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New Minimum Wage Act in Germany – New Obligations Also for Czech Employers

The new German Minimum Wage Act (Mindestlohngesetz, “MiLoG”) took effect on 1 January 2015, setting the general minimum wage at EUR 8.5 per hour. Given the width and breadth of the Act, the setting of the minimum wage also has a strong impact on Czech employers whose employees perform work activities in Germany.

Moreover, the level of the minimum wage stipulated by the Act does not need to be final in specific cases. In addition to the Act, the minimum wage is also defined by applicable collective agreements, which may have an extended effect in Germany. Therefore, it is always necessary to thoroughly examine whether the general Minimum Wage Act or special provisions of collective agreements shall apply in individual cases.

The Minimum Wage Act has a wide effect and also applies to employees of foreign companies working in Germany and seconded employees, ie employees working in Germany for a foreign employer on a temporary basis. The length of secondment is not decisive in the application of the Minimum Wage Act. Any business activity in Germany, however temporary, gives rise to the obligation for foreign employers to pay the minimum wage pursuant to the Minimum Wage Act.

Nevertheless, there is uncertainty regarding the application of the Act to transit transportation, ie when carriers pass through Germany. Although the Minimum Wage Act stipulates that the statutory minimum wage also applies to such cases, proceedings regarding the compliance of the Minimum Wage Act with the EU law are currently being held at the European Commission. So far, the European Commission has officially requested Germany to make a statement on the potential breach of EU law. A moratorium on the enforcement of obligations stipulated by the Minimum Wage Act purely for transit transportation has been declared over the duration of the proceedings. The above shall not apply to such transportation when the loading and unloading is performed in Germany.

The statutory wage applies unconditionally. It is impossible to arrange a different amount of the minimum wage in an employment contract; different contractual arrangements on the minimum wage are invalid. In addition, employees cannot renounce their right to the minimum wage.

What Does the Minimum Wage Comprise?

Employers are mainly uncertain about the components of the minimum wage because the calculation of the minimum wage may also comprise other wage constituents provided to employees by their employers.

There is unclarity related to various bonuses and personal allowances provided to employees. Owing to various opinions on what may be treated as part of the minimum wage and what the inspection bodies of the German Customs Office will consider as part of the minimum wage, it is recommended to consult every individual situation with legal specialists. Due to an incorrect calculation of the minimum wage amount, an incorrect amount of wage will be provided, contrary to the Minimum Wage Act, which will give rise to liability for administrative offence. In this case, employers will be subject to heavy fines. In the event that employees who are entitled to the minimum wage do not receive it in compliance with the Minimum Wage Act, a penalty of up to EUR 500 thousand may be imposed on employers.

Other Obligations of Employers

In addition to the obligation to pay the minimum wage, the Minimum Wage Act also defines other obligations for employees in selected sectors (such as the construction industry, hospitality, transportation, forestry, cleaning, exhibition management, and the meat industry). These include, for instance, the notification, registration and archiving obligations towards the headquarters of the Customs Office in Cologne. Before foreign employers initiate the delivery of their services, they are obliged to make a written announcement, in German, of the commencement of business activity. Employers are also obliged to record working hours using the required forms, including other data based on which the minimum wage will be provided. Employers are required to archive such data for two years. For the purposes of regulation, such data must be available in German at the place of commencement of work in Germany.

A breach of the above obligations is also penalised as a misdemeanour, with a fine of up to EUR 30 thousand.

Guarantee of the Contracting Authority

The employee’s right to the minimum wage is reinforced by the statutory guarantee provided by the contracting authority. An employee who has not been paid the statutory minimum wage even though he/she was entitled to receive it, may contact the contracting authority of his/her employer directly in this respect. The contracting authority’s liability cannot be ruled out. Nevertheless, the contracting authority is authorised to request compensation from its suppliers with respect to the supplies provided to those employees.