German Parliament Approves Controversial Minimum Wage Plans

By David Knight |

German lawmakers have rubber-stamped plans to introduce the country’s first nationally-mandated minimum wage. From 2015, companies will have to pay staff no less than €8.50 an hour – although many companies will be given a two-year grace period to introduce the new rules, and there are a number of exceptions.

The plans, approved on Thursday by the German parliament, the Bundestag, form part of the agreement paving the way for the so-called Grand Coalition between the centre-right Christian Democratic Union (CDU) of Angela Merkel, together with its Bavarian sister party the Christian Social Union (CSU), and the centre-left Social Democratic Party (SPD), which took power after the federal election last September.

But the new rules have caused controversy, with some business leaders claiming they will prove harmful to the economy and cause a loss of jobs, while supporters claim they will give workers – especially younger people – a much fairer deal.

This controversy extends very much into the tech space, where a recent guest post on Silicon Allee by German Startups Group founder Christoph Gerlinger arguing that interns at early stage companies should be exempt from the minimum wage provoked a furious reaction.

Up till now, Germany has not had one single all-encompassing minimum wage; rather, individual industries were responsible for setting their own, either through trade unions or business groups.

The new rules come into force on January 1 next year, with the amount to be reviewed every 12 months. There are a number of exceptions, however, and these include interns and trainees in their first six months. Founders even may face the situation where they are legally obliged to pay themselves more than they can, if they are bootstrapping their company.

The amount laid down, €8.50, is less than the hourly rate in the UK – £6.50, or about €8.20 – and the US, which is set at $7.25 (€5.33). It is, however, less than the €9.53 an hour mandated in France. The decision will now have to be approved by Germany’s higher house of parliament, the Bundesrat, although that is likely to be a formality.