Wage (Lohn) – Definition, Legal Framework & HR Tips

A wage is time-based compensation for work performed – calculated according to actual hours worked or shifts. Unlike a salary, which is paid as a fixed monthly amount, a wage varies depending on the hours worked. In Germany, the statutory minimum wage (§ 1 MiLoG) sets the legal floor for all employees and is regularly adjusted by the Minimum Wage Commission (Mindestlohnkommission).

What Is a Wage? – Definition

In employment law, a wage (German: Lohn) refers to the remuneration paid by an employer in exchange for work performed by an employee. In the narrow sense, it means a time-based, variable form of compensation – classically calculated by hours worked (hourly wage) or shifts. It is the typical compensation model in trade, craft, and industrial professions.

In a broader sense, "wage" is also used as a general term for any form of work-related pay. In German law, wages, salaries, and all other forms of remuneration are collectively covered under the term Arbeitsentgelt (employment income), as defined in § 14 SGB IV: all recurring or one-off earnings from an employment relationship.

Wage, Salary, Remuneration, Fee: The Differences

These four terms are often used interchangeably in everyday language. The table below clarifies the distinctions:

The key difference between wage and salary: A salaried employee receives the same amount every month – regardless of whether they worked more or fewer hours. With a wage, the payment amount is directly tied to actual hours worked.

Note on fees: Freelancers and self-employed individuals do not receive employment income in the social security law sense. Clients are not obligated to pay social security contributions – but misclassifying an employee as self-employed (so-called Scheinselbstständigkeit or bogus self-employment) can have serious legal and financial consequences if reclassified retrospectively.

Legal Framework for Wages in Germany

Statutory Minimum Wage (§ 1 MiLoG)

Since 2015, Germany has had a statutory minimum wage, regulated by the Minimum Wage Act (Mindestlohngesetz, MiLoG). According to § 1 MiLoG, all employees are entitled to remuneration of at least the minimum wage per hour worked. The exact amount is set periodically by the Minimum Wage Commission and published at www.mindestlohn-kommission.de.

Important for HR: The minimum wage applies to virtually all employees. Exceptions include long-term unemployed individuals during the first six months of a new job, compulsory internships, and certain voluntary internships lasting up to three months. The minimum wage also does not automatically apply to young people under 18 without a completed vocational qualification.

Practical tip: Check the current minimum wage amount regularly, as it can change. Set a reminder for each adjustment to ensure ongoing compliance.

Payment Due Date (§ 614 BGB)

Under § 614 of the German Civil Code (Bürgerliches Gesetzbuch, BGB), remuneration is due after work has been performed. In practice, this means the wage becomes due at the end of the period for which it is calculated – typically on the last working day or last banking day of the calendar month.

Different due date arrangements can be agreed upon in the employment contract or collective bargaining agreement. If an employer pays wages late, they automatically enter into default (Schuldnerverzug) – employees can then claim statutory default interest.

Wage Tax and Social Security Contributions

The following deductions are withheld from gross wages before payment:

• Wage tax (§§ 38 ff. EStG): income-dependent, remitted by the employer to the tax office
• Solidarity surcharge (Solidaritätszuschlag): applicable to certain income brackets
• Health insurance: approx. 14.6% (split equally between employee and employer)
• Long-term care insurance: approx. 3.4% (split equally; childless employees pay an additional contribution)
• Pension insurance: 18.6% (split equally)
• Unemployment insurance: 2.6% (split equally)

Employee and employer contributions to social security are roughly equal. The employer remits both shares directly to the relevant social insurance institutions.

Pay Transparency Act (EntgTranspG)

Since 2017, employees in companies with more than 200 staff have had the right to request information about the pay of comparable colleagues under the Pay Transparency Act (Entgelttransparenzgesetz, EntgTranspG). The law aims to promote equal pay between men and women and combat pay discrimination. HR professionals should be familiar with the disclosure obligations and document internal compensation structures transparently.

Gross Wage and Net Wage Explained

What Is the Difference?

• Gross wage: The agreed wage before all deductions – the figure stated in the employment contract.
• Net wage: The actual amount paid out after deducting wage tax, solidarity surcharge (where applicable), and the employee's share of social security contributions.

Sample Calculation (Simplified)

An employee with a gross wage of €3,000/month (tax class I, no children, statutory health insurance) can expect approximately the following deductions:

Note: This is a simplified model calculation. The actual deduction amounts depend on tax class, church membership, additional health insurance contributions, and other individual factors. For precise calculations, use certified payroll software or consult a tax advisor.

Labour Costs: What Does an Employee Really Cost?

In addition to the gross wage, employers incur further costs – the so-called ancillary labour costs (Lohnnebenkosten). These consist primarily of the employer's share of social security contributions, typically around 20–21% of the gross wage.

Total employment costs (simplified):

Additional costs that are not strictly labelled as ancillary labour costs also increase the total cost per employee: continued wage payment during sick leave, holiday pay, occupational pension contributions, and voluntary benefits.

This total cost perspective is particularly relevant for HR and management when drawing up a job requirements profile and when budgeting for new hires.

Continued Wage Payment During Sick Leave

The Continued Remuneration Act (Entgeltfortzahlungsgesetz, EFZG) requires employers to continue paying employees their full wage for up to six weeks in the event of incapacity for work due to illness. The prerequisite is at least four weeks of uninterrupted employment with the company.

From the seventh week of illness onwards, the statutory health insurance fund takes over payment of sick pay (Krankengeld) – generally around 70% of gross earnings, up to a maximum of 90% of net earnings.

Key points for HR:

• The six-week continued payment obligation applies fresh for each separate illness.
• If an employee falls ill again shortly after returning to work, the six-week period restarts – unless it can be demonstrated that the new illness is the same condition for which the employee had not fully recovered.
• A timely medical certificate (Arbeitsunfähigkeitsbescheinigung) is mandatory; continued payment can be withheld without it.

Frequently Asked Questions About Wages

What Is the Difference Between a Wage and a Salary?

A wage is calculated on an hourly basis and varies according to actual working time – typical in trades, industry, and hospitality. A salary is a fixed monthly amount, regardless of the exact number of hours worked – typical in office-based and white-collar roles. Both are forms of employment income within the meaning of § 14 SGB IV.

How High Is the Statutory Minimum Wage?

The current statutory minimum wage is determined by the Minimum Wage Commission and adjusted regularly. You can always find the current applicable amount at www.mindestlohn-kommission.de. The legal basis is § 1 MiLoG. Note: This article reflects the legal position as of the date of the last update – always check the current minimum wage before any salary negotiation or new hire.

What Do Gross Wage and Net Wage Mean?

Gross wage is the agreed wage before deductions (taxes, social security). Net wage is the actual amount paid out. The level of deductions depends on tax class, health insurance provider, church membership, and other factors.

When Must a Wage Be Paid?

Under § 614 BGB, wages are due after work has been performed – typically on the last working day of the month. Different arrangements can be agreed in the employment or collective bargaining agreement. Late payment puts the employer into default, which can trigger statutory interest claims.

What Are Ancillary Labour Costs?

Ancillary labour costs are the costs incurred by employers over and above the gross wage – primarily the employer's share of social security contributions (health, long-term care, pension, unemployment insurance). They typically amount to around 20–21% of the gross wage and add significantly to the total cost per employee.

What Is Continued Wage Payment During Sick Leave?

Continued wage payment means that employers pay employees their full wage for up to six weeks in the event of incapacity due to illness (EFZG). From the seventh week onwards, statutory health insurance provides sick pay. The prerequisite is at least four weeks of employment with the company.

Can an Employer Reduce a Wage?

Unilaterally and without consent: no. Exceptions exist in the case of a mutually agreed contract amendment, short-time work (Kurzarbeit, with Federal Employment Agency approval), or collectively agreed opening clauses. Any reduction below the statutory minimum wage is unlawful in all circumstances – regardless of any agreement to the contrary.

What Is the Difference Between a Wage and a Freelancer's Fee?

Wages and salaries are paid to employees subject to social security contributions. Fees (Honorare) are paid to freelancers and self-employed individuals for project-based or time-limited work. Clients have no social security obligations towards genuinely self-employed individuals – however, the boundary with bogus self-employment (Scheinselbstständigkeit) is fluid and should be assessed carefully.

Conclusion

A wage is more than a number on a payslip: it is a central element of the employment relationship, governed by a clear legal framework. For HR professionals, it is essential to know the current minimum wage, calculate gross and net wages accurately, factor ancillary labour costs into workforce planning, and keep track of continued wage payment obligations.

Transparent pay structures also strengthen employer branding – and with it, a company's attractiveness to qualified candidates. A fair, comprehensible pay policy is also a positive signal in terms of candidate experience.

Looking to complement fair compensation with objective, bias-free candidate selection? The digital platform Aivy supports HR teams with scientifically validated aptitude diagnostics tools. Learn more about fair and objective talent selection with Aivy.

Sources

• Minimum Wage Act (MiLoG) § 1 – Minimum wage level. Federal Ministry of Labour and Social Affairs, 2015 (continuously updated). https://www.gesetze-im-internet.de/milog/
• German Civil Code (BGB) § 614 – Due date of remuneration. Federal Ministry of Justice, continuously updated. https://www.gesetze-im-internet.de/bgb/__614.html
• Continued Remuneration Act (EFZG). Federal Ministry of Labour and Social Affairs, 1994 (continuously updated). https://www.gesetze-im-internet.de/efzg/
• Pay Transparency Act (EntgTranspG). Federal Ministry for Family Affairs, Senior Citizens, Women and Youth, 2017. https://www.gesetze-im-internet.de/entgtranspg/
• Social Code Book IV (SGB IV) § 14 – Employment income. Federal Ministry of Health, continuously updated. https://www.gesetze-im-internet.de/sgb_4/__14.html
• Current minimum wage levels and decisions. Minimum Wage Commission, 2025. https://www.mindestlohn-kommission.de/