In October, Germany increased the minimum wage for the third time in a single year. It also raised the income cap of mini-jobs, a form of short-term employment. These are efforts by the government to help people adapt to inflationary trends and the cost of living crisis.
German minimum hourly wage goes from €10.45 to €12
The year 2022 saw three minimum wage increases for workers in Germany. In January, it rose from €9.50 to €9.82, and in June, it rose again to €10.45. On October 1, it became €12. This is a national statutory minimum wage, which means that it applies to all regions and sectors. The minimum wage also applies to international students, who can work part-time for a maximum of 20 hours a week. Foreign workers, i.e., expats, are naturally also entitled to it.
It should be noted, however, that in some sectors, notably public administration and manufacturing, the collectively agreed minimum wage is higher than the statutory minimum wage. This is thanks to industry-wide labor agreements between companies and trade unions. There are also a few exceptions where a worker can be paid less than the statutory minimum wage. Workers under 18, university students who are doing an internship as part of their degree requirements, and workers with disabilities in sheltered workshops can all be legally paid less.
According to the Hans Böckler Foundation, in September, there were 6.6 million workers in Germany earning less than €12 an hour. They are the ones who will benefit the most from the new higher minimum wage. Only a minority of them, or 2.25 out of the 6.6 million, are full-time workers. The rest do different types of part-time work, including the so-called “mini-jobs.” Indeed, 80% of mini-job workers earned less than €12/hour before this new increase in the minimum wage. Mini-jobs are a form of short-term employment where the worker can only work for a maximum number of days per year.
Like most countries, Germany is currently facing a cost of living crisis, which was triggered by the pandemic and the Ukraine war. Inflation is over 10%, and a survey by the insurance company R+V Versicherung revealed that 67% of German residents are scared of being unable to cope with the rising cost of housing, energy and food. The rise in the minimum wage is one of the ways in which the government is trying to help working people during these difficult times. The state is also providing energy subsidies and has increased the maximum amount of money people can earn from a mini-job.
The monthly income cap of mini-jobs goes from €450 to €520
Mini-jobs are a peculiarity of German labor law that doesn't necessarily have an equivalent in other European countries. According to the Spanish business daily El Economista, mini-jobs have existed since the 1960s, but they were formally recognized as a form of marginal employment by the Hartz labor reforms of 2003.
Back in 2003, the category of “mini-jobs” was created in order to legalize the informal sector and to boost employment, especially among students (including international students!), mothers who are mostly dedicated to unpaid housework/childcare, newly arrived immigrants and retirees. These categories of people often work part-time or only for short periods of time. As the legal guide Handbook Germany says, many mini-jobs are in retail, trade, catering and home services (cleaning, baby or pet sitting, etc.). An example is doing afternoon shifts as a receptionist while attending university in the morning.
A person can work at a mini-job for a maximum of 70 working days a year. This translates to 3 months of full-time work or, if you are working all year round, to 8-12 hours a week. Before October 2022, a person could earn a maximum of €450 per month or €5,400 per year from a mini-job. They could also hold multiple mini-jobs as long as the total income from all of them didn't exceed the limit. It's also perfectly legal to have a full-time day job alongside a mini-job, which then works as a “side hustle.” You just need the permission of your main employer first.
International students from outside the European Economic Area (EEA) are allowed to work a maximum of 120 days during the course of their studies, so they can definitely take up a mini-job, whose limit of 70 days is less than 120 anyway. If you are an expat, you can also take up a mini-job as long as you have a work permit in the country.
However, since October, the aforementioned income limit itself has been raised to €520 per month or €6240 per year. It was changed in line with the rise of the minimum wage. If it had stayed the same, many mini-jobbers would have had to reduce their working hours just to remain within the income limit while earning €12/hour, clarifies Ius Laboris, an alliance of HR law firms.
Thanks to the adjustment, the number of hours a mini-jobber can work per month has remained roughly the same as in 2021: slightly more than 43 hours per month, or about 10 hours per week. The labor advisory service Fair Integration, however, shows that, owing to the significantly lower minimum wage back in 2020 (slightly over €9), a mini-jobber could work much more hours then: ∼48 hours a month.
Why do people choose mini-jobs?
The main advantage of mini-jobs is fiscal. All income from a mini-job, of course, within the established limit in euros, is tax-free. This income is subject to neither income tax nor social security contributions. As a mini-jobber, you only need to make a minimal contribution to your pension insurance scheme. Your employer, on the other hand, will be responsible for paying social insurance on your behalf.
You still have the right to paid sick leave and holidays – the same as a more “traditional” worker. You can also receive (albeit reduced) unemployment benefits if your sole source of income is a mini-job that you work at for less than 15 hours/week.
Even if mini-jobs have many advantages, they have been criticized by some economists and lawyers as being “traps” with little job security. Economists from the Bertelsmann Stiftung (Foundation) have demonstrated that, at the height of the pandemic, mini-jobbers were made redundant 12 times more than “traditional” workers. Not needing to contribute to social security is also a double-edged sword: when fired, mini-jobbers are often ineligible for unemployment benefits. Their very low pension contribution also prevents them from building an adequate pension fund over time.
Hence, while a mini-job is a good choice for students looking for some pocket money during their university years, it can be a trap for older adults who need more job security.
