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Directive on adequate minimum wages within the European Union

Directive on adequate minimum wages within the European

On 28 October the EU Commission made a proposal for an EU Directive to ensure that workers in the European Union are protected by adequate minimum wages, allowing for a decent living wherever they work.

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Mădălina Racovițan

Tax Partner, Taxation Services, Head of People Services

KPMG in Romania

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How can the proposal secure better wages and working conditions in the EU?

The proposal will contribute to better living and working conditions in the Union in three ways:

  1. By improving statutory minimum wages (where they exist) to make them more adequate.
  2. By the promotion of collective bargaining in all Member States.
  3. By better enforcement and monitoring in all Member States.

What does the Directive ask Member States to do?

The Directive proposes a combination of policy measures to improve minimum wage adequacy and increase access to minimum wage protection. Some measures apply only to those countries with statutory minimum wage setting systems and others to all Member States.

All Member States will be asked to:

  • Take measures to (further) increase the coverage of collective bargaining. If collective bargaining coverage is below 70%, Member States will also have to provide for a framework of enabling conditions for collective bargaining and establish an action plan to promote collective bargaining.
  • Enhance enforcement and monitoring. Member States will need to update the Commission each year with their national minimum wage protection data via annual reporting and structured dialogue.

Member States with statutory minimum wages will be additionally asked to:

  • Put in place governance elements such as: 
    • stable and clear criteria for minimum wage setting and adjustments - The national criteria should include at least the purchasing power of minimum wages, the general level of gross wages and their distribution, the growth rate of gross wages, and labour productivity developments.
    • indicative reference values to guide the assessment of adequacy - The Directive does not prescribe a specific indicator. The use of indicators commonly used at international level, such as 60% of the gross median wage and 50% of the gross average wage, can help Member States to assess whether a minimum wage is fair compared to the wages of other workers in the same country.
  • Limit the use of variations of and deductions from the statutory minimum wage for specific groups of workers.
  • Ensure the effective involvement of social partners in statutory minimum wage setting.
  • Ensure the effective access of workers to statutory minimum wage protection

Is the EU harmonising the level of minimum wages across the EU?

The proposal does not seek to harmonise the level of minimum wages across the EU, nor to establish a uniform mechanism for setting minimum wages in the Member States. Minimum wage protection will continue to be provided through collective agreements or through legal provisions, according to national traditions and with full respect for national competences and social partners' autonomy.

What are the next steps?

The Commission's proposal will go to the European Parliament and the Council for approval. Once adopted, Member States will have two years have to transpose the Directive into national law and communicate the relevant texts to the Commission.

 

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