All-In Transparency Rule effective January 1, 2016

Effective January 1, 2016, the base salary for standard working hours must be reported as an actual amount; otherwise, a fictitious base salary in line with industry and local standards will be used for the coverage check.

The new transparency rule was introduced by the 2015 Labor Law Amendment Act. It is intended to cover so-called “all-in agreements.” These all-in agreements, which provide for a total remuneration for all work performed and do not distinguish between base pay and overtime pay, are considered permissible by the courts. The coverage check serves the purpose of determining whether the overtime actually worked is included in the total remuneration.

Very few all-inclusive agreements specify the base wage for normal working hours. To protect employees, the legislature has now stipulated that the base wage for normal working hours must be specified in writing as a specific amount. If this disclosure requirement is violated, the employee is entitled, upon a coverage review, to the standard hourly wage customary for the industry and location, as paid to comparable employees at comparable employers at the workplace. This actual base salary is then used to calculate overtime pay. In addition, it has been stipulated that, for information regarding the base salary, a reference to collective bargaining agreements is insufficient.

From now on, the coverage check for cases where the base salary is not reported will no longer be based on the minimum base salary specified in the collective bargaining agreement, but rather on the new notional actual base salary.

The basis for calculating the base wage will be the minimum base salary specified in the collective bargaining agreement, based on the standard working hours set forth in the collective bargaining agreement. The calculation must be transparent to the employee. The basic wage may be specified in employment contract in a written notice of employment; compliance with the written form requirement is mandatory. It is recommended that the stated amount be explicitly designated as the basic wage. Additionally, it should be noted that employees must be notified immediately of any change to the basic wage.