Note: New minimum wage rules coming!

Both European and national levels are working hard to change the rules regarding the minimum wage. At the end of 2020, a directive proposal was submitted at the European level to regulate a European legal minimum wage. This could have significant consequences for the Dutch minimum wage. The Cabinet plans to agree to the directive proposal. So a new regulation seems to be on the way. In addition, the cabinet itself has plans to increase the minimum wage. Bas Blaauwhof and Ruud Olde explain the European directive proposal and the Dutch plans for the minimum wage.

Directive proposal 'adequate minimum wages in the EU'

The proposal does not include a common minimum wage amount. Nor does it require member states to establish a minimum wage, if they do not already have one. The proposal aims "only" to improve the adequacy of minimum wages to ensure good working and living conditions.

Member states should determine the minimum wage based on the country's prosperity. The minimum wage must reflect prosperity. This involves looking at:

💰the purchasing power of statutory minimum wages;
💰the general level of gross wages;
💰the growth rate of gross wages;
💰and labor productivity trends.

The European Union's preliminary agreement on the proposal states that these elements are not binding, but guiding. Member states can decide how the elements are weighted when setting the minimum wage.

The tentative agreement requires member states to account for the setting of the minimum wage every two years. In doing so, member states must make clear what circumstances were taken into account.

Change Dutch minimum wage

The Netherlands has legislated the level of the minimum wage. As of July 1, 2022, the minimum wage for workers 21 years of age or older is set by law at €1,756.20. This amount is indexed every six months. The employee working 40 hours currently still has a lower minimum hourly wage, than the employee working 36 hours. The Dutch legislature recently decided to change this. As of January 1, 2024, the minimum hourly wage will be leading and not the number of working hours per week. As a result, working more hours will lead to a higher income.

In addition, the Cabinet expressed satisfaction with the new minimum wage rules in the European Union. It was previously thought that the Netherlands would have to raise the minimum wage to €14 gross per hour under these rules. However, Minister Gennip of Social Affairs recently announced that this is not the case. After all, member states retain competence over minimum wage setting.

The government did announce a gradual - and parallel to the implementation of the directive - increase in the minimum wage by 7.5%. This increase is separate from the usual semi-annual indexation. The Cabinet plans to implement the first increase of 2.5% in January 2023. The final increase will be implemented in 2025, leading to an expected minimum hourly wage of €13.18 gross per hour. With this, although the minimum wage will not become €14 for the time being, a significant increase is certainly imminent.

Conclusion

If the proposed directive is adopted, the Netherlands will have two years after its entry into force to implement the regulation. What the exact impact of this will be on the minimum wage is not yet entirely clear.

The minimum wage will rise incrementally over the next few years to a minimum hourly wage of (probably) €13.18 gross in 2025. The increase will affect not only employees who receive the minimum wage, but also (part of) the rest of the salary house. The first step will already be taken in 2023. In addition, starting in 2024, the minimum wage will not apply per month, but per hour. So keep that in mind.

Do you still have questions about what this proposal could mean specifically for your company? Then contact Bas Blaauwhof and Ruud Olde or complete the contact form below.