The European Directive 2022/2041 on adequate minimum wages was published on 25 October 2022, aimed at improving the working and living conditions of workers in the European Union (“EU”) and at establishing certain criteria to enable wage inequalities to be reduced in the various Member States of the EU.
As is known, these wage inequalities are due to the differences existing in labour regulations and collective bargaining coverage within the scope of determining minimum wages, in addition to the different market models used in the EU.
Therefore, the Directive has determined a regulatory framework for the following purposes:
- To adapt the statutory minimum wages to contribute to achieving decent working and living conditions.
- To promote collective bargaining related to wages.
- To improve the worker’s access to protection of these statutory minimum wages.
We provide a summary of the most important sections below:
Promoting collective bargaining when determining the statutory minimum wages
The Directive requires that the Member States increase the capacity of the labour representatives in setting wages and requests constructive bargaining for wages is promoted under equal conditions. It therefore regulates that the Member States with a collective bargaining coverage rate lower than 80% must establish an action plan in which a schedule and specific measures are included to gradually increase the collective bargaining coverage rate on this matter.
Development of procedures to set adequate statutory minimum wages
The State’s obligation is regulated for the required procedures to be established to set and update minimum wages by determining certain criteria aimed at promoting social cohesion and reducing the inequalities in wages between men and women.
The following is included among such criteria: purchasing power, the general level of wages and their distribution, growth in the cost of living, domestic productivity levels in the long-term etc.
The minimum wages must be updated every 2 or 4 years in the case of countries that use an automatic indexing mechanism.
Workers’ effective access to the statutory minimum wages
In order to improve protection to access to these minimum wages, the Member States must provide work controls and inspections that guarantee application of these minimum wages and must train and guide the authorities so that they impose penalties on employers that infringe them.
The Directive also states that the penalties must be effective, proportionate and dissuasive, which means that the penalties imposed for this infringement could imply substantial amounts for companies.
Monitoring and data collection
The Member States must implement mechanisms to collect the required data to monitor compliance with the minimum wages, which must be reported every two years to the EU Commission. These data must include, among others, development in the collective bargaining coverage for setting the minimum wages, the minimum wage level and the proportion of workers covered by this.
As can be seen from the regulation explained above, the Directive is aimed at combating poverty and promoting social and economic cohesion in the EU. For such purpose, the key points regulated are the promotion of social involvement in the negotiations for minimum wages, greater control by the authorities and penalties being imposed on infringing employers.
It can also be considered that the EU aims at ending inequalities and discrimination in wages, as is shown by needing to provide data on compliance with the minimum wages broken down by age, gender, disability, sector and company size.
Nevertheless, the EU respects national practices for setting wages and any State regulation that supports these purposes, each country being competent for setting its own statutory minimum wages.
We still do not know if the measures regulated by this European Directive will be effective, but what they will create, for now, is greater social involvement and more control by the authorities in complying with setting adequate and non-discriminatory minimum wages.
The Member States are allowed a term of two years to transpose this regulation into their domestic legal systems. As of such time, we will be able to see the impact it has on the conditions of European companies and their workers.