The New Year has brought an increase in minimum wages across the majority of European Union member countries. While most of these changes have been minimal, France and Spain, in particular, announced considerable increases to their respective minimum wages at the end of 2018.
From the beginning of his tenure in May 2017, French President Emmanuel Macron has passed numerous reforms aimed at stimulating economic growth within the country. Many of these reforms have met opposition from the French people, ultimately culminating in the “Yellow Vest” Movement (“Movement”). Since November 2018, the Movement has seen thousands of people across France take to the streets to protest President Macron’s policies.
On December 10, 2018, after weeks of political pressure applied by the Movement, President Macron announced a series of concessions and called on the French people to come together. In his address, Macron: (i) announced an increase to the minimum wage; (ii) announced that taxation on overtime pay would be abolished; and (iii) called on employers to pay tax-free year-end bonuses to employees.
President Macron announced that France’s minimum wage would increase by €100 per month in 2019. Employers will not be responsible for this additional compensation, however. Instead, the French government will foot the bill. As part of his concessions, President Macron also noted that overtime compensation would no longer be subject to taxation, effective January 1, 2019. While this abolition of taxation on overtime pay was previously scheduled to go into effect on September 1, 2019, President Macron’s concession accelerated that timeline. Finally, President Macron urged employers to pay a year-end bonus to their employees, noting that such bonuses would be tax-free.
Two days after President Macron announced these concessions, Spanish Prime Minister Pedro Sanchez announced a 22% increase in Spain’s minimum wage beginning in 2019. The increase was later approved through a royal decree, ensuring it would take effect on January 1, 2019. The increase is the largest to Spain’s minimum wage in over 40 years.
The decree raises the minimum wage from €736 per month to €900 per month. This change will bring the yearly minimum salary to €12,600 and will affect an estimated 2.6 million workers. According to statistics, this increase will also inadvertently reduce the gender pay gap. This is because more than half of the employees who will benefit from this increase (56.7%) are women. The 22% increase stands in stark contrast to recent years where the country’s minimum wage has increased by only a few percentage points.
Employers operating in the EU should review their policies to ensure compliance with the widespread minimum wage increases.