New rules on adequate minimum wages have been adopted by the European Parliament

The European Parliament adopted new legislation on adequate minimum wages for all workers in the EU on 14 September 2022.

The directive defines procedures for the adequacy of statutory minimum wages, promotes collective bargaining on wage setting and enhances the effective access to minimum wage protection for those workers who are entitled to a minimum wage under national law. One of the goals of the directive is to increase the number of workers covered by collective bargaining on wage setting. To reach that objective, countries should promote the capacity of social partners to engage in collective bargaining. Where the collective bargaining coverage rate is, for instance, below a threshold of 80%, Member States should establish an action plan to promote collective bargaining.

Member States with statutory minimum wages are requested to put in place a procedural framework to establish and update these minimum wages according to a set of clear criteria. Updates to the statutory minimum wage will take place at least every two years (or no later than every four years for countries which use an automatic indexation mechanism). However, the directive will not force countries to implement a statutory minimum wage if they do not have one, which is the case for six Member States. The Member States that have a statutory minimum wage will have to ensure that it is “adequate”.

For the purpose of assessing the adequacy of minimum wages, the directive proposes that Member States use the reference values of 60% of the gross median wage or 50% of the gross average wage. These thresholds are higher than the minimum wage in most EU member states, meaning that minimum wages might be increased in the coming years.

The highest minimum wages are found in Luxembourg, Ireland and Germany, while the lowest in Bulgaria, Latvia, Romania and Hungary. In the EU, 21 out of 27 countries have a statutory minimum wage, while in the other six (Austria, Cyprus, Denmark, Finland, Italy and Sweden) wage levels are determined through collective pay bargaining.

Member States have two years to transpose the directive into national law.