German government clarifies minimum-wage law

16 Mar 15

GERMANY

IMPACT – HIGH

What is the change? The German government has clarified that foreign companies may use temporary pay raises when posting low-wage employees to Germany in order to comply with the country’s new €8.50-per-hour minimum-wage law.

What does the change mean? Companies considering posting low-wage employees to Germany now have a clear option for doing so while remaining in compliance with Germany’s wage requirements.

  • Implementation timeframe: Ongoing.
  • Visas/permits affected: The change does not affect any particular visa or permit; rather, it clarifies the implementation of Germany’s minimum-wage law.
  • Who is affected: Non-EU/EEA and Non-Swiss-based companies posting employees to Germany on temporary assignments, especially those from low-wage countries.
  • Business impact: The change makes it clear that foreign employers who pay employees less than €8.50 per hour can post employees to Germany so long as they are given a temporary pay raise to meet Germany’s minimum wage. The additional pay must be accounted for in an employment contract.
  • Next steps: BAL is following the implementation of Germany’s minimum-wage law and continues to seek clarification on whether other forms of payments – including per diem payments for work-related expenses and annual or semi-annual bonus payments – can be counted toward the minimum-wage requirement.

Background: Germany’s €8.50-per-hour minimum wage took effect Jan. 1. The law applies to anyone working in Germany, including foreign nationals.

The law has particular relevance to third-country nationals because their admittance depends on compliance with German labor laws. In the weeks following the implementation of the law, it remained unclear what forms of compensation would count toward satisfying the €8.50-per-hour requirement. In particular, it was not clear whether allowances paid to posted employees to supplement their base pay could be considered.

German authorities have now clarified that “additional allowance” (temporary pay raises) to bridge the gap between what an employee normally makes and Germany’s minimum wage can be counted toward the minimum-wage requirement. Payments such as Christmas bonuses and vacation pay can also be counted as long as these payments are included with the monthly salary on a pro-rata basis. Payments that cannot be counted include overtime pay; premiums for working Sundays, nights, or on public holidays; extra payments for outstanding results; or “dirt money” paid for working in dirty conditions.

Finally, it should be noted that Germany not only requires a wage of at least €8.50 per hour, but also requires that foreign nationals be paid on par with their German counterparts. The recent clarifications apply to the second requirement as well as the first.

BAL Analysis: Companies may now use temporary wage hikes to satisfy the minimum-wage requirement without violating Germany’s minimum-wage law. Employers should consider this option when determining whether to post employees to Germany for temporary work assignments.

This alert has been provided by the BAL Global Practice group and our network provider located in Germany. For additional information, please contact your BAL attorney.

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