Works council remuneration and comparison groups – is it all that simple?

Works council remuneration: The new regulations

In the past, only rudimentary legal regulation of works council remuneration existed. Over the years, the Federal Labor Court (BAG) has developed guidelines for determining remuneration. A ruling by the Federal Court of Justice (BGH) for Criminal Matters in 2023 ignited the issue after stating that excessive works council remuneration can be punishable as breach of trust. The resulting legislative initiative recently led to the amendment of the Works Constitution Act (BetrVG) with regard to works council remuneration.

For further information, see our article “Putting an end to the specter of works council remuneration”.

Comparison persons or comparison groups form the foundation

Section 37 (4) and Section 78 of the Works Constitution Act (BetrVG) contain definitive provisions for calculating the remuneration of a works council member. We will begin by examining Section 37 (4) of the Works Constitution Act (BetrVG): During his or her term of office and for one year thereafter the remuneration of a member of the works council may not be fixed at a lower rate than the remuneration paid to employees in a comparable position who have followed the career that is usual in the establishment.

The legislator has now added three sentences to the standard to further detail the formation of comparison groups.

Comparable persons

But who are generally suitable comparison persons? According to the Federal Labor Court, comparison persons are employees who, at the time of election to the works council (= assumption of office), performed similar, primarily equally qualified activities and were equally qualified both professionally and personally.

Participation in salary development

Yet what happens if the comparison persons’ salary then develops? Does a works council member completely released from their other duties fully benefit from this?

Yes, works council members who are completely released from their other duties fully receive the salary development of their comparison group. There are two methods of measuring this development.

1. Promotion of comparison group members with a homogeneous remuneration system
   The remuneration adjustment in the comparison group is transferred to the released works council member if the majority of the group receives a salary increase or the released works council member should have been promoted to a higher-paid position.
   However, the prerequisite for this is uniform behavior based on a rule established by the employer or generally applicable promotion rules (such as the next higher pay grade after 3 years, for example).
2. Average relative remuneration development with unequal salary progression
   Yet how do you make comparisons if there is no uniform, calculable remuneration system and the people in the comparison group have developed differently?
   In this case, the average relative development of remuneration within the comparison group is definitive: The average of the developments within the comparison group needs to be calculated, taking into account differing remuneration increases which take place at different times. Only the average of the entire group is relevant.

New cut-off time defined

Section 37 (4) sentence 3 of the Works Constitution Act (BetrVG) contains a genuine innovation regarding comparing remuneration:

Although the relevant time when calculating the remuneration comparison is the date on which the office was assumed, recalculation at a later date is also possible if an objective reason exists.

One reason for such an exception is professional promotion of the works council member, in legal terms a combination of the application of Section 37 (4) and Section 78 sentence 2 of the Works Constitution Act (BetrVG). Works council members who continue their education during their term of office can and must then be compared with the group which corresponds to the new qualification.