EU: on with minimum wage, but no obligation for Member States

Parlamento europeo

A step forward in the establishment of minimum wages for all workers in the European Union. Yesterday, the European Parliament and the Member States reached a provisional political agreement on the draft directive on adequate minimum wages in the EU, envisaged by a European Commission directive of October 2020. The directive establishes a framework for the adequacy of statutory minimum wages, promoting collective bargaining on wage setting and improving effective access for workers to the protection afforded by minimum compensation in the EU.

The directive does not oblige Member States to introduce minimum legal wages, nor does it set a common level of minimum wages across the EU.

Member States with statutory minimum wages are required to put in place a procedural framework to set and update these minimum wages according to a clear set of criteria. The Council and the European Parliament have agreed that statutory minimum wage updates will take place at least every two years (or at most every four years for those countries that use an automatic indexation mechanism). The social partners should be involved in the procedures for defining and updating statutory minimum wages.

The Interim Agreement between the Council and the European Parliament, in particular, provides that where the coverage rate of collective bargaining is below an 80% threshold, Member States should establish an action plan to promote collective bargaining by defining a clear timetable and concrete measures to progressively increase the rate of coverage of collective bargaining.

On the Council’s side, the agreement reached yesterday must be confirmed by Coreper. This approval will be followed by a formal vote both in the Council and in the European Parliament.

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