On 1 January 2015, a nationwide statutory minimum wage of EUR 8.50 will be introduced in Germany. The German Minimum Wage Law (Mindestlohngesetz) of 3 July 2014 aims to protect employees in low-wage sectors from wage dumping. The Federal German Government estimates that 3.7 million people will benefit from the new law. Germany is following the example of more than 20 other EU member states which already have a statutory minimum wage.

According to current legislation, employers and employees are normally free to decide on the wage level, provided it is not “unethically low”. That means the agreed wage must not fall below two thirds of the union wages which are customary in the sector. In 14 sectors, there is a generally binding union wage - for instance in construction, industrial cleaning and the nursing professions. All employers who fall within the scope of such union agreements already have to pay agreed minimum wages.

From 1 January 2015 all employees will be entitled to a minimum wage of EUR 8.50 per hour. The minimum wage also applies to employers who have their registered business seat outside Germany. Exceptions apply to interns, apprentices, employees who are under 18 years old and previous long-time unemployed. In sectors with a generally binding union wage, there is a two year transitional period before pay must reach the statutory minimum.

The customs administration authorities are responsible for ensuring that the obligations arising from the Minimum Wage Law are adhered to. In the event of non-compliance, employers risk administrative fines of up to EUR 500,000 and exclusion from public procurement contracts. There are still several questions open, such as how the hourly remuneration is calculated for piece work and whether Christmas allowances have to be included.

Karsten Kujath