The European Court of Justice (ECJ) has ruled in the case Commission of the European Communities v Federal Republic of Germany that member states of the European Union (EU) are not obliged, when checking to ensure that the minimum wage is being paid to workers posted from another member state, to take all allowances and supplements into account.

The Posted Workers Directive requires the legislation of each EU member state to provide a core of mandatory rules on minimum protection with which employers in one member state must comply when they send workers to work in another member state. This requirement covers, among others, provisions relating to the minimum wage. However, if the member state to which a worker belongs provides more advantageous provisions than the member state to which the worker is posted, the home provisions apply.

The European Commission (EC) brought an action against Germany in 2002 for failure to recognise all of the allowances and supplements paid by employers as counting towards the minimum wage. In Germany, the national minimum wage in the construction industry is governed by a national collective agreement under which only the hourly pay and a specific construction industry bonus count towards the minimum wage. Additional bonuses for, among other things, heavy work and additional working hours are not included. The provisions of the collective agreement are complicated by the fact that it does not define the minimum wage in absolute terms but relates it to the remuneration payable by the employer and the service to be provided by the worker.

The EC's concern was that other member states do require such allowances and supplements to count towards the minimum wage, with the result that the other member states are obliged to pay more to their workers posted to Germany than employers in Germany are required to pay in order to ensure compliance with Germany's rules.

Germany rejected the complaint and argued that hours worked outside normal working hours that involve requirements of a particularly high standard in terms of quality of results or that involve particular constraints and dangers have a greater economic value than normal working hours and that bonuses relating to such work should not be taken into account for the purpose of calculating the minimum wage. This argument means that, when a worker is rewarded for working to a higher quality standard than is required under the contract, or is rewarded for working in conditions that go beyond the conditions foreseen by the contract, such payments should not be considered in determining compliance with minimum wage rules for work performed under the contract.

Since the legal proceedings began, Germany has made changes to the collective agreement so that allowances and supplements paid by an employer that do not alter the relationship between the service provided by the worker and the consideration which he receives in return will count towards the minimum wage.

However, the ECJ disagreed with the EC's principal argument. It found that it is entirely normal that, if an employer requires a worker to carry out additional work or to work under particular conditions, compensation should be provided to the worker for those additional services without having to be taken into account for the purpose of calculating the minimum wage. The Court decided that the Posted Workers Directive does not require that forms of compensation which alter the relationship between what is provided and what is received in return should be treated as elements of the minimum wage.

The UK's national minimum wage legislation recognises the difference that exists between payments made for the performance of the contract and other payments made at a higher rate for work that exceeds the requirements of the contract, such as quality bonuses and bonuses for dirty, heavy or dangerous work. Regulation 31 of the National Minimum Wage Regulations 1999 requires a number of different kinds of payments to be deducted from gross pay before compliance with the minimum wages rules is checked. These include:

• time work that involves particular duties that is paid for at a higher rate per hour than the lowest rate per hour payable for time work worked that involves those duties, and
  
  
• output work that is paid for at a higher rate than the normal rate applicable to that work because it is done at a particular time or in particular circumstances.

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...back to 21 April 2005

Sources:
Commission of the European Communities v. Federal Republic of Germany
Recent Case-Law - Results