Employer Doesn’t Pay Salary – What Can You Do?

Employees rely on receiving their salaries on time – after all, they also need to pay bills, rent, and other expenses punctually. For many, this means securing their livelihood, which is why missed salary payments often lead to significant financial and emotional strain. Alongside the uncertainty about one’s financial future, feelings of frustration and anger about the situation often arise. It’s all the more aggravating when an employer pays wages late or not at all.

What should you do if your employer doesn’t pay your salary? In this article, we explain what employees can do in such cases and under what circumstances an employer might have the right to withhold payment.

Overview:

• When Must the Employer Pay the Salary?
• When Does the Employer Breach Their Duty to Pay Wages?
• When Is the Employer Justified in Not Paying the Salary?
• What Options Does the Employee Have?
• Conclusion: What to Do If the Employer Doesn’t Pay?
• FAQ

When Must the Employer Pay the Salary?

Whether the employer pays on time depends on the due date. The obligation to pay wages begins only from this date. Employers and employees can either agree on the due date contractually or follow the legal provisions.

In practice, it is common – in line with legal provisions – to pay wages at the end of a month. According to Section 614 of the German Civil Code (BGB), the employer is required to pay wages after the work has been performed. This means the law stipulates that the employee must first render their services in advance. Only after completing their work can they claim their salary at the end of the month.

However, there may be exceptions in some industries or for specific types of employment, such as commission payments or project-based work. In such cases, it is crucial to review the contractual provisions carefully.

Key takeaway: In most cases, wages are due after the end of the month. The salary must then be credited to the employee’s account on the first day of the following month. Collective agreements, in particular, may deviate from this date and specify earlier or later payment deadlines.

When Does the Employer Breach Their Duty to Pay Wages?

It’s obvious that an employer breaches their payment obligation if they fail to transfer any salary at all. However, in many other cases, the employer’s behavior may also be unlawful:

Employer Pays Salary Late

For instance, when the employer delays the payment of wages. Both contractual and legal provisions require employers to pay salaries on time. If the employee cannot see their wages credited to their account on the due date, the employer has not fulfilled their obligation to pay.

Even technical issues, such as a delayed transfer by the bank, do not exempt the employer from their responsibility. Employees should seek legal assistance promptly if delays occur repeatedly.

However, the delay can also have benefits for the employee: starting from the due date, you are entitled to claim default interest of approximately 4%. These interest payments can accumulate to a significant amount in cases of prolonged payment delays.

Employer Pays Salary Only Partially

If the employer only pays part of the salary, they may also be breaching their obligation to pay wages. Regardless of the reasons for withholding the full salary – unless it has been agreed upon or is justified by exceptional circumstances – this constitutes a violation of their contractual duty. Employers are not allowed to unilaterally decide the amount of wages or alter it at will.

This is often a contentious issue, particularly when it comes to overtime. According to the law, overtime must also be paid no later than with the regular salary, provided the employment or collective agreement stipulates it. Employees should not hesitate to actively demand overdue overtime payments.

Employer Does Not Pay Salary After Termination

Even after termination, an employee is entitled to receive any outstanding wages. If an employer refuses to pay for work already performed due to the termination, they are violating their contractual obligations. Termination only ends the employment relationship moving forward.

It is particularly important to pay attention to any limitation periods in your collective or employment contract! Claims automatically expire if they are not asserted within a specific timeframe (e.g., three months). If you do not demand payment from your employer, you lose the right to the outstanding salary. The only exception applies to the portion of the salary that corresponds to the statutory minimum wage.

When Is the Employer Justified in Not Paying the Salary?

However, there are situations in which the employer is justified in refusing to pay wages. In such cases, they may withhold payment in full or in part:

No work, No Pay

A classic scenario: The employee does not perform their work. Since the employment relationship is a mutual exchange, the employee cannot claim wages in this case. This is where the labor law principle "no work, no pay" applies.

However, caution is advised: there are many exceptions where the employer is still obligated to pay.

For example, the right to payment may continue if the employee:

• was excused from work for personal reasons, such as attending a funeral or the birth of their own child (so-called special leave),
• was entitled to refuse work due to unacceptable gaps in workplace safety or repeated non-payment of wages (so-called right of retention), or
• offered their work, but the employer failed to provide work opportunities (so-called operational risk).

Prolonged or Frequent Illness

If an employee is ill for more than six weeks, the employer is generally required to continue paying wages up until the six-week mark. This obligation is mandated by the Continuation of Remuneration Act (Entgeltfortzahlungsgesetz). However, after six weeks, the employer may stop payments. Most employees are then entitled to sickness benefits from their health insurance provider.

Calculating the duration of continued payment can be complex. In cases of repeated incapacity to work due to the same illness, the employer may, under certain circumstances, stop payments even before the six-week period ends. We are happy to advise you on the specifics.

Important: The rules of the Continuation of Remuneration Act apply only if the employee has been continuously employed with the same employer for at least four weeks.

Termination with Change of Terms, Short-Time Work & Insolvency

Exceptional situations call for exceptional measures: during economic downturns or other extraordinary circumstances, your salary may effectively be reduced. However, this is only permissible in narrow exceptions.

The most common scenario that requires your consent is a termination with a change of terms. In such cases, the employer offers reduced pay and threatens termination if you do not accept the new conditions. However, these terminations aimed at reducing wages are only permissible within strict limits and are often subject to legal challenge.

In recent times, many employers have implemented short-time work, reducing employees' salaries as a result. In most cases, this measure is not already permitted under collective or employment contracts, meaning the employer also needs your consent here.

Insolvency can also effectively lead to salary suspension. While the employer technically remains obligated to pay your wages, this often fails due to a lack of available funds. A small consolation may be the insolvency benefit provided by the Employment Agency, which can replace your salary for up to three months.

What Options Does the Employee Have?

An employee who receives no salary or an insufficient amount without justification is fortunately not powerless. You have several options to compel your employer to make the payment:

• First, you should notify your employer of the missed payment and simultaneously request that the salary be transferred within a specific deadline. This can be done verbally or in writing, though we recommend a method of communication that can later be proven. Additionally, you should adhere to the format and timeframe specified by the limitation period in your employment or collective agreement.
• If the employer still fails to pay, you may issue a formal warning as a second step. In this warning, the employee reiterates the demand for salary payment and simultaneously threatens to terminate the employment relationship without notice if payment is not made. Naturally, this option is only advisable if you are genuinely considering changing employers in the near future.
• If the warning does not yield results, you should consider filing a lawsuit for payment. If you have already been terminated, you can combine this with a dismissal protection claim. If the court determines that the employer unjustly withheld payment, it will order them to pay. If necessary, you can enforce your wage claim through compulsory enforcement measures.
• In some cases, you may also refuse to perform your work if payment is withheld. If your employer fails to pay, you may have a so-called right of retention. However, you should initially only threaten to exercise this right. It is essential to discuss the specific requirements with our law firm beforehand. If you unjustly refuse to work, you risk termination.
• Lastly, you may demand default interest and compensation for damages resulting from the missed payment. In some cases, you may also be entitled to a flat-rate default penalty of €40. However, court interpretations on this matter vary.

Conclusion: What to Do If the Employer Doesn’t Pay?

• The employer is obligated to transfer the agreed salary to you on time. Typically, wages are due on the first day of the following month.
• If the employer pays late, only partially, or – for example, after termination – not at all, they are breaching their contractual obligations.
• However, there are exceptions where the employer is justified in refusing payment. For instance, if you have not worked or have been continuously ill for more than six weeks.
• If the employer unjustly withholds payment, employees should not accept this passively. By issuing reminders, warnings, and ultimately filing a claim with the labor court, you can demand your wages.
• In the event of late payment, you are also entitled to default interest and, in some cases, compensation for damages.

FAQ

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