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Minimum wage – taking into account vacation pay and Christmas bonus

Germany: Special payments, such as vacation pay and Christmas bonus can – under certain conditions – be taken into account when calculating the minimum wage.

German courts are ever busier clearing up open questions with regard to the minimum hourly wage of EUR 8.50, in force since 2015.

The Federal Labour Court (BAG) has now clarified under what conditions special payments such as vacation pay and Christmas bonus can be taken into account when calculating the minimum wage.

This applies – only – if the special payment is being paid as consideration for work done and if it is paid to the employee at the decisive maturity date effectively and irrevocably.

In the case of vacation pay and Christmas bonus, these conditions are usually met if payments - are made monthly pro rata and - do not serve any other purpose (e.g. compensation for vacation expenses or rewarding company loyalty).

When drafting contractual terms special attention must be paid to the exact wording in order to ensure recognition.

Source: BAG decision of 25.05.2016, Az: 5 AZR 135/16