In Germany, minimum wage is a key issue that is the subject of intense political and public debate. Just in the last few days, the Federal Chancellor has reignited the debate after the Sarah Wagenknecht Alliance failed shortly beforehand with its motion for an increase on April 25, 2024 in the Bundestag.
The current minimum wage
The introduction of the minimum wage in 2015 marked an important step towards ensuring fair wages and protecting employees from unreasonably low pay. The minimum wage in Germany is regulated in the Minimum Wage Act (MiLoG), which was enacted on August 11, 2014 and has been in force since January 1, 2015. According to this law, every employee is entitled to payment of a wage at least equal to the minimum wage by the employer. This applies to all employees, regardless of the type of employment contract (full-time, part-time, mini-job, etc.). Employers are subject to a documentation obligation to ensure compliance with the minimum wage.
Since January 1, 2024, the statutory minimum wage has stood at €12.41 gross per hour and is set for a further increase to €12.82 in 2025. This gradual adjustment reflects efforts to ensure an appropriate wage floor that takes account of the cost of living and general wage trends.
The level of the minimum wage can be changed by statutory order of the Federal Government on the proposal of a permanent commission constituted of members of employers’ associations and trade unions, the Minimum Wage Commission. The Minimum Wage Commission takes general wage trends and labor market conditions into account when making its recommendations for adjusting the minimum wage. Trade unions criticise the Minimum Wage Commission and demand a higher increase than the Commission proposes.
The current debate about the minimum wage in Germany
The minimum wage is a controversial topic that is discussed time and again in Germany. The current debate is also focusing on Chancellor Olaf Scholz’s call for an increase in the minimum wage to EUR 15, which is provoking different reactions and is being viewed critically by economists.
Some experts emphasize that the current minimum wage is not enough to make ends meet. A further increase could help to reduce poverty. The cost of living increases over time due to inflation. In order to maintain the real value of wages, a regular adjustment of the minimum wage is necessary. The minimum wage should ensure that employees can make a living from their work. An increase is seen as a step towards greater social justice.
Federal Chancellor Olaf Scholz has promised a gradual increase in the minimum wage to EUR 15 euros. Scholz is committed to a gradual increase in the minimum wage. This was a key election promise of his party. Initially, the minimum wage is to be increased to EUR 14 per hour and then, in a further step, to EUR 15. The demand for an increase in the minimum wage to 15 euros was also supported by the Greens, the Left Party and the trade union Verdi. They argue that a higher minimum wage is necessary so that everyone can make ends meet. The employers’ association BDA criticised Scholz for interfering in the setting of the minimum wage and described it as a “breach of taboo”. The business community warns of the dangers to job security and collective bargaining autonomy if the pressure on the minimum wage commission is constantly increased.
Violation of the minimum wage law can result in considerable sanctions
Employers who violate the Minimum Wage Act can face considerable sanctions. Violations can be classified as an administrative offense and punished with fines of up to EUR 500,000. In addition, fines of more than EUR 2,500 can result in exclusion from the award of public contracts. In addition, there is a risk of retroactive payment of social security contributions for at least four years, and even for 30 years in the case of intent. The social insurance institution has a claim for back payment even if the employee does not sue for back payment of the difference to the minimum wage.
For further information, please contact:
Dr. Artur-Konrad Wypych, Partner, Bird & Bird
artur.wypych@twobirds.com
