Uncovering Minimum Wage Fraud in Germany's Workforce
Multitudes of workers deprived of legally mandated minimum wage earnings.
Minimum wage fraud is an unfortunate reality that surfaces from the shadows across industries. Germany sets the minimum wage at €12.82 per hour since 2022, yet hundreds of thousands of eligible workers still find themselves short-changed1. Fear of losing employment often compels affected workers to actively participate in these fraudulent practices.
How Widespread is the Issue?
Minimum wage violations unfold in secrecy, making precise figures almost impossible. The German Institute for Economic Research (DIW) reports that around 2 million people earned below minimum wage in 2021, while another study based on data from employers suggests nearly 800,000 individuals1.
The Watchdogs: Customs Inspectors and DIW
Protecting the integrity of the Minimum Wage law is the responsibility of the Financial Control Schwarzarbeit of the Customs (FKS). Their efforts led to 2,759 administrative sanctions against non-compliance in 2021. However, DIW reveals a loophole: the lack of suitable documentation and traceability[2].
Bypassing the Minimum Wage: Tactics employed
Customs inspectors have identified various deceitful practices aimed at dipping below the minimum wage, such as:
- Inaccurate recording or absence of working hour records. Hours are manipulated, breaks are not calculated correctly, or preparation times are ignored, all in violation of labor law.
- Undercounting of on-call and preparation times or 'empty runs'.
- Misclassifying employees as interns, apprentices, or independent contractors.
- Opaque business activities to evade sector-specific minimum wages.
The portal Mindestlohnbetrug.de lists additional strategies. For instance, unrealistic performance requirements that force workers to put in additional hours without extra pay. Other tactics include deducting money for supposedly bad work, tools, and work apparel[2]. Further, some employers charge their employees excessive costs for materials or food, which they subsequently deduct from wages[2].
In the construction industry, companies may even orchestrate insolvency tactics, leaving workers, particularly those from abroad, with little chance of recovering pay.
The Call for More Diligence in Inspections
Economists emphasize the importance of prompt, thorough inspections, warning that a higher minimum wage might lead to an increase in moonlighting and other labor market distortions[2]. Despite the challenges, efficient enforcement of the Minimum Wage law remains essential to defending the rights of employees and ensuring fair wages for all.
Minimum Wage Exemptions
Though most workers are entitled to minimum wage, certain groups are exempt from this entitlement. Trainee workers, self-employed individuals, workers in voluntary service or workshops for people with disabilities, volunteers, participants in employment-focused programs, and long-term unemployed in the first six months after returning to employment fall under these categories[2].
In fields with a specified sectorial minimum wage, long-term unemployed workers receive that wage instead[2]. Trainees may also claim minimum wage under certain conditions[2].
[2]: https://www.zeitufer https://www.zeitufer.de/wirtschaft/wo-mindestlohn-beschaedigt-wohlfahrt-unterdrueckt-hartz-4~1661680.html
- The German government and community, in collaboration, could consider implementing stricter vocational training programs to equip workers with skills that would increase their value in the job market, thereby reducing their vulnerability to minimum wage fraud.
- In light of the extensive minimum wage violations prevalent in Germany, it's crucial for the finance ministry and politics department to advocate for increased funding for the Financial Control Schwarzarbeit of the Customs (FKS) to strengthen their capabilities in carrying out thorough inspections and vetting General-news about business activities suspect of Minimum Wage Fraud.
