The first German Minimum Wage Act (MiLoG) came into force at the start of 2015. However, many questions remain unresolved and foreign employers in particular are objecting to its application. The German Confederation of Trade Unions (Deutsche Gewerkschaftsbund – DGB) reports on its website attempts to get around the payments by issuing cinema vouchers or sauna tickets .
Besides the level of remuneration under the MiLoG, Dutch employers also have to fear the new reporting and record-keeping requirements in particular.
In a previous article, the debate surrounding the applicability of the MiLoG to foreign employment contracts was explained. In practice, this raises the far more important question of the consequences of the applicability of the MiLoG for foreign business-owners. This question will be answered in this article.
1. Minimum wage
You might think that Dutch business-owners would be indifferent to the introduction of the German minimum wage. After all, a statutory minimum wage has existed under Dutch employment law for several years. However, this is where the first error lies. A comparison of the contents of the two sets of provisions reveals that, unlike the Dutch legislation, the MiLoG does not allow for differentiation based on the age of the employees. The German statutory minimum wage applies in principle to all employees aged 18 or over, specifying a standard hourly wage of €8.50. The Dutch Act specifies a similar amount, but only for employees aged 23 or over. The Dutch Act therefore has a narrower scope than the MiLoG.
A second point is that infringement of the German statutory provisions regarding the minimum wage can lead to a horrendous fine of up to €500,000.
2. Reporting requirements
Besides the provisions regarding the minimum remuneration, the MiLoG also contains new recording and reporting requirements. Although these requirements have not attracted much attention in the international debate surrounding the MiLoG, the author believes that Dutch employers in particular should object to these requirements very strongly. These requirements also apply following the implementation of the MiLoG.
Perhaps the most important provision, which also carries a possible fine, is the reporting requirement with respect to German customs to tackle illicit employment (section 16 MiLoG). Companies falling within the scope of this provision and employing or hiring out employees in the relevant sectors must declare the relevant employee data to the customs authorities before work commences in Germany.
To make it easier to fulfil these reporting requirements, the customs authorities have prepared a form, but this is only available in German and does not answer the question of whether the reporting requirement applies to the sector in question. The Dutch employer has fulfilled his duties initially by handing in the relevant form. However, based on the declaration, the MiLoG also grants the German authorities the power to demand that the employer hand over all employment contracts and payslips for the employees concerned. Foreign employers must comply with this request from the German authorities, which also carries a possible fine, and supply the relevant documents in German.
This provision could also be criticised in respect of European legislation and certainly represents a substantial barrier to access to the German market for foreign business-owners. However, pending a final ruling by the European Court of Justice, employers must comply with these requirements.
3. Conclusion and recommendations
The conclusion of this review for foreign employers is crystal clear. For the time being, it must be assumed that the MiLoG also applies to Dutch employment contracts. This means that the remuneration of employees working in Germany must be carefully scrutinised and adjusted if necessary in line with the requirements of the Arbeitnehmerentsendegesetz and the MiLoG.
However, the reporting requirements under the MiLoG are just as important. In view of these requirements, it is advisable for all Dutch employers to engage a German lawyer to establish whether their own company is affected by these reporting requirements. If so, the corresponding reporting requirements should be fulfilled by the Dutch employer, otherwise they will face a fine of several tens of thousands of Euros.
As this subject is highly topical, the author will provide regular updates to this article. Any questions can of course also be addressed to Dirkzwager’s German Desk.