The European Parliament and the EU Member States reached today a political agreement on the Directive on adequate minimum wages proposed by the Commission in October 2020.
The European Commission welcomes the political agreement reached today. At the start of her mandate, Commission President von der Leyen promised a legal instrument to ensure that workers in the EU have a fair minimum wage, and she repeated that pledge in her first State of the Union address in 2020.
The Directive establishes a framework for the adequacy of statutory minimum wages, promoting collective bargaining on wage setting, and enhancing the effective access of workers to minimum wage protection in the EU.
Adequate minimum wages are important to strengthen social fairness and underpin a sustainable and inclusive economic recovery. Better working and living conditions also benefit businesses as well as society and the economy in general by boosting productivity and competitiveness.
Improving minimum wage protection respecting national competences
Minimum wage protection exists in all EU Member States, either through statutory minimum wages and collective agreements, or exclusively through collective agreements.
Ensuring that workers earn adequate wages is essential for improving their living and working conditions and for building fair and resilient economies and societies. Yet, some workers are affected by low adequacy and/or gaps in the coverage of minimum wage protection.
The new Directive aims to address this by establishing an EU framework to improve adequate minimum wage protection. This will be done in full respect of national traditions and competences as well as the autonomy of social partners. It does not require Member States to introduce statutory minimum wages, nor does it set a common minimum wage level across the EU.
The main elements of the Directive are:
- A framework for setting and updating statutory minimum wages: Member States with statutory minimum wages will need to put in place a sound governance framework for setting and updating minimum wages. This includes:
- clear criteria for minimum wage setting (including: the purchasing power taking into account the cost of living; the level, distribution and growth rate of wages; and national productivity);
- the use of indicative reference values to guide the assessment of the adequacy of minimum wages, with the Directive giving indications on possible values that could be used;
- regular and timely updates of minimum wages;
- establishing consultative bodies, in which social partners will be able to participate;
- ensuring that variations and deductions of statutory minimum wages respect the principles of non-discrimination and proportionality, including the pursuit of a legitimate aim; and
- effectively involving social partners in statutory minimum wage setting and updating.
- Promoting and facilitating collective bargaining on wages: in all Member States, the Directive supports collective bargaining. This is because countries with high collective bargaining coverage tend to have a lower share of low-wage workers, lower wage inequality and higher wages. Moreover, the Directive asks Member States where the collective bargaining coverage is less than 80% to establish an action plan to promote collective bargaining.
- Improved monitoring and enforcement of minimum wage protection: Member States will have to collect data on minimum wage coverage and adequacy, and ensure that workers can access dispute resolution and have a right to redress. Compliance and effective enforcement are essential for workers to actually benefit from access to minimum wage protection, and promote a competitive setting based on innovation, productivity and the respect for social standards.
The political agreement reached by the European Parliament and the Council is now subject to formal approval by the co-legislators. Once published in the Official Journal, the Directive will enter into force 20 days after publication and Member States will then need to transpose the new elements of the Directive into national law within two years.
The European Parliament Committee on Employment and Social Affairs adopted the Directive in July 2022.
The right to adequate minimum wages is embedded in Principle 6 of the European Pillar of Social Rights, jointly proclaimed by the European Parliament, the Council on behalf of all Member States, and the Commission in Gothenburg in November 2017. The Directive on adequate minimum wages is one of the key actions of the European Pillar of Social Rights Action Plan to further implement the Pillar principles.
The Commission proposed a Directive on adequate minimum wages on 28 October 2020, following a two-stage consultation of social partners carried out in accordance with Article 154 Treaty on the Functioning of the EU (TFEU). The EU Directive is based on Article 153 (1) (b) of the TFEU on working conditions.