Agreement Reached on Directive on Adequate Minimum Wages in the EU

Negotiators from the European Parliament and the rotating presidency of the EU Council reached an agreement on Tuesday night regarding the proposal for a directive on adequate minimum wages.

The new directive aims to improve the adequacy of statutory minimum wages to ensure decent working and living conditions for European employees.

Minimum wages exist in all member states. In 21 member states, including Croatia, they are prescribed by law, while in six countries (Austria, Cyprus, Denmark, Finland, Italy, and Sweden), minimum wages are negotiated through collective bargaining.

This directive does not change anything for those countries where minimum wages are negotiated through collective bargaining.

In most member states with statutory minimum wages, they are not adequate, and this directive is intended to change that.

The aim of the directive is not to harmonize the level of minimum wages within the EU or to establish a uniform mechanism for determining minimum wages in member states, as the Union does not have jurisdiction in these matters. The goal is to establish minimum conditions for determining an adequate minimum wage with clear and stable criteria, which will be regularly and timely updated and ensure the involvement of social partners.

According to the agreed directive, standards for statutory minimum wages from which workers could live decently will be established. These standards will be determined based on purchasing power, taking into account the cost of living, the overall growth rate, and the relative wage structure in each EU country.

It has been agreed that updates to statutory minimum wages will occur at least every two years or at most every four years for those countries that use the mechanism of automatic indexing. Social partners will need to be involved in the processes of determining and updating statutory minimum wages.

The directive also aims to strengthen workers and unions during collective bargaining negotiations. According to the directive, when the coverage rate of collective bargaining is below 80 percent in a member state, it will have to adopt a national action plan for the progressive increase of the number of protected workers.

Member states where a large majority of workers are protected by collective agreements have fewer low-wage workers, lower inequality rates, and generally higher wages.

The directive also provides for improved monitoring of the implementation of the law. Member states will have to collect data on coverage by minimum wages and their adequacy and ensure that workers can access dispute resolution and have the right to compensation.

The agreed directive must now be confirmed by both co-legislators – the Council and the Parliament. The directive will enter into force 20 days after its publication in the Official Journal of the EU. Member states will have two years to transpose the directive into their national legislation.