German Federal Cabinet Approves Bill to Increase the Minimum Wage

As early as the end of January 2022, German Federal Minister of Labor Hubertus Heil presented a draft bill governing the minimum wage. Although this draft has not yet been published, it was made available to various news agencies, so the main contents are already known through the press.

The central component of the bill is a raise in the minimum wage to €12.00 per hour on October 1, 2022. In addition, the earnings limit for mini-jobs,1 relevant for social insurance inclusion, will be raised by €70 from the current €450 to €520. The earnings limit for employment in the transitional sector (midi-job)2 will also be raised, by €300 from €1,300 per month to €1,600.

Up to now, regular increases in the minimum wage have been made by statutory ordinance on the proposal of the Minimum Wage Commission. This is a body made up of employee and employer representatives, which bases its proposals on the development of collective wages. As an exception to the rule, the increase to €12.00 will instead take place by law. As with the first statutory introduction of the minimum wage in 2015, however, there will then be a return to the tried and tested method and increases will be made by ordinance on the basis of proposals from the Minimum Wage Commission. The June 2022 deadline for the Minimum Wage Commission to pass a resolution on the adjustment of the minimum wage will therefore be suspended and postponed until June 2023, with initial effect from January 1, 2024.

The increase to €12.00 represents a huge increase. Before the new law comes into force, the minimum wage will still be raised as planned from the current €9.82 to €10.45 on July 1, 2022. An increase of a further €1.55 just three months later will have a significant impact.

At the same time, Germany will move even further ahead in comparison with the other EU member states. With the current minimum wage of €9.82, Germany already ranks sixth behind Luxembourg, the Netherlands, France, Ireland and Belgium. From October 1, 2022, Germany will then only be behind the front-runner Luxembourg, which currently has a rate of €13.05 per hour.

The next step is for the draft law to be introduced in parliament, the German Bundestag. Employers should already prepare—especially in the low-wage sector and when employing mini-jobbers—for the fact that this new mandatory wage floor will soon apply and salaries will have to be adjusted. According to the draft legislation, approximately 6.2 million employees will expect a salary increase on October 1, 2022, due to the increase in the wage floor alone.

The gradual introduction of the minimum wage of €12.00 per hour will also mean that, for example, the wage levels regulated in many existing collective agreements will be skipped in one step. Employees who have earned an hourly wage of € 12.00 over several years will now wonder whether they will also receive a pay increase. There is also a risk that already-planned collective wage increases will be overtaken. In collective bargaining, the new minimum wage is already now likely to be regarded by the trade unions as the absolute lower limit of the negotiations.

See Footnotes

1 A “mini-job” is marginal employment exempt from social security contributions.

2 A “midi-job” is an employment relationship with a reduced contribution rate for social security.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.