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Legal Advice

New Minimum Wage Brings New Pitfalls

Since Ja­nu­ary 1, 2015, there has been a ge­ne­rally ap­plica­ble sta­tutory mi­ni­mum wage in Ger­many. Since then al­most every em­ployee of le­gal age has a man­datory right against his em­ployer to a gross pay­ment of at least €8.50 per hour. The sta­tute pro­vi­des that this mi­ni­mum wage will be re­viewed re­gu­larly and ad­jus­ted if ap­pro­priate (and by "ad­jus­ted" they mean "in­crea­sed"). The in­itial ad­just­ment is to take ef­fect as of Ja­nu­ary 1, 2017.

Un­derage workers are ex­empt from the sta­tutory mi­ni­mum wage un­less they have com­ple­ted their vo­ca­tio­nal trai­ning; re­du­ced ra­tes ap­ply to volun­tary po­si­ti­ons. Trai­nees are not re­qui­red to be paid a mi­ni­mum wage. Howe­ver, not only full-time and part-time em­ployees are en­tit­led to the mi­ni­mum wage, but so are tem­porary workers, mar­gi­nal part-time workers, se­aso­nal workers and - with a few ex­cep­ti­ons - in­terns. This me­ans that not just a few in­dus­tries are af­fec­ted by the sta­tutory mi­ni­mum wage - al­most every com­pany is.

New Minimum Wage Brings New Pitfalls© Thinkstock

And the new law doesn't just re­quire em­ploy­ers to pay a mi­ni­mum wage. It also es­ta­blis­hes a se­ries of other re­qui­re­ments, such as when wa­ges and sala­ries must be paid, na­mely no la­ter than the last ban­king day of the month fol­lo­wing the pe­riod in which the work was per­for­med, alt­hough where em­ploy­ment agree­ments pro­vide for ear­lier pay­ment, they ob­viously take pre­ce­dence.

Only pro­per ti­mes­heet sys­tems that have been agreed to in wri­ting enjoy cer­tain pro­tec­tion. They re­main per­mis­si­ble such that the com­pen­sa­tion of over­time may to a cer­tain ex­tent be post­po­ned by ma­king an entry in the ti­mes­heet.

But that is not the only re­ason why the em­ployer's self-mo­ni­to­ring is time-con­su­ming. If, for ex­am­ple, the em­ploy­ment agree­ment pro­vi­des for a fi­xed wage of less than €8.50 per hour, then an ana­ly­sis must be per­for­med to de­ter­mine whe­ther the mi­ni­mum wage is re­ached by ad­ding other wage com­pon­ents to the hourly rate.

Lump-sum wage agree­ments, such as in the form of a monthly salary, are even more com­plex to eva­luate. If the monthly salary is not cle­arly hig­her than the mi­ni­mum wage, care must be ta­ken, par­ti­cu­larly in ca­ses where em­ployees work va­ria­ble hours. In many ca­ses it will not be pos­si­ble to avoid sha­dow cal­cu­la­ti­ons on the ba­sis of the mi­ni­mum wage, which will re­sult in in­crea­sed ad­mi­nis­tra­tive ex­pense. This ap­plies par­ti­cu­larly to tem­porary em­ployees, but also to em­ployees with a re­la­tively low base salary and fre­quent over­time.

The cur­rent dis­cus­sion of the mi­ni­mum wage re­cord-kee­ping re­qui­re­ments must be seen against this back­drop. In cer­tain in­dus­tries re­cords of the ac­tual work per­for­med must be kept for all em­ployees who re­ceive a monthly salary of up to €2,958. These in­clude the con­struc­tion in­dus­try, ho­tels and re­stau­rants and the trucking and re­la­ted lo­gistics in­dus­try.

The re­por­ting ob­li­ga­ti­ons ap­ply to all em­ploy­ers with re­spect to their mar­gi­nal part-time workers and their short-term em­ployees. In all of these ca­ses the be­gin­ning, end and du­ra­tion of the daily working time must be re­cor­ded wi­thin a week af­ter the work is per­for­med and the re­cords must be kept for at least two years.

There are re­asons to pay close at­ten­tion to mar­gi­nal part-time em­ploy­ment re­la­ti­ons­hips any­way. These of­ten in­volve working ti­mes of around 15 hours a week. That re­sults in 60 to 65 hours worked per month; mul­ti­plied by the mi­ni­mum wage, a gross amount of €510 to €552.50 would have to be paid, i.e., more than the €450 li­mit for mar­gi­nal part-time work. If the em­ployee de­mands to be paid the mi­ni­mum wage, then not only must the em­ployer pay the dif­fe­rence in ar­rears, but the em­ploy­ment re­la­ti­ons­hip re­troac­tively lo­ses its sta­tus as mar­gi­nal. Back ta­xes and so­cial se­cu­rity pay­ments will have to be paid, most of them by the em­ployer.

Gi­ven the li­mit on mar­gi­nal part-time em­ploy­ment, an em­ployee en­ga­ged in mar­gi­nal part-time work should now not work more than around 52.9 hours per month. The working hours pro­vi­si­ons of exis­ting em­ploy­ment agree­ments with per­sons en­ga­ged in mar­gi­nal part-time em­ploy­ment should be re­viewed, along with any pro­vi­si­ons re­gar­ding over­time.

Fi­nally, a de­ci­sion to out­source in­di­vi­dual tasks to sub­con­trac­tors is not wi­thout its pro­blems. For ex­am­ple, the em­ployer can be re­qui­red to pay the mi­ni­mum wage by the em­ployee of its sub­con­trac­tor if the sub­con­trac­tor fails to meet this ob­li­ga­tion. Alt­hough the em­ployer in such si­tua­ti­ons has a claim against the sub­con­trac­tor, there are bound to be costly dis­pu­tes and if the sub­con­trac­tor be­co­mes in­sol­vent, the claim will ul­ti­mately be worth­less.

The bot­tom line is this: Every com­pany - and also every as­so­cia­tion and pri­vate in­di­vi­dual with em­ployees - must re­view their com­pli­ance with the mi­ni­mum wage re­qui­re­ments. Vio­la­ti­ons can re­sult not only in back-pay ob­li­ga­ti­ons, but in many ca­ses con­sti­tute ad­mi­nis­tra­tive of­fen­ses sub­ject to si­gni­fi­cant mo­ne­tary pe­nal­ties. It is also pos­si­ble that vio­la­tors will be ex­clu­ded from par­ti­ci­pa­tion in pu­blic ten­ders. And that is so­me­thing ever­yone wants to avoid.

Mi­chael Huth, At­tor­ney and Spe­cia­list At­tor­ney for La­bor Law at Eb­ner Stolz in Ham­burg

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