European Trade Union Institute, ETUI.

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The state of labour market reforms - background summary

There has been relatively little labour market reform in Germany in the past few years. The most high-profile piece of legislation has been the Act introducing a statutory national minimum wage. These provisions are part of legislation on strengthening bargaining autonomy, which came into force in August 2014. Other areas of legislative change include temporary agency work, quotas for women on company boards and legislation clarifying the application of collective agreements.

Statutory national minimum wage

  • Probably the most high-profile labour market-related piece of legislation in recent years is the law introducing a statutory national minimum wage (Mindestlohngesetz) for the first time in Germany. The new minimum wage came into force in 1 January 2015 at a rate of €8.50 an hour.
  • On 28 June 2016, the minimum wage commission decided to recommend an increase in the minimum wage to €8.84 an hour from 1 January 2017.
  • The new statutory national minimum wage has had a number of positive effects. It has increased wages in low-wage sectors; it has resulted in the transformation of many so-called Minijobs into more regular forms of employment; and it has had a positive effect on collective bargaining in terms of increasing wages in the lowest wage categories of collective agreements. For more details, see the 2016 report by the WSI. Further, there are no reports of negative effects on employment as a result of the introduction on the minimum wage.
  • The introduction of the minimum wage is considered to be a huge achievement for the unions, as they have campaigned for many years to achieve this goal, which they view as a key element of social progress.
  • According to Federal Employment Agency, around 4.4% of employees receive the statutory national minimum wage. One important effect of the minimum wage appears to be a decline in minijobs between 2014 and the first quarter of 2015. The Institute for Employment Research, part of the Federal Employment Agency, states that data from the employer survey, the IAB Establishment Panel shows that 12% of all establishments should be paying the minimum wage as they have at least one worker earning below €8.50 per hour in 2014. However, these data do not cover Mini-jobbers and so are likely to underestimate the total number of workers who earn below this threshold.
  • However, there have been some criticisms of the minimum wage, mainly in the area of the employer obligation to keep a record of their employees’ working hours, including those on Minijob contracts, who can earn up to €450 a month, with social security contributions paid by the employer. In addition, there are criticisms of employers’ liability for subcontractors. The minimum wage has also been criticised by Polish and Czech employer representatives in the context of foreign drivers transiting through Germany. Part of the Act has been suspended pending clarification at European level.

Quota for female board members

  • In March 2015, a Bill was passed setting a 30% quota for women on company boards. The new legislation, which entered into force at the beginning of 2016, sets the quota for new members of supervisory boards in just over 100 market-listed firms that are also subject to co-determination. Medium-sized companies, of which there are an estimated 3,500, will be required to develop their own targets for the share of women on their executive and supervisory boards and in their two highest management tiers.
  • Figures from the German Institute for Economic Research (DIW) show that in the 490 companies listed on the German stock market DAX-30, the share of female executive board members actually declined from 7.8% in late 2012 to 5.5% in July 2014. However, it has now climbed to 10% by the end of 2015. By contrast, women accounted for 27% of all supervisory board members at the end of 2015.
  • New legislation, the Act on collective agreement unity (Tarifeinheitsgesetz) was passed by on 22 May 2015. Under this new legislation, if two non-identical collective agreements from different unions in the same establishment conflict and this situation is challenged by one of the bargaining parties (employer or trade union), only the collective agreement of the trade union with the most members in the establishment will apply.
  • However, the new Act has been controversial: when it was signed, a number of trade unions, such as the dbb confederation, its affiliated union the German Engine Drivers’ Union (GdL) and the doctors’ union Marburger Bund, said that they would make a constitutional complaint against it. Other trade unions opposing the legislation include the service sector union Ver.di, the food workers’ union NGG and the Christian Federation of Trade Unions (CGB). Trade unions are worried that the new law will limit their ability to conclude collective agreements.
  • However, the energy and chemical workers’ union IG BCE, the metalworking union IG Metall and the construction union IG Bau have welcomed the Act, as has the Confederation of German Employers' Associations (BDA).

Act on collective agreement unity

Strengthening bargaining autonomy

Legislation strengthening bargaining autonomy (Gesetz zur Stärkung der Tarifautonomie) came into force in August 2014 along with the provisions on the national minimum wage. The legislation contains new rules on the extension of collective agreements, with the aim of increasing extension by easing the rules governing extension. The extension of collective agreements has declined in recent years. Previously, a collective agreement could only be declared generally binding if it covered more than 50% of employees in a sector. Under the new law, the prerequisite for an extension is that it is ‘of public interest’, for example to protect working conditions in a sector or to prevent wage dumping.

Temporary agency work

  • One area of proposed new legislation is a Bill on temporary agency work and service contracts. This Bill provides for the introduction of a maximum hire period of 18 months (although collective agreements may derogate from this). If the maximum hire term is exceeded, an employment relationship with the hiring business is deemed to be in place, provided the temporary employee does not object to this. Legislation dating from 1972 set the maximum hire term at three months and this was gradually extended to 24 months before being abolished completely at the end of 2003.
  • A first draft of this Bill was rejected in December 2015 and a revised version was expected to be passed in spring 2016. However, the Bill has been halted before reaching the federal cabinet for debate.