Is overtime covered by your salary? What really applies - and where the pitfalls are

What does it mean when overtime is covered by the salary? 

When overtime is covered by the salary, this means: a certain share of extra work is not paid separately or compensated with time off, but is already covered by the agreed monthly salary. 

In practice, employment contracts often contain wordings such as: 

• “10 overtime hours covered by the salary” 
• “20 overtime hours per month covered by the salary” 
• “10 per cent of working hours count as overtime covered” 
• Or even: “All overtime is covered by the salary” 

But not every one of these clauses is permissible - and not all of them are fair to employees. Working hours are regulated by law, and any extra work has to be handled transparently and traceably. 

How much overtime may be covered by the salary? 

German case law is clear on this point: only a limited amount of overtime may be covered by the salary as a flat rate. What that means in concrete terms: 

• The contract must contain a clear limit (e.g. “up to 10 overtime hours per month”)
• The number must not be unreasonably high - as a rule, 10 to a maximum of 20 hours per month is permissible 
• Blanket wordings such as “all overtime is covered by the salary” are legally invalid 

Anyone who regularly works more than the contract allows is entitled to additional pay or comp time - even when the contract contains a coverage clause. What matters is whether the extra work goes beyond the permissible level and whether it can be proven. 

What does the Working Hours Act say about this? 

The German Working Hours Act (Arbeitszeitgesetz, ArbZG) sets clear limits for daily and weekly working hours: 

• a maximum of 8 hours per working day
• an extension to 10 hours is only possible if this is balanced out within 6 months 
• Rest periods of at least 11 hours between two working days are mandatory 
• Work on Sundays and at night is only permitted in exceptional cases 

Overtime that goes beyond these limits is legally problematic and cannot simply be “covered” by a contract clause. 

Is covering overtime with the salary valid? 

Only if the arrangement in the employment contract is clear, understandable and proportionate. Otherwise it is invalid under case law, with the consequence that all overtime worked must be paid out or compensated with time off.

Key requirements for a valid clause: 

• correct upper limits for the hours covered (e.g. “up to 10 hours per month”)
• Transparent wording that leaves no room for interpretation 
• No breach of statutory requirements (e.g. the Working Hours Act) 

Does the rule also apply to part-time staff and managers? 

Yes – but with restrictions:

Part-time employees 

Part-time staff must not be burdened disproportionately. Overtime has to be regulated with particular care here. Flat-rate coverage as in full-time contracts is not permissible in many cases. Every hour of extra work must be individually justified, recorded and compensated. 

In the case of tax-free overtime premiums, for example, the government has announced that these will exclude part-time staff. The aim is to prevent the new law from being used to gain tax advantages. More on this topic here. 

Managers 

With senior staff it is often assumed that overtime “simply comes with the job”. But the same applies here: a flat-rate coverage can only be lawful if the salary is high enough for overtime to be paid for within it. The benchmark here is often the income threshold for state pension insurance contributions (Beitragsbemessungsgrenze). If a manager's salary is below that threshold, the same rules apply to them as to other employees.

Overtime: payment or comp time? 

If the overtime worked goes beyond the level set out in the contract, employees are entitled to compensation. That can happen in two ways: 

1. Payment - The employer pays for the additional hours on the basis of the regular hourly wage. 
2. Comp time - The extra work is balanced out with paid time off at a later date. 

Both are legally permissible; what matters is: transparent documentation of working hours, so that the entitlement can be traced. 

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Conclusion: overtime covered by the salary - only with clear rules 

Flat-rate overtime arrangements are widespread in day-to-day work - but they are not always legally permissible. Anyone who permanently works more than their contract says should know their entitlements. Employers, in turn, are well advised to create transparent and fair rules in order to avoid disputes and legal risks. 

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One thing is clear: overtime rules have to be traceable, limited and fair. 

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Track working hours transparently with clockin 

With clockin you record working hours and overtime easily via the app - mobile, legally compliant and to the minute. That way you keep an overview of the extra work done at all times, and you can comply with working time law, plan comp time and pay overtime correctly. 

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