Underground Wage Theft: Hundreds of Thousands Cheated Out of Minimum Wage
Multitudes deprived of legally guaranteed minimum wages
Let's talk about the hot topic of minimum wage discussions in our new government. Currently, all workers aged 18 and over are entitled to at least 12.82 euros per hour gross, with a few exceptions. But here's the kicker—hundreds of thousands of eligible claimants are getting less money for their work. It's not just black market work; it's also about document manipulation and twisted employment relationships. Some workers, out of fear of losing their job, even participate in the scam willingly.*
The Extent of the Issue
Minimum wage violations are tricky to pin down since they take place behind the scenes, leaving us with mere estimations. The German Institute for Economic Research (DIW) approximates almost six percent of eligible workers based on Socio-economic Panel data—around two million people earned less than the minimum wage in 2021, as DIW expert Johannes Seebauer explained to ntv.de. However, if we look at data from employers' income surveys at the beginning of 2022, only approximately 800,000, or two percent of eligible workers, received below their entitled wage.
Monitoring and Control
The Financial Control Schwarzarbeit of the Customs (FKS) keeps tabs on compliance with the Minimum Wage Act. Last year, they initiated 2,759 administrative offence proceedings for non-payment of the statutory minimum wage, according to an ntv.de spokesperson. Along with these administrative offences, there are also formal ones, such as against recording obligations.
The Hidden Traps of Minimum Wage Evasion
Seebauer points out that the main gateway for minimum wage evasion is the recording of working time. "Proper documentation often doesn't happen and is difficult to check or easily manipulable: breaks aren't recorded correctly, preparation times aren't paid, and so on," he explained.
In addition to day-to-day controls, the FKS conducts regular nationwide and regional focus checks. Penalties for violations can reach up to 500,000 euros. However, efficient controls are already challenging due to a lack of personnel, according to DIW.
The Tricks Employers Play
The customs office regularly encounters various forms of manipulation to fall below the minimum wage, such as:
- Incomplete or inaccurate recordings of working hours
- Standby or preparation times, as well as empty runs, are not counted as working time
- False classification of employees as interns, trainees, or self-employed
- Concealing the main operation of a business to avoid branch minimum wages
Plus, there are other methods like unrealistic performance requirements—the piecework provided cannot be completed in the agreed time, making affected employees work longer without receiving overtime pay*.
Job portal StepStone reports that some employers charge their employees excessive prices for materials or food and then deduct these amounts from their wages. In the construction industry, even insolvencies are staged: Just before a building is completed, companies "disappear" and fail to pay the final wages, leaving many workers empty-handed, particularly foreign workers.
Economists Demand Controls, Higher Minimum Wage: Economist Predicts More Undeclared Work
In addition to control issues, some employees agree to be paid less than the minimum wage out of fear of losing their jobs. They then claim to receive the minimum wage during inspections.
Who's Vulnerable?
Undeclared work and illegal employment exist across various sectors. The customs spokesperson informed us that the inspectors keep a close eye on the construction industry, as well as hospitality, transport, and cleaning industries.
According to the DIW, minimum wage violations are particularly common in mini-jobs, temporary positions, small businesses, and among certain groups like women, foreigners, young and elderly workers, those with low education levels, and those in eastern Germany.
Who's Exempt from Minimum Wage?
Apprentices, the self-employed, volunteers, participants in job promotion measures, and long-term unemployed people in the first six months after re-entering the workforce are exempt from minimum wage requirements. If they work in a branch with its own branch minimum wage, they receive it immediately. Trainees only have a minimum wage claim under specific conditions.
- Sources: ntv.de
- Terms: Minimum Wage, Customs Investigators, DIW, Undeclared Work, Misclassification, Underreporting Hours, Mini-Jobs
- Enrichment Data:
- Undeclared Work and Minimum Wage Evasion
- One common method to circumvent the minimum wage is through undeclared work, which is part of Germany's shadow economy.
- Employers might misclassify workers as independent contractors or freelancers to avoid minimum wage obligations.
- Recording of Working Hours
- Proper documentation of working hours is crucial in maintaining the minimum wage, but it's often not carried out correctly or is easily manipulated.
- Skip Hours and Standby Time
- Employers might not count standby or preparation times as working time, resulting in fewer hours being compensated.
- Stage Insolvencies
- Some employers in the construction industry use insolvencies as a tactic to avoid paying the final wages, particularly affecting foreign workers.
Within this context of minimum wage violations, it might be beneficial for the community to implement a policy that emphasizes workplace-wellness and health-and-science, including vocational training programs. This could equip workers with the necessary skills to navigate potential employment manipulations and understand their rights in the workplace.
Moreover, as our discussion revolves around various sectors where minimum wage evasion is prevalent, such as construction, hospitality, and transport, it would be prudent to incorporate science-based workplace-wellness and health-and-wellness reforms to foster a safer and more equitable work environment for all vocational trainees and eligible workers.
