Do you have employees who receive the minimum wage? If so, there will be changes from 1 January 2024. This is because of amendments to the Minimum Hourly Wage and Minimum Holiday Allowance Act. From 1 January 2024, employers are legally required to pay their employees at least the statutory minimum hourly wage. Perhaps nothing new in this regard since you are already required to pay your employees a minimum wage. However, the difference is that the current minimum wage is determined per month, per week or per day. These minimum amounts will disappear and will be replaced by a fixed amount per hour.

What will change?

Until 1 January 2024, it did not matter whether a full-time working week consisted of 36 or 40 hours, the statutory minimum wage was set at a minimum daily/weekly or monthly amount for full-time employment and, therefore, was the same irrespective of the length of the full-time working week. As of January, this will no longer be the case. Fixed minimum daily, weekly and monthly wages will no longer be prescribed by law.

The definition of full-time employment may vary by sector (e.g. 36, 38 or 40 hours per week). Under the previous law, the same minimum monthly amount applied in all cases. In practice, this created a situation where a 40-hour job actually had a lower hourly wage than, for example, a 36-hour job. So from January 2024, the minimum wage will be set on the basis of a minimum hourly wage, as a result of which the difference in hourly wages will no longer exist.

What are the consequences?

If you have employees with full-time employment exceeding 36 hours, you need to pay particular attention. The 'new' statutory minimum hourly wage is based on the current minimum monthly wage for full-time employment of 36 hours. This means that, in principle, this amendment of the law does not affect full-time employees earning the minimum wage and work 36 hours per week. However, if an employee works full-time in excess of 36 hours, the amendment will result in a wage increase.

As a result of the legislative amendment, salary scales will have to be updated, therefore. This also applies to salary scales in collective labour agreements (CLAs).

The basic formula for calculating the minimum wage is as follows:

wage in period Y = (number of hours worked in period Y ) x (statutory minimum hourly wage)

An example

If an employee currently has full-time employment of 40 hours with a minimum (monthly) wage of €1,995, the wage will start to increase as per 2024, therefore[1]. The minimum hourly wage is based on a 36-hour work week. This means the minimum hourly wage is (€1,995 x 3/13/ 36 =) €12.79. For this employee, the monthly wage under the new rules will then amount to (€12.79 * 40 *13/3=) €2,236.00.

Other points of interest

Fixed monthly amount  
It is still permitted to agree on a fixed monthly remuneration if the employee works a fixed number of weekly hours. Incidentally, this must be laid down in a CLA or written employment contract and is also possible if the employee works a fixed number of weekly hours (on average). For example, 36 hours one week and 40 hours the next, resulting in a fixed average of 38 hours per week. In the case of fixed agreed working hours per week, the fixed amount per month can be calculated as follows:

fixed amount per month =

(number of working hours in relevant calendar year / 12) * minimum hourly wage

An example        
Number of workable days in 2024 (Mon, Tue, Wed, Thu, Fri): 262             
Number of working hours per working day: 40 / 5 = 8     
Number of working hours in 2024: 262 * 8 = 2096

Statutory minimum hourly wage (based on 2023): € 12.79

fixed amount per month = (2096 / 12) * € 12.79               

fixed amount per month = € 2,233.99

A fixed monthly amount with a part-time schedule can also be calculated like this, for example. 

Pay slip
An employee's pay slip must state the applicable minimum hourly wage. 

LIV
This change also affects the Low-Income Benefit 2021 (LIV). This is an annual allowance for employers with low-income employees. These employees must have worked a minimum of 1,248 hours for the employer in a calendar year and have an average hourly wage of between 100 and 125 per cent of the statutory minimum hourly wage. From 1 January 2024, the upper limit of the hourly wage criterion will be lowered from 125 to 104 per cent of the statutory minimum hourly wage. Incidentally, the government intends to abolish the LIV from 1 January 2025, so this will only apply for the year 2024.

Minimum monthly wage in the law         
The law will continue to include a minimum monthly wage. This concerns a reference monthly wage and is included because it is of relevance with respect to a number of social security laws. This reference monthly wage cannot be used to calculate the minimum hourly wage, therefore, but must always be based on the statutory minimum hourly wage.

Are you prepared?

As you have read, the changes to the Minimum Hourly Wage and Minimum Holiday Allowance Act may have a significant impact on your wage costs, especially if your employees work full-time in excess of 36 hours. If you have any further questions, please contact your regular contact person at RSM or one of our payroll tax specialists.
 

[1] For the sake of simplicity, we do not take inflation into account