Compliance with and enforcement of minimum wages in Germany
Frederic Hüttenhoff, Institute for Work, Skills and Training, University of Duisburg-Essen
Claudia Weinkopf, Institute for Work, Skills and Training, University of Duisburg-Essen
» Full paper: ilera-2019-paper-144-Huttenhoff.pdf
The statutory minimum wage of 8.50 € in Germany had been introduced in January 2015 after more than a decade with very controversial debates. Moreover, in a couple of industries employer associations and unions have agreed upon sector-specific minimum wages typically far above the statutory minimum wages in Germany. In our paper, we raise issues of compliance and enforcement based on a review of the broad international literature on issues of compliance and enforcement of labour standards on the one hand and on findings of a 3-year qualitative research project funded by the Hans-Boeckler-Foundation (HBS) on the other hand (Bosch et al. 2018).
The Financial Control of Illicit Employment (Finanzkontrolle Schwarzarbeit - FKS) is responsible for monitoring the compliance with the statutory minimum wage and the higher minimum wages agreed upon in several sectors in Germany. However, there are repeated indications that the current control strategy and personal capacities of customs authorities are not sufficient to detect and penalize infringements effectively. It is also frequently critisized that employees in Germany still have to assert their wage claims at courts on an individual basis. Although the trade unions provide important support, this is completely lacking from the state. Experience at home and abroad shows, however, that the acceptance of minimum wages by companies is strongly influenced by whether they are effectively observed and enforced.
International studies on the strategies of supervisory authorities responsible for monitoring compliance with minimum wages have shown that strategic enforcement is important to achieve the largest and most sustainable changes in corporate behaviour with limited resources (Weil 2010 and 2015). The aim is to encourage leading companies to set and control internal standards that must be followed by subcontractors along the value chain (Hardy/Howe 2015). In addition, “cooperative enforcement” with an involvement of public, private and civil society actors and associations has proved to be more effective compared to separate enforcement solely by state authorities (ILO 2013; Amengual/Fine 2017).
Our qualitative study focused on three industries – construction, hospitality and meat processing. All three sectors have been included in the Act to Combat Illicit Work (Schwarzarbeitsbekämpfungsgesetz) and are subject to special monitoring by the FKS. Despite different conditions and structures, all three sectors face similar problems in terms of compliance with and enforcement of minimum wages. In particular, inaccurate information on working hours and unpaid overtime (as well as unpaid pre- and post-work) are important gateways for non-compliance with minimum wages. In addition, various deductions from wages, e.g. for "bad work", working materials or board and lodging, also prove to be recurring problems. In our paper, we will name approaches how the control, observance and enforcement of minimum wages can be more successful.
Literature
- Amengual, Matthew / Fine, Janice (2017): Co-enforcing labor standards: the unique contributions of state and worker organizations in Argentina and the United States. In: Regulation and Governance 11 (2): 129-142.
- Bosch, Gerhard / Hüttenhoff, Frederic / Weinkopf, Claudia / Kocher, Eva / Fechner, Heiner (2018): Kontrolle und Durchsetzung von Mindestarbeitsbedingungen: Einhaltung von Mindestlohnansprüchen am Beispiel des Bauhauptgewerbes, der Fleischwirtschaft und des Gastgewerbes. Düsseldorf: Hans-Böckler-Stiftung. Forschungsförderung Working Paper Nr. 95. https://www.boeckler.de/6299.htm?produkt=HBS-007033
- ILO (2013): Labour inspection and undeclared work in the EU. LAB/ADMIN Working Document No. 29. Geneva. https://digitalcommons.ilr.cornell.edu/intl/275/
- Hardy, Tess / Howe, John (2015): Chain Reaction: A Strategic Approach to Addressing Employment Non-Compliance in Complex Supply Chains. In: Journal of Industrial Relations 57 (4): 563-584.
- Weil, David (2010): Improving Workplace Conditions through Strategic Enforcement: A Report to the Wage and Hour Division. https://journals.sagepub.com/doi/abs/10.1177/0022185618765551
- Weil, David (2015): Strategic Enforcement in the Fissured Workplace. John T. Dunlop Memorial Forum. Harvard Law School.
