What are the new rules on minimum wages for workers in the European Union?

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The EU has adopted a new directive designed to promote adequate statutory minimum wages in all 27 member states. But the new levels will not be the same in each country, nor will the same rules exactly apply.

What is the scope of the new rules?

The new directive is designed to make sure that the national minimum wage in each country is adequate. But as of the beginning of 2023, five member states:

• Denmark, Italy, Austria, Finland, Sweden

don't have a national minimum wage at all. In these countries, the minimum wage is protected exclusively via collective agreements negotiated with trade unions.

These countries will not be obliged to introduce the new rules. Instead, they'll be asked to report on the lowest pay rates set by those collective agreements and on the wages of those not covered by them. The Commission will analyse this data and report to the Council and the European Parliament.

Of the seven potential candidate countries, five have a national minimum wage (Montenegro, North Macedonia, Albania, Serbia and Turkey), while two do not (Bosnia and Herzegovina, Kosovo).

How will national variations be taken into account?

Monthly minimum wages vary widely across the member states. For example, the minimum wage is €2387 in Luxembourg, €1981 in Germany, €620 in Latvia and €399 in Bulgaria.

The EU countries with a national minimum wage above €1500 are:

• Luxembourg, Germany, Belgium, Netherlands, Ireland, France

The EU countries with a national minimum wage higher than €1000 but lower than €1500 per month are:

• Slovenia, Spain

And the EU countries with a national minimum wage below €1000 are:

• Cyprus, Portugal, Malta, Lithuania, Greece, Poland, Estonia, Czechia, Slovakia, Croatia, Latvia, Romania, Hungary, Bulgaria

However, when the cost of living is taken into consideration, the disparities are less flagrant. With a benchmark Purchasing Power Parity Standard of 1000, the national minima vary from PPPS 717 in Bulgaria to PPPS 1843 in Germany. The following EU countries have minimum wages above the PPPS 1000 benchmark:

• Germany, Luxembourg, Belgium, the Netherlands, France, Slovenia, Ireland, Poland, Spain, Lithuania, Romania, Cyprus

While the following countries have minimum wages below the PPPS 1000 benchmark:

• Portugal, Croatia, Malta, Hungary, Czechia, Greece, Estonia, Slovakia, Latvia, Bulgaria

To take into account the different circumstances of each country, determining the level of the minimum wage will remain a national competence.

However, it will have to be set within certain parameters.

How do you define an adequate minimum wage?

Member states will have to guarantee that their national minimum wages allow workers to lead a decent life, taking into account the cost of living and wider pay levels.

For the adequacy assessment of their existing statutory minimum wages, member states may either:

• establish a basket of goods and services at real prices
• set the minimum to at least 60% of the gross median wage and 50% of the gross average wage

How collective bargaining helps maintain standards

Sectoral and cross-industry level collective bargaining is considered an essential factor for achieving adequate minimum wages.

Collective bargaining is the process whereby working people, through their representatives, negotiate contracts with their employers or employer organisations to determine their terms of employment, including:

• pay and benefits
• hours and leave
• job health and safety policies

Studies have shown that countries with high collective bargaining coverage tend to have a smaller share of low-wage workers and higher minimum wages than those with low collective bargaining coverage.

The new rules seek therefore to expand the practice. In countries where fewer than 80% of workers are covered by collective bargaining, member states – with the involvement of social partners – will have to establish an action plan to increase the coverage.

The action plan will need to set out a clear timeline and specific measures to progressively increase the rate of collective bargaining coverage.

How rules on statutory minimum wages in Europe will be enforced

The agreed text introduces the obligation for EU countries to set up an enforcement system, including reliable monitoring, controls and field inspections, to ensure compliance. Among the issues that must be monitored are:

• abusive sub-contracting
• bogus self-employment
• non-recorded overtime
• increased work intensity

Member states will have to monitor the coverage and adequacy of minimum wages. In addition, they'll be asked to report every two years to the Commission on the rate of collective bargaining coverage, the level of the statutory minimum wage and the share of workers covered by the statutory minimum wage.

When will the directive on adequate minimum wages come into force?

With 505 votes in favour, 92 against and 44 abstentions, the EU Parliament adopted new legislation in June 2022.

The final text of the directive was then adopted bythe Council on 4 October 2022. 

Member states now have two years from that date - so until October 2024 - to transpose the directive into national law.