27.01.2015The German Minimum Wage Law – Summary and Practical Consequences
§ 20 of the German Law to Regulate a General Minimum Wage (MiLoG) includes the fundamental duty for employers registered nationally or abroad, which duty is punishable with a fine, to pay their national employees at least the minimum wage from January 1, 2015. The gross amount of the minimum wage is initially set at EURO 8.50 per hour. The payment must be made by the due date stated in the MiLoG at the latest.
1. Summary of Contents
MiLoG applies to all employees. However, employees are not entitled to the minimum wage in the first six months of employment, if they were unemployed for a year or more directly before starting the employment. Trainees (the legal definition is stated in § 22 Subsection 1 MiLoG) are generally covered by MiLoG unless one of the exceptions regulated in the law exists. This is especially the case when the practical training is obligatory due to a college or school stipulation or practical training lasting for up to three months serves as guidance for occupational training or for commencing university studies. MiLoG does not apply to apprentices, volunteer workers or other contractual relationships in the sense of § 26 German Vocational Training Act (Berufsbildungsgesetz – BBiG). Individuals in such relationships are only entitled to claim for appropriate remuneration. Finally individuals who have not reached the age of 18 years and who have not finished occupational training are also excluded from the scope of application of MiLoG.
Transitional regulations with respect to whether MiLoG applies exist for people delivering newspapers and in case of different provisions in binding collective bargaining agreements by representative collective parties. Provisions of such collective bargaining agreements must be modified to meet the requirements of MiLoG by December 31, 2017.
As stated above, the amount of the minimum wage is initially set at EURO 8.50 per hour. A modification of the amount of the minimum wage is generally envisaged. It is proposed by a minimum wage commission whereby a decision on a modification of the minimum wage shall first be made by June 30, 2016, to take effect as of January 1, 2017, and then every two years subsequently.
The claim to the minimum wage cannot be lost and it is only possible to waive it by means of a court settlement. The claim to the minimum wage cannot be restricted nor excluded, i.e. any applicable exclusion clauses do not cover the claim to the minimum wage.
Particular attention should be paid to the employer's joint and several liability regardless of negligence or fault based on the reference to § 14 of the German law concerning the posting of employees (Arbeitnehmer-Entsendegesetz - AEntG) when the employer contracts another entrepreneur to render work or services. Said employer shall be liable for obligations of the entrepreneur, a subcontractor or a company renting out employees which is commissioned by the entrepreneur or the sub-contractor to pay the minimum wage to employees likewise a guarantor who has waived the defense of unexhausted remedies.
2. Practical Consequences
The minimum wage is the lowest level of remuneration for employees in Germany. Agreements undercutting this level are invalid although the employment agreement otherwise remains valid (contrary to § 139 BGB). The legal consequence of a remuneration agreement which is invalid since it is contrary to the minimum wage is not only a modification to the level of the minimum wage. Rather the employer owes the remuneration which is customary for this and/or a comparable activity in the area. As the minimum wage is understood as the lowest level of remuneration, MiLoG is subordinate to other minimum wage regulations. Therefore, other statutory minimum wage regulations pursuant to the German Law on Temporary Employment (Arbeitnehmerüberlassungsgesetz – AÜG) or the AEntG prevail MiLoG if more favorable to the individual employee.
Practical difficulties result from the fact that MiLoG does not determine a period decisive for calculating the wage and benefits/payments affecting the minimum wage, i.e. validly fulfill the employee's claim to the minimum wage.
MiLoG generally foresees the maturity of the minimum wage for the last business day of the month following the month in which the work was rendered. The working time rendered in the calendar month and the remuneration paid in the same calendar month would therefore probably be the decisive items for judging whether the minimum wage has been paid. That is the case if the gross remuneration paid in the calendar month equals the product of EURO 8.50 multiplied by the number of working hours.
For "mini-job" employees (geringfügig Beschäftigte) with agreed flat-rate remuneration strict attention must therefore be paid to the fact that the maximum permitted number of working hours (remuneration EURO 450.00/max. 52.9 working hours) is not exceeded. Agreeing a piece-work wage remains permitted. If the minimum wage is not reached, the employer must raise the piece-work wage to the level of the minimum wage.
Commission can be offset against the minimum wage if it is paid without reservation when due. However, commissions which are paid with a time delay or as a lump sum for longer periods than single months must not be taken into account. Only by way of making preliminary payments which can be offset subsequently but cannot be reclaimed such provisions will be regarded as payments fulfilling the entitlement to the monthly minimum wage. If the employee does not earn a sufficient commission, the employer must raise remuneration at least to the level of the minimum wage.
Regarding the question what sort of remuneration can be offset against the minimum wage entitlement German legislation refers to the decisions by the European Court of Justice (ECJ) and the German Federal Labor Court (Bundesarbeitsgericht - BAG) on deployment of employees. Pursuant to the said legislation remuneration such as allowances and supplements can be offset against the minimum wage if they were granted in return for work. Therefore, allowances for additional qualitative or quantitative work or supplements for special working hours (e.g. Sunday or Bank Holiday premium rates), or difficult or dangerous circumstances (allowances for difficult working conditions) cannot be offset with the minimum wage. It also is not possible to effectively offset bonus payments or special remuneration on a monthly basis if such remuneration is paid as an annual deferred amount.
Considering the maturity of the monthly minimum wage stipulated in the MiLoG one exception exists in case of working time accruals. Working hours exceeding the contractually agreed amount may be credited to the working time accrual in favor of the individual employee. However, the working hours credited must not exceed 50 % of the contractually agreed working hours per month. The working hours must be compensated by time in lieu or payment of the minimum wage within a period of twelve calendar months after the month in which they were recorded unless the claim to the minimum wage was already compensated by payment of a regular working salary. If the employment relationship is terminated, such compensation must be granted until the end of the month that follows the month of termination.
3. Conclusion
For the first time in history on January 1, 2015 a minimum wage will be introduced in Germany. The rate will be standardised throughout Germany and is initially set at a gross amount of EURO 8.50 per hour. The exceptions in the scope of application which have already caused lively discussions in advance appear to be justified while the transitional regulations will be resolved over time. Apart from introducing the new law also insures that the employees will actually and punctually receive the stipulated minimum wage. The working time accrual provisions allow the employer the full freedom of scope as long as the stipulated monthly minimum wage will be paid to the employee.
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