German Minimum Wage Increase Scheduled

Germany’s minimum wage will rise in 2019, and again in 2020 - what do employers in Europe’s largest economy need to know?

Following proposals put forward earlier in the year, the German cabinet agreed to raise the country’s minimum wage in January 2019, with an additional rise scheduled for 2020. Motivated by a desire to increase consumption, Germany’s 2019 wage hike will be the second in Angela Merkel’s tenure as Chancellor - the first coming in 2017, when the wage rose from €8.50 to €8.84.

The new minimum wage will come into effect on 1 January 2019, and will affect over 2 million employees working in Germany. If they have not already, employers in Germany, and those with foreign workers assigned in the country, should explore the details of the new wage rates.

Minimum Wage Schedule

The minimum wage commission proposed the new wage rates in June 2018 through analysis of existing collective bargaining agreements and potential impact on employees. In October 2018, the schedule for the minimum wage rises was agreed:

  • From 1 January 2019, the minimum wage will rise to €9.19 per hour
  • From 1 January 2020, the minimum wage will rise to €9.35 per hour

Under the 2019 rates, the minimum monthly wage will be €1,599.06 (based on a 40 hour work week). The wage rates will apply to all employees, with the exception of those on apprenticeships and compulsory internships, and the long term unemployed in their first 6 months of employment.

Assigned Foreign Employees

The commission placed a specific focus on foreign employees who are assigned to work in Germany by their employers. Under the minimum wage regulations, this category of employee must obtain consent from the German Labour Authority in order to work in Germany, and employers must provide relevant information about the assignment, such as working hours and salary. Assigned workers’ salaries (paid in their home countries) must be comparable with those of their German counterparts, and conform to minimum wage regulations.

Although most expat employees working in Germany will usually be on wages substantially higher than the minimum wage rates, employers should nonetheless conduct suitable pre-assessments on assigned immigrant employees’ salaries. Since the salary regulation applies to all employees, even those on short-term business trips, and not necessarily needing a work authorisation, must meet the minimum wage rate regulations.

Driving Growth

According to WSI research, Germany already has one of the highest minimum wage rates in the EU, but 2019’s minimum wage hikes are specifically intended to drive economic growth by taking advantage of, and working in combination with, the country’s high employment rates and low borrowing costs. Germany’s Federal Statistics Office estimate that 1.4 million people were receiving the country’s minimum wage in April 2017, while a further 800,000 earned even less, despite qualifying.

The Social Democratic Party in particular is pushing the minimum wage rises - seeking to shore up popular support after election defeats. In October, SPD Finance Minister, Olaf Scholz, called for an even higher rate of €12 per hour.

For more information on wages in Germany, check out activpayroll’s dedicated Global Insight Guide to Germany.