Calculation and payment of the minimum wage

• Basic principle
• Allowances and supplements
  • Examples of allowances or supplements that are always included are:
  • Examples of allowances or supplements that are disregarded:
• Christmas bonus and additional holiday pay

Basic principle

The minimum wage is a gross payment that is calculated and disbursed as a monetary consideration. An alternative non-monetary remuneration where the employer grants certain benefits, that is, in a form other than money, is not permitted. The option whereby considerations in kind made to seasonal workers, as provided for by the Minimum Wage Act, count towards the minimum wage, is not permitted for work under the Posted Workers Act or the Provision of Temporary Workers Act.

The following principles must be followed when determining the minimum wage:

Allowances and supplements

The minimum wages laid down by the Posted Workers Act and the minimum hourly rate representing the wage floor pursuant to the Provision of Temporary Workers Act, are gross hourly payments. The entitlement to receive not less than the minimum rate is not dependant on the time of day when a job is done nor on the circumstances or success of the work performance. The minimum pay entitlement shall be deemed satisfied by the employer as soon as that money has been transferred or made available to the worker for his or her free disposal.

All monetary contributions coming under the relationship of exchange between employer and employee can satisfy a worker’s minimum pay entitlement. The only monetary contributions in this context which are excepted from satisfying the entitlement are those made by the employer regardless of the execution of a certain job or in order to comply with specific legal requirements.

Examples of allowances or supplements that are always included are:

• The supplement for employees in the construction industry (Bauzuschlag),
• Allowances identified in the employment contract as the difference between the local wage and the applicable minimum wage,
• Overtime supplements,

• Allowances or supplements, the payment of which is conditional on the following:

  • more work per time unit (piecework premiums),
  • above-average quality work results (quality premiums),
  • work at special times (such as overtime, Sundays and public holidays),
  • work under difficult or dangerous conditions (e.g. dirt allowance or danger allowance).

Examples of allowances or supplements that are disregarded:

Supplements for working nights.

• Allowances which employers pay their workers to reimburse them the costs they actually incurred while working abroad (such as travel, board and lodging) and which are regulated by the relevant legislation in many countries.

  • Remuneration plus (flat) daily allowance
    Where an employer domiciled abroad pays their workers a daily subsistence allowance in addition to the regular wage during their temporary posting to Germany, and where the amount of such allowance is not broken down and it is therefore not evident which part of the allowance serves to reimburse a worker’s actual expenses and which part is meant to close out any additional disadvantages related to a deployment abroad or to balance the difference between a worker’s wage in their country of provenance and the minimum pay under German legislation, it is necessary - for the purpose of calculating those portions of the allowance that count towards the minimum wage - to view the different uses of such payment separately. In order to break down the allowance accordingly, the following criteria should be applied:

    1. Legal stipulation specifying the proportion between individual components of a daily allowance
       Where relevant legal provisions (such as the labour legislation in the country of provenance) clearly lay down how the daily allowance is structured and/or specify which portion of the allowance is allocated to the reimbursement of expenses and which portion is paid solely because of the deployment abroad, this allocation as stipulated by law shall be applied. For the purpose of determining whether the minimum wage requirement is complied with, the portion paid as reimbursement of actually incurred expenses shall be disregarded. Only the remaining portion will count towards the minimum wage entitlement.
    2. Actual expenses
       In the absence of any rules governing the composition of the daily allowance the factual circumstances should be taken into account. It means that the expenses actually incurred by the employee as a result of their posting abroad (such as the cost of travel, board and lodging) should be deducted from the full allowance amount. Where such costs make up or even exceed a worker’s full subsistence, the payment does not count towards the national minimum wage pay at all. On the other hand, where the actual expenses of an employee fall short of the allowance paid, such difference may count towards the minimum pay.
    3. Deduction for the provision of lodging and board pursuant to the Social Insurance Fees Ordinance
       sIf it is not (any more) possible to determine the expenses actually incurred by the employee, the amount of board and lodging determined in accordance with Section 2 of the Social Insurance Fees Ordinance shall be deducted from the daily allowance. Only the amount remaining after such deduction shall be taken into account when determining whether the minimum wage is indeed being paid.
  • Remuneration plus benefits in kind
    Where the employer grants an employee, in addition to the wage, benefits in kind that have a monetary value, e.g. accommodation and/or meals, such monetary value shall not be taken into account as a wage component.
  • Deduction by the employer
    Where the employer deducts the cost of benefits in kind (e.g. the cost of employer provided accommodation) from the wage, then only the sum actually paid to the worker shall count towards the minimum wage.
  • All-inclusive amount
    The employer pays an overall wage that includes both the remuneration for work and some additional amounts for employees to cover expenses for accommodation and meals themselves. No further details regarding the various components of such pay, the respective amounts where applicable, or the actual provision of board or lodging, are available. In such case an amount equivalent to the lowest applicable rate for food and accommodation paid under the Social Insurance Fees Ordinance shall be deducted and only the remaining amount be taken into account for national minimum wage purposes.

Christmas bonus and additional holiday pay

Payments such as the Christmas bonus or additional holiday pay are regarded as satisfying the minimum wage over the due period for which they are being paid (or proportionally paid, where appropriate), and only under the condition that the employee does indeed receive them irrevocably.

The one-off annual payment of a Christmas bonus in December of a given year, for example, can only satisfy the minimum wage entitlement for the month of November because the due dates of payment from January to October have already expired. Any excess, that is, an amount that goes beyond the figure needed to fulfil the minimum wage requirement, may however be carried over to subsequent periods.

Where a generally binding collective agreement provides for an additional holiday pay, such payment cannot be taken to satisfy the minimum wage requirement. Please refer to the tabular summary "Conditions of employment as laid down in collective bargaining agreements and legal provisions" to find out whether an employer is required to make an additional holiday payment.

Summary of the conditions of employment as laid down in collective bargaining agreements and legal provisions

The calculation of the minimum wage does not include employer contributions to social insurance funds.