Common minimum wage in Germany

Germany: New minimum wage act sets lowest hourly remuneration for workers at Euro 8.50 from 1 January 2015.

Among EU member states, 21 of 28 have already enacted a compulsory minimum wage. The lowest legal monthly salary in those countries ranges from 174 EUR (Bulgaria) to 1,921 EUR (Luxemburg). In Germany a minimum wage is currently compulsory only in certain industries, such as the building trade, hairdressing, nursing, security, education, in temporary employment, and in companies where a collective bargaining agreement has been concluded. Almost half of all employees are covered by such agreements. Hourly wages range from EUR 7.50 to 13.95, depending on the industry and the part of the country where the work is performed.

The new Minimum Wage Act, which sets a compulsory common minimum gross hourly wage of EUR 8.50 and is not connected with any particular industry, becomes effective on 1 January 2015. Exceptionally, minimum wages established by a collective bargaining agreement remain in force to the end of 2016, but from 1 January 2017 the minimum hourly wage fixed in such agreements must not be lower than EUR 8.50.

The new legislation is particularly relevant for companies from other countries. Entrepreneurs that send their employees to Germany will have to pay them at least EUR 8.50 an hour. Defining which elements of workers’ remuneration may be included for fixing the minimum wage may cause significant problems with calculating the outstanding minimum wage. The rule is the following: a minimum wage will only be considered as the nominal remuneration which an employee receives for each hour of work, whereas expenses covered by employers for e.g. travel to Germany or food allowance cannot be included in the calculations.

Although foreign companies will have to bear additional costs connected with sending their employees to Germany (since the law in many countries sets compulsory benefits for working abroad, such as daily allowance), they will still have to pay these workers EUR 8.50 EUR gross hourly rate (where a collective bargaining agreement does not set a higher minimum wage). Result: non-German employers will have to bear higher labour costs when operating in Germany than domestic entrepreneurs. The upcoming changes will have the biggest impact mostly on companies from Central and Eastern Europe, which provide low paid manual workers, often only for seasonal jobs.

Please feel free to contact us if you need any additional information on these issues.

Source: Act regulating a common minimum wage (Act on minimum wage)

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