18.11.2021

Remuneration of works council members

After the upcoming works council elections, employers will once again be faced with the task of determining the remuneration of the individual works council members. The following post is intended to provide an overview of the statutory basis and of the risks involved for employers.

Legal Basis

The assumption of the office of member of the works council involves the performance of functions for the works council. Pursuant to Section 37 (2) German Works Constitution Act (Betriebsverfassungsgesetz – BetrVG), members of the works council are to be released from their work duties for the performance of these functions to the extent that the relevant activity for the works council is proven to be “necessary”. In this respect, a special rule exists according to which for companies in which 200 employees or more are normally employed, the irrefutable assumption is that the amount of work to be performed by the works council is equivalent to one or more full-time positions, depending on the size of the company. The employer is required to fully release from their work duties as many works council members as are specified for the relevant company size in Section 38 (1) German Works Constitution Act. The members to be released are determined by secret ballot of the works council (Section 38 (2) German Works Constitution Act).

The office of member of the works council is unpaid (Section 37 (1) German Works Constitution Act). However, the employee remains entitled to the remuneration payable according to his employment contract for any period of time spent working for the works council during which the employee cannot perform his regular professional duties. Pursuant to Section 38 German Works Constitution Act, this rule applies even if the employee is fully released from his work duties. This means that under German law, the employer remains obliged to pay the full remuneration to works council members who are released, in whole or in part, from their primary work duties for the purposes of performing their functions as members of the works council.

There is, however, often uncertainty about the amount of remuneration to be paid. Pursuant to Section 37 (4) sentence 1 in conjunction with Section 78 sentence 2 German Works Constitution Act, the employee is entitled to remuneration of no less than the remuneration paid to comparable employees who have followed the career that is usual in the business. The works council member must be placed in the position in which he would have been if he had continued his professional career, rather than working as a member of the works council. The employer is obliged to review and adjust the remuneration on its own initiative, without any requirement for the works council member to actively assert any rights in this respect.

This leaves the employer with the sometimes extremely difficult task of determining for each works council member the remuneration that meets these requirements without violating Section 78 (2) German Works Constitution Act by disadvantaging or favouring the respective works council member. Violations of the aforesaid provision are regularly the subject of decisions of the German Federal Labour Court.

Comparable employees

Pursuant to Section 37 (4) sentence 1 in conjunction with Section 78 sentence 1 German Works Constitution Act, members of the works council are entitled to remuneration comparable to that of comparable employees. This does not mean the average remuneration of a group of employees. Instead, the employer must determine at least one comparable employee for the purposes of determining the concrete remuneration of the works council member by objectifying the claim for remuneration. Comparable employees are employees of the same business who perform activities that are essentially comparable from an objective point of view. The comparability criteria to be taken into account include, in addition to the work performed, the professional qualifications, such as vocational training, further education and the previous career, as well as the personal qualifications, such as the level of education, the quality of the work results and the potential for development. This can already give rise to disputes about how to define the term “business” and, hence, about which employees should be included in the comparability check. In addition, there is also dispute about how to proceed in the situation where no employee can be found who is comparable to the works council member on the basis of the aforesaid criteria. The question of whether in this case the remuneration should be determined by reference to the employee who is most comparable to the works council member or whether, as the comparability required by Section 37 (4) German Works Constitution Act does not exist, the remuneration should, in the light of Section 78 sentence 2 German Works Constitution Act, be determined exclusively on the basis of a hypothetical assessment has not been finally clarified.

It should be noted, however, that special developments in the comparable employees’ remuneration which are the result of special achievements that could not have been achieved by the works council member due to non-fulfilment of the relevant access criteria must be left out of consideration; the same applies to special achievements of the works council member that regard exclusively his work on the works council.

Conversely, periods during which the works council member has not worked, for example, because he has been unfit for work for a longer period of time, must be taken into account when determining the appropriate remuneration. This is because if the works council member had worked in his regular job, his remuneration would not have increased during such periods, either.

The relevant point in time for this determination of comparable employees is when the employee assumes the office of member of the works council for the first time. Consequently, even if the works council member’s term of office is renewed, the comparable remuneration at that point in time must be taken as a basis.

Promotion with adjustment of remuneration

Although the works council member is not directly entitled to a promotion under Section 37 (4) in conjunction with Section 78 sentence 2 German Works Constitution Act, Section 37 (4) in conjunction with Section 78 German Works Constitution Act can give rise to a claim for a corresponding increase in remuneration if the promotion is customary in the business and, therefore, comparable employees also get promoted. This is the case, for example, when certain promotions depend exclusively on the employee’s seniority. In addition, a claim for remuneration in excess of the customary remuneration may arise from Section 611a German Civil Code (Bürgerliches Gesetzbuch – BGB) in conjunction with Section 78 sentence 2 German Works Constitution Act in cases where, due to special qualifications, the works council member would have been assigned a better job that would have justified an increase in remuneration if he had not worked on the works council. In this case, however, the situation must be such that the member of the works council would have been preferred over the employee actually promoted on the basis of objective criteria.

In such cases, it may become necessary to determine the comparable employees anew.

Consequences of a new job

In the event that the employee is assigned a new job during his term of office as member of the works council, in particular because his previous job has ceased to exist after he has assumed the office of member of the works council, his remuneration will be determined based on this new job. In particular in the case of works council members who are fully released from their work duties, the employer must examine when determining the appropriate remuneration in what job the employee would, hypothetically, be employed. In this case, too, it may be necessary to determine the comparable employees anew.

Practical tip

Determining the remuneration to which a works council member is entitled is often extremely difficult in practice and can give rise to disputes. Especially in cases where an employee has been on the works council for many years and/or has been fully released from his work duties, the annual employee interview can, therefore, be used to help determine and review the remuneration payable to this employee. To this end, the works council member can be informed of the employees comparable to him and possible changes can be discussed.

It can also be helpful to make determinations about the comparable employees already at the time the works council member takes office and document these determinations in a staff list. This list can then be adjusted together with the works council member on the occasion of the annual employee interviews with him – for example, by adding new hires and by deleting employees who have left the company or employees with an exceptional career path. In this respect, it should be noted, however, that the determination of general remuneration rules that do not only apply to an individual works council member may be subject to co-determination by the works council. Apart from documenting information about comparable employees, the employer can also document the specific parameters of the job, the employee’s professional and personal qualifications and the usual development opportunities, if any. These determinations can likewise be updated on the occasion of the annual employee interviews and supplemented with information about professional developments that have taken place on the part of the works council member. Such determinations at the beginning of the term of office can help avoid the situation where the comparable employees leave the company or cease to be comparable during the term of office and no new comparable employees have been determined.

Finally, employers would be well advised to ensure that the salaries of all members of the works council are reviewed at regular intervals. This review can be carried out simultaneously with or shortly after the regular salary discussions in the business so as to be able to take into consideration the changes in the comparable employees’ remuneration structure, if any. Developments that take place during the intervals between the regular reviews, such as appointments to existing or new higher posts or the elimination of jobs, must, however, also be taken into account.

Author
Cyrielle Therese Ax

Cyrielle Therese Ax
Associate
Frankfurt a.M.
cyrielle.ax@luther-lawfirm.com
+49 69 27229 27460