Increase of minimum wage
Effects of increase of minimum wages on marginal employment relationships



At the start of its legislative period, the new federal government set itself ambitious goals of reforming the labour market and the social system. One of the key points of the election campaign was that more justice and respect should be shown to working people, especially those with lower incomes.

On 23 February 2022, the federal cabinet passed draft legislation, which was originally proposed by Hubertus Heil, the federal minister of labour, to increase the minimum wage and the maximum monthly amount for marginally employed individuals. This legislation will enter into force on 1 October 2022.

This article provides an overview of the consequences that will arise for both employees and employers.

Increase of minimum wage

The statutory minimum wage applies to all adult employees, with the exception of the long-term unemployed after taking up work in the first six months, as well as trainees and people in internships of less than three months.

Since the start of 2022, it has become apparent that the most prominent election promise is already being implemented. The draft legislation for this as presented by the Ministry of Labour has now passed the federal cabinet and is about to be executed and published. From 1 October 2022, the minimum wage will rise to €12 per hour. This is the second increase since 1 January 2022, when it rose from €9.60 to €9.82. Prior to the target increase to €12 in October 2022, another increase to €10.45 will take place in July 2022. The increase to €12 will be the last until 2024.

The fact that the government is increasing the minimum wage in this way is a unique step because, until these changes were announced, it was up to employers, employers' associations and trade unions to negotiate employees' wages.

Trade unions applaud the plans for increasing the minimum wage. However, there is a lot of criticism from employers and other stakeholders, who see the autonomy of collective bargaining at risk and no reason for political interference in the decision-making of the so-called "minimum wage commission" (made up of representatives of employees and employers). The increase in the minimum wage would interfere with more than 190 collective bargaining agreements in Germany, and more than 570 wage groups would become obsolete, with more than six million people and 54% of businesses being affected. In the services sector, the figure is as high as 42.5%. Further, employers have pointed to economic tension due to the ongoing covid-19 pandemic, which will not necessarily relieve the expected 25% increase in labour costs for employers. The metal workers union, however, does not see any impairment of the fundamental competence of the minimum wage commission and argues that the planned step is merely a one-off and does not change anything about the known distribution of roles in the minimum wage commission.

This step is also receiving a lot of criticism in political circles. For example, the opposing parties argue that not enough attention is being paid to provisions for the elderly, as the higher minimum wage is unlikely to result in a pension level above the planned minimum pension.

Effects of increase of minimum wages on marginal employment relationships

So-called "mini-jobs" are marginal employment relationships that provide for a gross remuneration of not more than €450 per month or for a maximum of 70 working days per calendar year (the latter regardless of the remuneration, as long as the average does not exceed €450 gross per month). The maximum gross remuneration of €450 for marginal employees is a cap, so that the number of working hours is limited and depends on the applicable minimum or agreed hourly wage. There are two important aspects to mini-jobs:

  • The maximum gross remuneration may not exceed €450. The number of working hours, therefore, is linked to the agreed hourly wage; however, this must be at least the statutory minimum wage.
  • Short-term mini-jobs may not exceed three months or 70 working days per calendar year; therefore, the monthly remuneration may fluctuate below the maximum limit.

Mini-jobbers are considered part-time employees within the meaning of the Part-Time and Fixed-Term Employment Act. This means that they basically have the same rights as full-time employees; in particular, they enjoy:

  • protection against dismissal;
  • remuneration for work on Sundays and public holidays;
  • maternity pay;
  • statutory accident insurance in the event of accidents at work or on the way to work; and
  • holiday entitlements.

The amount of vacation days depends on the number of days they work per week. On the other hand, mini-jobbers are not automatically covered by health and nursing care insurance, although, lump-sum social security contributions are deducted. Employees pay into health and long-term care insurance only from the monthly remuneration of €450, which allows them to acquire the corresponding insurance coverage.

The increase in the minimum wage to €12 per hour also poses practical problems. At the current minimum wage of €9.82, an employee may work a maximum of 45.82 hours per month in order not to exceed the so-called "marginal earnings threshold". At a minimum wage of €12 per hour, the maximum number of working hours employees could have worked up to the monthly ceiling amount of €450 per month would only be 37.5 hours per month. In order to allow employees to continue to work more than 10 hours per week, the maximum remuneration limit for marginal employees will also increase from €450 to €520 per month from 1 October 2022.

In addition, for so-called "midi-jobs", the maximum limit will be raised from €1,300 to €1,600 per month. Midi-jobs provide for a monthly gross remuneration that is higher than the remuneration ceiling for mini-jobs (ie, at least €520.01 from 1 October 2022) up to the maximum. They are subject to a sliding contribution scale whereby the employer's share is fixed, and the employee's contribution percentage is lower for those whose remuneration is at the lower end of the transition zone and higher for those with remuneration closer to the higher end.

Even though mini-jobbers do not have to pay unemployment insurance contributions and thus have more net income, they have the disadvantage of not being entitled to unemployment benefits. After all, mini-jobbers are insured with the German pension insurance, although an exemption is possible. For employees making use of the exemption option, it means that there is no entitlement to pension payments even in retirement, which greatly increases the risk of poverty in old age. Nevertheless, a stable statutory pension cannot be expected if a mini-job is the only gainful employment, as the compulsory contribution is also low due to the low pay. The risk of poverty in old age remains. Contribution payments on the basis of a monthly gross income of €450 (or €520 going forward) do not result in a relevant pension expectancy.

However, in light of the higher remuneration ceiling, employees have more money available during their period of employment and the drop is all the deeper when they retire, since – unlike low-income earners with full social security contributions – mini-jobbers receive even less pension. Most mini-jobbers still decide to be exempted from pension insurance, so that they would have no pension entitlements at all after their period of employment.

On the other hand, the increased minimum wage is planned to enable a living wage, at least for those in full employment, and improve social participation through greater purchasing power. The National Liberal Party emphasises that a mini-job, especially for students or pensioners, is now the "ideal way to earn some extra money". Unfortunately, this short-sighted view of higher wages alone misses the fact that policymakers initially tried to prevent the low-wage sector, and mini-jobs in particular, from growing any further.

In addition, a risk also arises, for example, for regular part-time employees. It could now become more attractive for employers not to offer part-time work or not to extend temporary employment contracts and instead hire low-wage employees. In this way, employers save on social security contributions and employees are placed in an even stronger position of social and societal dependence.


It is clear that both those in favour and those opposed have valid arguments regarding the increase in the minimum wage.

The logical step after raising the minimum wage is to also increase the marginal earnings threshold to €520 per month. On the one hand, this is advantageous for employees, as they receive higher pay. On the other hand, employers also benefit, because they would otherwise have had to hire new employees, as employees with an hourly wage of €12 would only have been able to work approximately 38 hours per month. The fact that, despite the exclusive competence of the minimum wage commission, wages in the low-wage sector are still at a precarious level speaks rather less for high efficiency, which should not be expected from 2025 on either.

In addition, employers will still have to accept much higher wage and production costs, even though the covid-19 pandemic and the associated economic burdens are still ongoing. Even if previous experience with the minimum wage has shown that companies have largely succeeded in adapting to the higher wage cost level, this political step is still a risky bet at the expense of the employment level and the economic existence of employers. Against this backdrop, it is also questionable whether the EU Commission will stick with its plans for a framework for European minimum wages or postpone them until after the covid-19 pandemic.

It is a fallacy to justify the rising minimum wage primarily on the grounds that more remuneration boosts worker productivity. As a result of the rising hourly wage, the maximum monthly earnings of marginally employed individuals will also increase to €520 for the same number of hours worked. As a result of the maximum limit, higher productivity cannot be rewarded by more pay for mini- and midi-jobbers, so higher motivation is less likely.

The criticism from practitioners – that instead of social inclusion, there is more of a risk of expanding precarious employment – is justifiable. This is because, due to significantly lower social security contributions, it will be more attractive for employers to employ marginal employees, whose higher pay of €520 per month brings them closer, in terms of pay, to the rest of the full-time workforce, whose pay level is already higher. In order to improve the social position of employees, a reform of pension and unemployment benefits would be more beneficial instead of, or at least in addition to, a higher minimum wage. The accusation of violating collective bargaining autonomy is strong, but not necessarily convincing. In low-wage sectors, for example, it is often only a minority of employees who are protected by collective bargaining agreements.

For further information on this topic please contact Hagen Köckeritz or Sören E Hennies at Mayer Brown by telephone (+49 69 7941 0) or email ([email protected] or [email protected]). The Mayer Brown website can be accessed at

An earlier version of this article was published in Labor Law Magazine.