Minimum Wage Increase Starting in 2026: What Employers Need to Know Now
On June 27, 2025, the Minimum Wage Commission unanimously issued a recommendation to raise the statutory minimum wage. According to the recommendation, the minimum wage is to rise to €13.90 gross per hour as of January 1, 2026, and to €14.60 gross per hour as of January 1, 2027. Even though this is currently only a proposed resolution, formal implementation by the federal government is expected.
For employers—especially small and medium-sized enterprises—this means that labor costs will rise significantly over the next two years. This makes it all the more important to be informed about the planned changes early on and to realistically assess their impact on operations.
Legal Basis and Previous Developments
Since January 1, 2025, the statutory minimum wage has been 12.82 euros gross per hour. The basis for this adjustment is the Minimum Wage Act (MiLoG), which stipulates in Section 9 that the Minimum Wage Commission regularly determines the amount of the statutory minimum wage. The federal government may make the recommendation binding by statutory order without the consent of the Bundesrat.
Several factors are decisive for the adjustment:
- Wage trends in recent years
- The gross median wage of full-time employees
- The criteria of the EU Minimum Wage Directive, in particular the goal of adequate minimum protection
- The economic situation and forecasts for employment and the economy
The planned increase was assessed as a balanced response to these factors.
Gradual increase: Two steps by 2027
The Minimum Wage Commission’s recommendation calls for a two-stage increase:
- Effective January 1, 2026: Increase to 13.90 euros gross per hour
- As of January 1, 2027: further increase to €14.60 gross per hour
This phased approach is intended to ensure that minimum protection for workers is improved without placing an excessive burden on the economic stability of businesses.
Commission’s Rationale: Protective Function and Economic Balance
In its justification, the Commission refers to a comprehensive assessment that took into account both the statutory mandate to ensure an adequate minimum wage and the current situation in the labor market. The economic impact on companies, particularly on SMEs, was carefully weighed.
The decision was preceded by a comprehensive evaluation, which is documented in the Commission’s Fifth Report to the Federal Government. This report was supplemented by a public hearing pursuant to Section 10(3) of the Minimum Wage Act (MiLoG), the statements from which were published in a separate volume.
What Employers Should Do Now
Even though the final implementation of the recommendation by the Federal Government is still pending, companies should take action now:
- Update cost calculations: Realistically assess personnel and wage costs and incorporate them into the 2026/2027 budget planning
- Review contracts: Check mini-jobs, part-time contracts, and hourly wages for compliance with the minimum wage
- Adjust controlling: Assess the impact on margins and product prices
- Rethink HR strategy: Identify efficiency gains, optimize work processes, and review training opportunities
Sectors with a high proportion of marginal employees—such as retail, the restaurant industry, or service businesses—are particularly affected.
Conclusion: The minimum wage increase is coming—early preparation is crucial
The planned increase in the statutory minimum wage presents many small and medium-sized enterprises with additional challenges. However, those who react in a timely manner and strategically integrate the increases into their business planning can mitigate the economic impact and even capitalize on it—for example, through stronger employee retention or process optimization.
As tax and business consultants, we support you in taking the right steps—competently, in compliance with the law, and tailored specifically to your company.
