Germany introduces a statutory minimum wage

by Michael Wendler, Wendler Tremml Rechtsanwälte

On 1 January 2015, the Minimum Wage Act (MiLoG) came into force in Germany, which fixes the minimum hourly rate at €8.50. Around 3.7 million workers in the low-pay sector will benefit from the new legislation, with their wages rising as a result. A statutory minimum wage is now in force across every sector of 22 of the 28 EU member states, with the exceptions being Austria, Cyprus, Denmark, Finland, Italy and Sweden.

In Germany, a nationwide statutory wage already applies to some sectors and industries, since a collective wage agreement was declared to be generally binding under the terms of the Employee Act (AEntG).

Most employees whose working conditions in particular industries or sectors come under a minimum wage collective agreement of this type may already be earning more than the €8.50 statutory minimum, but some collective wage agreements (which have already been in force for some time) specify a lower minimum wage.

The legal entitlement to a minimum wage applies to anyone aged 18+ who works in Germany. It also covers foreign staff if they are working in Germany, irrespective of whether they are employed by a domestic or foreign company. However, the law also provides for a few exceptions.

The Minimum Wage Act does not contain any express regulation on which types of contractual or actually paid remuneration elements can be included when determining the minimum wage. In the past, the European Court has examined the potential inclusion in the minimum wage of variable remuneration elements paid in connection with wages.

The court found that variable remuneration elements could be included if they represented a consideration paid to remunerate the regular activity of the employee.

Inclusion of payments based on an entitlement to a minimum wage pursuant to a collective wage agreement depends on whether the additional elements of remuneration are equal in value in practical terms to the intent of the minimum wage, for example in the case of one-off payments made under the terms of collective wage agreements.

Conversely, elements of remuneration which pursue a completely different purpose and are subject to other provisions are not admissible for inclusion. This covers, for example, capital-forming benefits, compensation for rotating shifts, dirty work bonuses, overtime payments, night shift bonuses, Sunday and bank holiday work bonuses, danger money, time workers bonuses or quality bonuses.

Whether these basic principles as established by the European Court will actually apply to the statutory minimum wage remains to be seen.  Since the law does not give any clear ruling, the courts may well have to decide this issue.

Employers are liable – regardless of culpability – as absolute guarantors, for the net amounts owed to their employees under the terms of the provisions covering the minimum wage. However, this does not apply to taxes and social contributions relating to minimum wages.

In future, the level of the minimum wage will be verified by a commission of parties to the collective wage agreement.  When determining the minimum wage, the commission will take into account the development of collective wage tariffs in Germany. In the context of an overall assessment, it will investigate whether the minimum wage provides employees with appropriate minimum wage protection, allows fair competitive conditions and does not jeopardise employment. The legislation provides for an adjustment to the statutory minimum wage every two years.

With the introduction of the Minimum Wage Act, employers are subject to new record-keeping obligations. From 1 January 2015, they are obliged to record the start, end and duration of the hours worked by marginal employees (defined as “mini jobs“) within one week of the work being carried out and to keep these records for a term of two years.

In certain industries and sectors (e.g. construction, gastronomy, building cleaning, exhibition construction and the meat industry) the employer’s obligation to record working hours extends to include all employees. Over and above this, employers whose registered office is situated abroad must notify the German Head Office of Finance West of the job for which employees are being taken on prior to their employment.

Compliance with payment of the minimum wage and with notification and record-keeping obligations will be strictly monitored in future by the Financial Supervisory authorities for the prevention of black labour (undeclared work), a department of the German Financial Administration. The Minimum Wage Act provides for substantial penalties in the case of infringements.

Michael Wendler
Wendler Tremml Rechtsanwälte, Berlin, Dusseldorf, Germany
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published: March 2015

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