EU Directive on Adequate Minimum Wages

by Julie Galbraith, Partner, Head of Employment & Labour Law at Eversheds Sutherland LLP

The European Union Adequate Minimum Wages Directive (the “Directive”) was published on 19 October 2022. The Directive must be transposed into Irish law by 15 November 2024.

There are two main objectives provided for in the Directive:

1. Increasing collective bargaining coverage; and
2. Ensuring minimum wages are set at an adequate level.

Collective Bargaining

• Article 4(1) and 4(2) of the Directive aim to enhance collective bargaining on wage setting. The Irish government, together with trade unions and other key stakeholders, is required to develop an action plan to include the following aims:
• Foster the development and strengthening of trade unions’ ability to conduct collective bargaining, especially at sector and cross-industry level;
• Support constructive and informed wage discussions between trade unions and employers;
• Ensure the enforcement of the right to collective bargaining over wages;
• Implement safeguards for the protection of workers and trade union representatives, along with trade union and employer organisations against interference by each other; and
• Establish a framework of enabling conditions for collective bargaining and to promote collective bargaining in circumstances where such coverage rate is below 80%.

Minimum Wage

The Directive’s goal is not to mandate a uniform approach for minimum wage determination but instead to give each Member State the responsibility to set adequate minimum wages. To guarantee that minimum wages meet the adequacy criteria, countries with statutory minimum wages, like Ireland, are required to establish regular reviews of the minimum wage level based on specific criteria. Such criteria should be defined by taking into account purchasing power, long-term national productivity levels and developments, as well as wage levels, wage distribution, and wage growth. It is mandatory for Member States to conduct these reviews at minimum biennially.

Key Takeaways for Employers

The new legislation extends its protections to all workers in the EU who have an employment contract or employment relationship.

We recommend that employers should:

• Adhere to the minimum wage adequacy criteria: Employers must adhere to the minimum wage adequacy level, once the Directive has been transposed into Irish law.
• Consultation and Negotiation: Employers should engage in meaningful dialogue with their employees and workers’ representatives to promote collective bargaining on wage setting.
• Monitor Local Legislation: Employers should monitor local legislation in other Member States where they have operations.
• Review collective agreements: Employers should review any collective agreements they have entered into with trade unions and ensure that the agreements are fit for purpose, once the Directive is transposed into Irish law.

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