On July 11, 2014, the Bundesrat approved the latest draft of the Minimum Wage Act (Mindestlohngesetz - MiLoG), a law proposed by the federal government. The law will come into effect on January 1, 2015.
The new Minimum Wage Law imposes far-reaching regulations upon employers. We have outlined the most important ones in the following:
1. Payment of minimum wages
Starting on January 1, 2015, every employer must pay to his employees, who regularly work in Germany, a minimum wage of EUR 8.50 (gross) per working hour. For the purpose of the law, interns are also regarded as employees.
A few exceptions apply, in particular temporary exceptions where branch-specific generally binding collective bargaining agreements provide for different wages. However, as of January 1, 2017, the amount of EUR 8.50 gross shall be the general minimum for all industries and branches.
The exact amount of the hourly minimum wage shall be re-determined on a biennial basis by the federal "Minimum Wage Commission". Hence, future increases of the minimum wage are likely.
2. Impact on part-time employees
The new statutory minimum wage has a particular impact on part-time employees if they are employed on a marginal basis of max. EUR 450.00 (gross) per month ("geringfügig Beschäftigte/Mini-Jobbers") and if they currently receive a wage below EUR 8.50 per hour. Though not explicitly stated in the Minimum Wage Act, the actual working hours of these Mini-Jobbers must be capped at 52 hours per month in order to comply with the new law.
3. Special rules for foreign employers
The MiLoG also contains obligations for employers who have their registered office outside of Germany and who are involved in certain industries (e.g. the building industry, transportation industry, or industrial cleaning). Before engaging employees or independent contractors in Germany, the foreign employer has to provide defined information to the German customs authorities to allow them to screen and verify the compliance with the MiLoG.
4. Liability for contractors
If a company assigns services to an agent it has to ensure that such agent complies with the laws on minimum wages. Consequently, a company must refrain from contracting with agents who do not comply with the new law. If a company has knowledge of the agent undercutting minimum wages or lacks such knowledge due to gross negligence, it will be held liable for payment of the minimum wages to the agent's employees.
We strongly recommend asking your contractors to confirm that they comply with the MiLoG and to arrange for proper documentation.
5. Consequences of non-compliance
If employers do not comply with their duties under the new Minimum Wage Law, a fine of up to EUR 500,000.00 may be imposed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.