Business Law Articles
By Dr. Eric Uftring – German Attorney at Law at WINHELLER
A recent court judgment concerning the legal obligation in Germany to pay a minimum wage of € 8,50 per hour can help employers deciding when to disburse bonus payments such as Christmas and holiday bonuses. Therefore, the employer has to figure out for what purpose he pays the bonuses.
Qualification of bonus payments as compensation for performed work
In the case at issue, the German plaintiff was entitled to a Christmas and holiday bonus according to her German work contract. The bonuses were not paid at once but spread over the year in monthly rates. The plaintiff sued her employer as her monthly wage was slightly lower than the legal minimum wage. In her opinion, the bonus payments must not be taken into account in the calculation of the average hourly wage. However, the Federal Labor Court decided that the bonus payments are part of the wage if they are paid as an extra compensation for the performed work. Only if the bonuses are paid due to a legally intended purpose (such as night work bonuses) or completely regardless to the employees performed work, they are not taken into account concerning the obligation to pay the minimum wage.
Monthly payments are better for employers than payments at once
If bonus payments can be qualified as compensation for performed work, the time of disbursement of the bonuses plays a decisive role. The crediting of wage and bonus payments is only made within a period of two months after the performance of the employees work. That means that bonus payments that are disbursed at once can only be taken into account for two months. As a result, it is much more advantageous for employers in Germany if they spread the bonus payments in monthly rates over the year. In this way enterprises can reduce their expenses for wages in Germany.
If you have any questions about minimum wages as well as labor law in Germany, our specialist lawyers for labor and employment law can help you with any legal issue. Please do not hesitate to contact us and we will be happy to assist.