25 March 2015

Letter to America: From Germany - Minimum wage and women on boards quota

2015 sees the introduction of two major new employment laws in Germany.

New general statutory minimum wage

US employers are used to minimum wage legislation. But in Germany a national hourly minimum wage of EUR 8.50 has only just been introduced. Lucky Germans! From the start of 2015 everyone goes home satisfied with a gross hourly minimum wage of EUR 8.50. 

Actually, not quite everyone. A transition period will apply until the end of 2016, during which employers can pay less than the minimum wage on the basis of certain collective agreements. And the more unlucky Germans will not participate at all in the minimum wage scheme, including apprentices, minors, students and trainees completing a compulsory internship. 

The new legislation applies to companies of all sizes - with no exemption for small businesses. Employers face extensive record-keeping and documentation obligations intended to monitor compliance. The penalty for breach? Fines of up to EUR 500,000.

Proposed women's quota at management level

Germany’s female executives (or soon to be executives) may shortly be celebrating a new law for equal participation of women and men in leadership positions. Just as in the US, in Germany there is concern at the proportional under-representation of women at management level. In response, a new bill  which has yet to be confirmed by the second chamber of the German parliament provides for a women's quota of at least 30% of supervisory board seats in certain listed companies to be newly filled from 1 January 2016.  

This would be the first mandatory women's quota for supervisory boards in Germany. This applies to listed companies that, as a rule, employ more than 2000 staff and therefore will affect only about 100 businesses in Germany. All businesses affected are obliged to report on whether the quota has been achieved as well as the reasons for any failure to achieve it. In the event of a failure to achieve the quota, the appointment to the supervisory board will be void.

In addition, around 3,500 other businesses in Germany will be affected by other new obligations to set specific time-bound targets on how to increase the share of women on the supervisory board, the executive board and the two management levels below the executive board. Compliance with agreed target figures and time limits, as well as the achievement or failure of targets, must be published. However, the bill does not provide for any sanctions for failure to comply. As a result, the target may remain just an aspiration for now.

For further information refer to our recent Insight

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