What if the workers get paid more?

What to do if the employer doesn't pay

The employer is obliged to the employee to pay the owed salary in good time. The monthly salary is usually due after the end of the respective month, i.e. the employer must pay the salary on the first day of the following month at the latest. However, other due date regulations can result from the employment contract or from a collective agreement.

If the employer does not comply with his obligation to pay the salary on time, the employee has various options to react. He can

  • ask the employer in writing or orally to pay and set a deadline for payment,
  • warn the employer,
  • refuse to work,
  • Charge interest,
  • Demand compensation,
  • bring an action for payment,
  • Apply for unemployment benefit,
  • Cancel without notice and claim damages.

Important: note the deadlines!
It may be that the employee has to meet certain deadlines if he does not want to lose his wage and salary entitlements. This is the case if the employment contract or a collective agreement applicable to the employment relationship contains so-called exclusion periods. Deadlines require the employee to assert his claims against the employer in writing within a certain period (usually 3 or 6 months). If the preclusive periods are not adhered to, the claims are mostly irretrievably lost (exceptions are possible, however).

1. Request payment and set a deadline

The employee first has the option of asking the employer to pay in writing or orally and also to set a deadline for payment.

In order to emphasize the demand, the employee can threaten the employer, after the deadline has expired, to refuse to work (see below), to instruct a lawyer to assert the wage and salary claims or to take legal action to enforce these claims.

2. Issue a warning

The employee also has the option of sending a warning to the employer. Issuing a warning if the employer is in arrears makes sense if the employee has an interest in terminating the employment relationship at short notice (e.g. because he wants to start with another employer). If the employer does not pay even after a warning, the employee can usually terminate the employment relationship without notice, depending on the circumstances.

3. Refuse to work

If the employer is in arrears with wage and salary payments, the employee can have the right to refuse to work ("right of retention"). Before stopping work, the employee should always threaten the employer that he will make use of this right.

In principle, however, the employee has no right to refuse to work in the following cases:

  • The wage arrears are only relatively low (less than one content or two monthly salaries)
  • it is to be expected that the delay in payment of wages will only be short-term
  • Refusal to work can cause disproportionately high damage to the employer
  • the employee's wage entitlement is secured
  • the wage claims are mere bankruptcy claims

If the employee rightly refuses to work, the employer may not sanction this behavior. In particular, he may not terminate the employment relationship because of the refusal to work.

For the period in which the employee has rightly refused to work, he can request to be paid as if he had worked.

4. Charge interest

If the employer does not pay the salary or certain additional benefits or does not pay them on time, he is usually in default of payment. The employee is therefore entitled to demand interest from the employer on the outstanding salary (so-called default interest) at a rate of 5 percentage points above the base rate. That is currently 4.17 percent (as of August 2015). When calculating the interest, the gross salary is to be taken as a basis.

You can calculate your interest claims here.

5. Demand compensation

In principle, the employer has to compensate the employee for any damage suffered as a result of the employer not paying the salary on time. The employer must therefore pay for tax disadvantages, for example, that the employee may have incurred as a result of having to pay more taxes due to a one-off total back payment than if the employer had paid the monthly salary as owed. The claim for damages would also include the costs of hiring a tax advisor to determine the damage incurred.

6. Bring a lawsuit

Of course, the employee also has the option of suing the labor court for his wages. If he has won the process, he can use the judgment of the labor court to initiate enforcement measures against the employer, e.g. instruct a bailiff or seize the employer's account.

7. Apply for unemployment benefit

Even if the employment relationship continues, the employee can be entitled to unemployment benefit if the employer no longer pays a salary (unemployment benefit as part of the non-compliance). The prerequisite for entitlement to unemployment benefit is that the employee is unemployed because he is making use of his right of retention (see above) or because he is no longer employed by the employer.

8. Apply for bankruptcy money

It is often the case that the employer no longer pays the salaries not because he does not want to pay them, but because he can no longer pay them. In such a situation, the employer's bankruptcy is usually imminent. In the event of the employer's insolvency, the employee can have a claim to insolvency payments under social security law in addition to his or her salary entitlement under the employment contract. This claim must be made at the employment agency.

The entitlement to insolvency money presupposes the existence of an insolvency event. Bankruptcy events are:

  • the opening of insolvency proceedings against the employer's assets,
  • the rejection of the bankruptcy petition for lack of assets and
  • the complete cessation of operations.

The remuneration of the last three months before the occurrence of the insolvency event is included in the insolvency payment claim.

9. Terminate without notice, demand loss of earnings and compensation

The sharpest sword of the employee in the event of non-payment of the salary by the employer is the extraordinary, immediate termination. If the employer is significantly delayed in paying wages, either in terms of time or amount, the employee can usually terminate the employment relationship without notice. A prerequisite is basically an unsuccessful warning.

If the employee resigns without notice due to the arrears in salary, he is also entitled to compensation from the employer. This claim for damages basically comprises the replacement of the lost remuneration until the end of the normal notice period and, in addition, the payment of a severance payment as compensation for the loss of the job.