The cost of living is increasing, particularly food and fuel costs against the backdrop of the Ukraine war, and the minimum wage is rising again in Germany. From 1 October 2022, employers must pay their employees at least EUR 12 per hour. The minimum wage was already increased to EUR 10.45 on 1 July 2022. This might mean changes to employment contracts, especially for ‘mini-jobs’, which have advantageous tax and social security status and which are currently limited to a maximum of EUR 450 per month.
Minimum wage increases matter for many employers and employees: Around 22% of all employment relationships in Germany are remunerated at the minimum wage. The statutory minimum wage applies (with few exceptions) to all employees.
The minimum wage rise increase applies regardless of the type of employment and is particularly significant for ‘mini-jobs’. This is because if the number of hours worked remains the same, the previously applicable EUR 450 marginal earnings threshold for mini-jobs could quickly be exceeded, affecting liability for wage tax and social security.
But the legislator has thought ahead: at the same time the minimum wage is increased to EUR 12 on 1 October 2022, the marginal earnings threshold will also be raised to EUR 520.
Another novelty: the marginal earnings threshold will be dynamic in the future. It will always be based on a weekly working time of ten hours at minimum wage conditions. What was unfortunate about the previous legal regulation was that every increase in the minimum wage led to a reduction in the maximum number of regular working hours possible within the mini-job framework, given the rigid EUR 450 limit that applied previously.
In future, the marginal earnings limit cannot be exceeded more than twice per payroll year (previously it was up to three times a year). In addition, additional earnings may not exceed EUR 520 per month. That means that in future, earnings of up to EUR 1,040 per month will be allowed a maximum of two times per payroll year. In justified exceptional cases, annual earnings can be up to EUR 7,280, provided that the excess was unforeseeable.
Employees subject to compulsory insurance who are paid between EUR 450 and EUR 520 on the cut-off date of 30 September 2022 will still be considered as employed subject to compulsory insurance until 31 December 2023. However, it is possible to apply for an exemption from compulsory insurance.
In view of these changes, many employers are currently working out what to do about their ‘EUR 450 contracts’. The weekly working hours of many marginally employed individuals had to be reduced as early as 1 July 2022 when the first minimum wage increase took effect to comply with the marginal earnings threshold. Fixed working hours that exceed the minimum wage may still be agreed, especially in older employment contracts. No transitional provisions have been made relating to exceeding the marginal earnings threshold, so employers must act.
Changes in weekly working hours must be implemented by mutual agreement. This can be achieved, for example, through a supplementary agreement to the employment contract.
Given the dynamic link introduced between minimum wage and the marginal earnings threshold from 1 October 2022, employers will need to adapt their contracts in future. To comply with the marginal earnings threshold, ten hours’ weekly working time should not be exceeded. For gross monthly pay, a dynamic reference to the statutory regulations is recommended.
It should not be necessary to involve the works council when making these changes.
If employees are employed for under ten hours per week, it is advisable to link the hourly wage to the current minimum wage instead of referring to the marginal earnings threshold.
The rising minimum wage means employers must act. The ‘EUR 450 job’ is becoming the EUR 520 job’. Complying with this limit is in both the employee and the employer’s interests, meaning it should be possible to find amicable solutions for adjustments to existing employment contracts. Employers should also adapt their model contracts so that future minimum wage increases do not cause any problems.
Future minimum wage increases will continue to be proposed by the Minimum Wage Commission, starting on 1 January 2024. The marginal earnings threshold will also ‘grow’. Employers can prepare for this now by drafting forward-looking contracts.
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