On January 1, 2015, Germany’s law on the statutory minimum wage became effective and is set at EUR 8.50/working hour (gross). The monthly rate, according to the German authorities, amounts to EUR 1,473 based on a 40-hour work-week. The new German statutory minimum wage affects all individuals working in Germany regardless of their nationality. Additionally, the location of their employing entity is not taken into account, so even foreign companies located abroad and assigning employees to Germany are legally required to pay the statutory minimum wage during an assignment.
On January 1, 2015, Germany’s law on the statutory minimum wage became effective. The law implements – for the first time in Germany – a general statutory minimum wage for all occupations and it applies to all individuals actually working in Germany, including European Union (EU) and European Economic Area (EEA) nationals, as well as Swiss nationals and other third-country nationals1. Until a possible revision (with effect as of January 1, 2017), the statutory minimum wage is EUR 8.50/working hour (gross).
The new German statutory minimum wage affects all individuals working in Germany regardless of their nationality. Additionally, the location of their employing entity is not taken into account, so even foreign companies located abroad and assigning employees to Germany are legally required to pay the statutory minimum wage during an assignment. Statutory minimum wages are subject to decisions of the Federal Employment Agency (FEA) regarding labor market-access of non-EU2/non-EEA/non-Swiss nationals. If statutory minimum wages will not be paid during an assignment, the FEA will deny its internal approval for the issuance of a required residence title.3
Currently, it is not clear if and to what extent assignment-related allowances (e.g., housing, per diems, etc.) may be considered when determining whether the statutory minimum wage is legally attained. In some cases, assignees to Germany come from low-wage countries4 and they are paid allowances to raise their wage to a comparable level. A statement5 issued by the German government (Bundesregierung) during the law-making procedure indicates that allowances that are paid, but not tied to the performance of “additional” work, shall not be considered.
Since the end of 2014, the FEA requires companies to pay allowances for the entire assignment period indicated with the application. Temporary project workers who are travelling back and forth between their home countries and Germany must receive their full allowances during the entire assignment period. Otherwise, one of the main requirements for a German residence and work permit will not be fulfilled, which might lead to the rejection of the application.
Differing terms in an employment contract and an assignment letter for the same employee that do not comply with the statutory minimum wage are considered as “non-effective” from a German legal stand-point, which means basically that the employee has the right to claim the statutory minimum salary guaranteed by law despite the apparent discrepancy in the actual agreements. In addition, it is important to note that as long as an employee is entitled to be paid according to minimum wage conditions, the employee can sue his employer in Germany – even if that employer is located abroad – if he is not paid properly under the terms of the law.
Based on the legally required hourly rate of EUR 8.50, the monthly rate the FEA requires amounts to EUR 1,473 based on a 40-hour work-week.
Please note that the FEA will evaluate whether a third-country national is being paid comparably to local colleagues working in the same position with a comparable professional background. Subject to the approval process, therefore, is the comparability of working conditions. The FEA will compare salaries for local hires and assignees during an assignment to Germany not only with local salary levels; the FEA will also investigate if the third-country national will receive the statutory minimum wage. Thus, the evaluation will encompass two stages:
Evaluation, if statutory minimum wage level is met
EUR 8.50/hour (gross)
EUR 1,473/month (gross)
Evaluation, if salary is comparable to the salary of local colleagues
|No fixed wage level, depending on an Individual assessment|
In light of the aforementioned statement from the German government, it is currently not clear if and to what extent allowances can be utilized to boost basic salaries paid by companies with employees from low-wage countries. For the second stage of the evaluation, this has regularly been accepted by the FEA; however, the statement from the German government may prevent the FEA from considering allowances for the first stage of the evaluation, as well as the second stage.
This could, for example, affect allowances such as:
KPMG Law has engaged in discussions with the FEA and, subsequently, the German Ministry of Labor and Social Affairs (Bundesministerium fuer Arbeit und Soziales, or “BMAS”), which has responsibility for the FEA. For the time being it is likely that the FEA will consider allowances – as in the past – in respect of the statutory minimum wage. We have been informed6 that the FEA has not finally decided on a revision of its approach (including the evaluation at the first stage), but it is aware of the government’s statement. The internal consultation underway at BMAS will hopefully yield clarification and establish a clear decision process to be followed by the FEA.
(According to the information from the FEA, allowances will be considered as in the past for renewals, if they were also considered for the initial internal approvals.)
However, since companies are not likely to postpone assignments until answers are forthcoming from the German authorities, it is advisable, in the meantime, to consider structuring assignments on the basis of a temporary German employment contract in addition to the contract with the home entity in case the employee is definitely needed in Germany and a delay is not possible.
1 As defined by EU law, third-country nationals are nationals of non-EU countries.
2 Exceptionally, this also applies to Croatian nationals. They are restricted in terms of labor market access at least until June 30, 2015, and may require a special EU work permit. If so, the requirements for non-EU/non-EEA/non-Swiss nationals apply to the special EU work permit for Croatians analogously.
3 For example, a national visa or a combined residence and work permit.
4 For example, the BRIC countries (Brazil, Russia, India and China).
5 BR-Drs. 18/1558, page 67.
6 KPMG Law initiated an official request with the FEA regarding the handling of future cases in respect of the statutory minimum wage in general and a first call took place on January 7, 2015. In accordance with the German Administrative Law (§ 25 Verwaltungsverfahrensgesetz) an “abstract” request can be raised to the German federal authorities for discussion. Subsequent to the call, KPMG Law submitted a broad list of possible allowances and requested legal opinions in this regard. On January 12, 2015, KPMG Law was informed by the FEA that the request had been brought to the attention of the BMAS.
For additional information or assistance, please contact your local GMS or People Services professional or one of the following professionals with KPMG Rechtsanwaltsgesellschaft mbH in Germany:
Dr. Thomas Wolf
Tel. +49 (0) 30 530 199 300
Tel. +49 (0) 69 95 11 95 090
The information contained in this newsletter was submitted by the KPMG International member firm in Germany.
© 2017 KPMG AG Wirtschaftsprüfungsgesellschaft, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.