Exposed: Thousands Still Cheated Out of Minimum Wage Despite New Government Policy
Numerous workers denied fair wages as per legal requirements
By Christina Lohner
The minimum wage debate rages on within the freshly formed federal government, as coalition negotiations continue. Currently, workers aged 18 and above are guaranteed a minimum of 12.82 euros per hour gross, with a handful of exceptions. However, numerous eligible workers are still receiving less than their due, not just due to under-the-table work, but also because of employer manipulations and shady employment relationships. Many of these underpaid workers, out of fear of losing their jobs, actively participate in this systemic fraud.
Who's Affected by Minimum Wage Cheating?
Minimum wage cheating happens behind the scenes, and exact numbers are hard to pin down, but estimates suggest that close to six percent of eligible individuals are affected, which equates to about two million people earning less than the minimum wage in 2021 according to DIW expert Johannes Seebauer. If we consider data from the early 2022 income survey, roughly 800,000 – approximately two percent of eligible individuals - received less than they were entitled to.
How is Minimum Wage Enforced?
The Financial Control Schwarzarbeit of the Customs Administration (FKS) is responsible for ensuring compliance with the Minimum Wage Act. Last year, the FKS initiated 2,759 administrative offence proceedings due to non-payment of the statutory minimum wage, as a spokesperson told ntv.de. This includes infringements, such as violations of recording obligations.
Demands for Higher Minimum Wage and Tighter Controls
"In my view, the greatest loophole for circumventing the minimum wage is the recording of working hours," explains Seebauer. "Proper documentation often does not take place and is difficult to verify or easily manipulable: breaks are not correctly calculated, preparation times are not paid, etc."
In addition to routine inspections, the FKS conducts regular nationwide and regional focus inspections. Fines of up to 500,000 euros may be imposed for violations, yet efficient controls are difficult due to a lack of personnel, according to DIW.
How is the Minimum Wage Circumvented?
Employers' strategies to dodge the minimum wage typically involve the following techniques, according to the customs administration:
- Missing, incorrect, or incomplete records of working hours
- Overlooking standby or preparation times, as well as empty runs, to exclude them from working time as per labor law
- Misclassifying employees as interns, trainees, or self-employed
- Concealing the main activity of an operation to evade branch-specific minimum wages
Lastly, job portal StepStone reported that some employers inflate the cost of materials or food, deducting these costs from their employees' wages, while in the construction industry, insolvencies are faked, leaving particularly foreign workers in the lurch.
Experts Call for Tightened Controls and Higher Minimum Wage
The customs office has encountered instances where workers agree to wages below the minimum wage during an inspection out of fear of losing their jobs. Economic experts demand stricter controls and a higher minimum wage, as they expect a rise in undeclared work due to an increase in the minimum wage.
Who is Exempt from Minimum Wage Claims?
Apprentices, the self-employed, volunteers, participants in job promotion measures, long-term unemployed in the first six months after re-entry, and workers in voluntary services or workshops for people with disabilities are all exempt from minimum wage claims, but if they work in a branch with its own branch minimum wage, they receive it immediately. Trainees have a minimum wage claim under certain conditions.
Source: ntv.de
- Minimum Wage
- Customs Officers
- DIW
Additional Insights:
Misclassification of Employment Relationships: Employers might label workers as independent contractors instead of employees, which allows them to dodge minimum wage obligations, since minimum wage protections primarily cover employees.
Payment in Non-Monetary Forms or Under the Table: Some employers evade minimum wage laws by paying wages partially or fully off the books to avoid official scrutiny.
Undeclared Work and Working Time Manipulations: Employers could underreport actual hours worked or demand unpaid overtime, making the effective hourly wage fall below the legal minimum.
Exploiting Legal Loopholes and Exemptions: There might be attempts to utilize exemptions or special conditions in minimum wage laws, for instance in probation periods or for certain job categories, to pay less.
Pressure on Workers to Accept Lower Pay: Economic conditions or threats of job loss might compel workers to accept payments below the minimum wage.
- Given the ongoing issue of minimum wage cheating, as highlighted in the community policy, it's vital that vocational training programs equip workers with the skills to identify fraudulent employment practices and assert their rights.
- As the debate on minimum wage continues, and considering the challenges in enforcement due to financial constraints, there is a need for the government to allocate more funds in the general-news budget to strengthen the Customs Officers' efforts to combat businesses circumventing the Minimum Wage Act through misclassification of employment relationships, under-the-table payments, and working time manipulations.
