projects with durations of two to four years. Time tracking exists, but only at project level, not at phase or milestone level. Follow-up projects are quoted with flat-rate estimates based on internal experience. Because time data from completed projects is not available in structured form, there is no reliable effort history for estimating. Over- and under-quoting happens systematically.
In this scenario, structured project time tracking with integrated project controlling works on three levels at once: compliance, more precise estimates and early detection of deviations during delivery.
When does a professional services firm need systematic software?
The question is not whether a structured system is necessary. The question is when the damage caused by not having one becomes greater than the effort of introducing one.
Concrete triggers that signal a need for action:
- The company has more than ten employees and no verifiable time recording system
- More than 30 percent of employees work hybrid or remotely
- Projects are billed on a time & material basis and time data is regularly missing
- Monthly billing runs take longer than three working days
- Project margins only become visible afterwards, not during delivery
- HR and finance work from different data sets
If you recognise several of these points, you already have the operational problem. The legal risk comes on top.
Conclusion: time tracking is not a compliance task but a management problem
Implement the existing obligation now, without waiting for a new law. The BAG ruling already applies. Check whether your current system meets the requirements for objectivity, reliability and accessibility. If your system separates working time recording and project time, or if time data has to be consolidated manually, you should plan the switch while no statutory deadline is putting pressure on you.
Concrete steps:
- First, check whether your existing system documents the start, end and duration of working time for all employees completely and traceably, including home office and business trips. If individual employees enter hours retroactively or the system does not allow differentiation by project, you have a compliance gap.
- Then assess whether working time recording and project time tracking come together in one system. Separate systems create breaks that mean extra operational work and deliver data from which no reliable statements about margin or forecast are possible. For organisations that still work with Excel spreadsheets and separate mailboxes for time reports today, the BAG ruling is the trigger to reassess their operational infrastructure.
- Decision-makers in IT consultancies, management consultancies and engineering firms should see time tracking as the basis of their operational management. Compliance is the mandatory framework. Project billing, margin and forecast are the economic substance. Both stand or fall with the quality of the time data.
- If you introduce a structured system now, you create legal certainty and at the same time lay the foundation for Resource Planning, project controlling and billing to be based on the same data. That is the difference between a compliance measure and a real operational upgrade.
- The structure of the ZEP product lines allows a suitable start: if you only need to meet the compliance requirements, ZEP Clock is a separate line for working time recording. If you book hours to projects, start with ZEP Track and, as the number of projects grows or margin pressure increases, move to ZEP Control without changing software. If you want to scale professional services, you do not need a multi-year ERP implementation but a clear path from the first booking to commercial management.
FAQs
Does mandatory time tracking in Germany already apply, or only with the new law?
Mandatory time tracking already applies in Germany, since the Federal Labour Court (BAG) ruling of 13 September 2022 (1 ABR 22/21). It took effect immediately and without a transition period. The draft bill reforming the Working Hours Act is intended to specify the form of implementation: electronic recording is to become the mandatory standard. The law has not yet been passed. The basic duty to document, however, already exists today regardless of the new law.
Which data do I have to document for time tracking?
Employers in Germany must record the start, end and duration of daily net working time for all employees. This includes overtime, work on Sundays and public holidays and all places of work: office, home office, field service and business travel. Break times must be identifiable. The obligation lies with the employer, even if employees do the recording themselves.
What do employers face if they do not track working time?
Violations of mandatory time tracking can lead to fines of up to €30,000 per violation. In addition, employers are at a disadvantage on the burden of proof in disputes over overtime pay: without a verifiable recording system, the employer bears the risk in a dispute. In official inspections, missing records can lead directly to sanctions.
Is trust-based working time compatible with mandatory time tracking?
Yes. Trust-based working time (Vertrauensarbeitszeit) remains permitted as a working model, also under the current draft bill. What goes away is doing without time documentation altogether: even with trust-based working time, the start, end and duration of working time must be recorded. Employees' freedom to organise their own time is not affected.
Do freelancers and external project staff have to be included in time tracking?
The statutory duty to document applies to employees within the meaning of German employment law. Freelancers and self-employed people are generally not covered. For project-based billing with external resources, structured time tracking is still advisable, as it forms the basis for time & material billing and prevents disputes about hours worked.
What requirements must a time recording system meet to be legally compliant?
According to the CJEU, the system must be objective, reliable and accessible. Objective means recording is systematic, not done on request or by estimate; reliable means the data is tamper-proof and traceable. Accessible means authorities and authorised bodies can inspect the records. With the planned law, the electronic form is also to become the standard.
