Ne
ws

Minimum Wage Increase as a Risk Factor for Minimum Wage Violations?

Experts predict that raising the minimum wage to €15 per hour will create incentives for undeclared work. However, any change to the minimum wage already carries a criminal risk:

If wages are not adjusted in a timely manner, the employer will be accused of withholding and misappropriating wages (Section 266a of the German Criminal Code) and failing to pay the minimum wage (Sections 10, 23 of the Posted Workers Act).

While the failure to pay the minimum wage is only punishable as an administrative offense under the Posted Workers Act,

Any employer who provides incorrect information to the agencies responsible for collecting social security contributions regarding facts relevant to social security law, thereby withholding social security contributions, is liable to prosecution under Section 266a of the German Criminal Code. This applies regardless of whether wages are actually paid. The investigating authorities regularly assume intent on the part of the employer.

A common consequence of proceedings for undeclared work is the employer's liability for the income tax that should have been paid on the minimum wage. If no income tax was paid, the employer then faces criminal tax proceedings for income tax evasion.

However, legal proceedings for minimum wage violations are not quite so simple in practice. Details regarding the type and scope of employment, the employer's understanding of the intentional nature of the action, or the calculation of the damages under social security and tax law can provide starting points for a successful defense.