With effect from January 2015, a minimum wage of EUR 8.50 gross per hour will apply to all employees in Germany. This makes Germany the 22nd country in the EU to fix a statutory minimum wage.

Against this background and in particular with regard to low paid workers, the question arises as to how the minimum wage is calculated and what, if any, payments by the employer over and above the basic hourly rate may be taken into account in the calculation.

According to current German case law, whether or not additional elements of pay will be included in the calculation of minimum wage, depends on why those elements are paid. For example, if an enhanced payment is made by the employer but relates to the performance of contracted duties, then such payments will form part of the individual’s pay. An example would be an enhancement frequently offered to those involved in the removal of waste or with sewerage, referred to as a “dirty work” allowance. However, payments which are made in order to compensate the employee for work exceeding their contractual duties would not be taken into account in calculating the minimum wage level. Examples in this latter case would include incentive awards or overtime premiums. Capital-forming benefits which do not fall into the hands of the employee but are paid separately as savings are also not included in the calculation of minimum wage because they do not form part of the employee’s disposable income.

A final word of caution: one-off payments, such as Christmas bonus -or “Weihnachtsgeld”, which are common practice in Germany, are not straight forward. This is because minimum wage entitlement is calculated according to payments due at the end of the month following the month in which the work was performed. A later payment may not be set off against prior payments, even if it would bring earnings above the minimum threshold, potentially leaving an employer guilty of an underpayment of wages and an administrative offence.