Works council remuneration & company agreements

The problem of works council remuneration

For a long time, works council remuneration was essentially a gamble. Given that there was little legal regulation, some works council members (released from their other duties) were paid too much. The Federal Court of Justice for Criminal Matters ruling that excessive works council remuneration could incur criminal liability due to breach of trust came as a rude awakening.

In response to the ruling, the legislator amended the Works Constitution Act (BetrVG), addressing the issue of works council remuneration. Sections 37 and 78 now largely incorporate the long-standing case law in order to establish greater legal certainty.

Problem of “comparable” employees

Calculating the “correct” works council remuneration – especially for works council members who are completely released from their other duties – involves the fundamental problem of correctly determining the appropriate comparison group. The company has to determine which group of employees a works council member can be compared with in terms of their remuneration in order to be able to calculate it correctly. Even works council members who have been exclusively active on the works council for years must have the opportunity for the salary to develop appropriately.

See also our article “Works council remuneration and comparison groups – is it all that simple?”.

Company agreements create greater clarity

To create a higher level of legal certainty of companies, Section 37 (4) sentence 4 of the Works Constitution Act (BetrVG) now stipulates that employers and works councils may define a procedure for determining comparable employees or comparison groups in a company agreement. This transposes the existing case law of the Federal Labor Court into law. However, the amount of the remuneration itself may not be fixed and neither side may force such an agreement.

With this provision, the Works Constitution Act now contains its own legal basis for regulating works council remuneration in a company agreement.

What does the company agreement regulate?

Naturally, the specific procedures for determining comparable employees or comparison groups are individually negotiable.

The procedure that the employers and works councils can or should regulate in a company agreement includes the following aspects:

• Who proposes comparable employees to form a comparison group? Ideally, both parties!
• Which point in time is relevant when establishing the comparison group? The typical point in time is when the works council member assumes their office but in exceptional cases a later date may also be agreed.
• Is only one company committee (Section 27 of the Works Constitution Act (BetrVG)) involved in the proceedings on the works council side?
• Is a mediator or arbitrator consulted in the event of conflict-laden constellations and what are their duties? For example, if an agreement cannot be reached, a comparison group may be formed from suggested employees.
• At what intervals is the procedure or can the procedure be repeated?
• What are the criteria for selecting the comparable employees (Section 37 IV 5 main sentence. 1 of the Works Constitution Act (BetrVG))? These could be pay grade classifications, individual performance, employment at specific companies?

Regulations can only be legally contested to a limited extent

If such a company agreement exists, the regulations can only be contested with regard to gross errors. The law now expressly states this in Section 37 (4) sentence 5 of the Works Constitution Act (BetrVG) as an incentive for greater transparency.

The parties to the company agreement can also determine the comparable person on the basis of the company agreement. However, this only applies if the agreement between the employer and the works council has been documented in text form.

What can we do for you?

Do you have any questions about this issue? Do not hesitate to contact us!