German cabinet has endorsed a draft bill to introduce a nationwide minimum wage: More money for 3.7 million people

As part of the coalition agreement, the parties of the joint administration under the lead of Chancellor Angela Merkel planned to introduce a minimum hourly wage of EUR 8.50 (GBP 7.11; USD 11.55) (see our post dated December 20, 2013).  On April 2, 2014, the German cabinet endorsed a draft bill to introduce a nationwide minimum wage. Although the measure will be in place nationwide across all industry sectors, the deal negotiators have agreed on the following few exceptions, which some commentators suggest go wider than originally planned due to industry influence:

  • Minors who have not completed vocational training;
  • Interns who fulfill an obligatory internship required for school, vocational training or university studies or an orientation internship of maximum six weeks in order to help to choose a training, unless the internship is repeated several times with  the same company;
  • Voluntary workers; and
  • Long-term unemployed people within the first six months after finding a new job.

 In the transitional period up to December 31, 2016 deviations will only be permitted under a union contract based on the German Temporary Employment Act (Arbeitnehmerüberlassungsgesetz, AÜG) and the Act on Posting of Workers (Arbeitnehmerentsendegesetz, AEntG).

The level of the minimum wage will be reviewed by a specific commission annually, for the first time with effect to January 1, 2018.

A first reading of the bill within the Bundestag, Germany`s lower house of parliament, is due in June. The government expects the bill to be voted through in July just before the parliament`s summer recess.  The Federal Ministry of Labour and Social Affairs (BMAS) assumes that 3.7 million employees will receive a higher salary due to the introduction of the minimum wage as of January 1, 2015. Several business organizations have already voiced strong criticism of the minimum wage deal as they expect it to result in the loss of many jobs.