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Germany – Rise of Minimum Wage and New Ceilings for Social Security Contributions

Germany – Rise of Minimum Wage and New Ceilings for Social Security Contributions

January 4, 2017

Authored by: Martin Luederitz and Stefan Skulesch

Rise of Minimum Wage as of January 1st 2017:

As of January 1st 2017 the statutory Minimum Wage in Germany rises from € 8.50 to € 8.84 gross per hour. It is the first increase, since the Minimum Wage Act (Mindestlohngesetz – MiLoG) has put into effect a statutory minimum wage for Germany in 2015. This statutory minimum wage applies – with some exceptions – to all employees working on German territory. Most interim arrangements that allowed for lower wages for certain groups of workers expired on 31st of December 2016. As the Minimum Wage Act only states a base amount to be paid for any employee in Germany, binding collective bargaining agreements (Allgemeinverbindliche Tarifverträge) stipulate higher hourly wages in many work areas.

Clients employing blue collar workers in Germany with low salaries as well as clients who have marginal employed employees (geringfügig Beschäftigte) are advised to check whether they comply with the new Minimum Wage.

New contribution assessment ceilings for statutory Social Security as of January 1st 2017:

In Germany, most social benefits such as health insurance, long-term care insurance, pension insurance as well as unemployment insurance are statutory and compulsory for the absolute majority of employees. These programs are generally financed by employers and employees jointly. The contributions employers and employees have to pay are determined by percentage rates applying to the gross salary of the employee. The contribution assessment ceilings (the maximum amount of monthly income to which the contribution rates apply) are subject to periodic changes. As of

Germany – First Court decisions on New Minimum Wage Act

Germany – First Court decisions on New Minimum Wage Act

July 2, 2015

Authored by: Martin Luederitz and Stefan Skulesch

The calculation of the minimum wage causes much uncertainty for companies. Now, the first court decisions have been published that provide for a certain legal security on this matter. In its judgment of 13 May 2015 – 10 AZR 191/14, the Federal Labor Court decided that the minimum wage is to be observed for holidays and in the calculation of the continued payment of wages during sickness. According to a decision of the Labor Court of Düsseldorf (judgment of 20 April 2015 – 5 Ca 1675/15, not yet legally-binding), a performance bonus may also form a component of the statutory minimum wage.

For the first time ever, Germany now has introduced a statutory minimum wage at a gross amount of currently € 8.50 per hour, pursuant to the new Minimum Wage Act (Mindestlohngesetz, MiLoG), effective as of 1 January 2015. Lower wages are still possible until 31 December 2017, inter alia, on the basis of collective bargaining agreements, while generally binding collective agreements may stipulate higher hourly wages. The minimum wage must be granted every month and not on an annual average. The aforementioned decisions answer the question of how a company must calculate minimum wages. Whether or not supplements, variable compensation and special payments are to be included in the wage and, thus, cause the monthly base salary to be exceptionally lower, seems to depend on whether the wages – other than, for example, contributions to capital formation – have a “direct relation to the work performance.” Even if an

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