The directive, which does not require further parliamentary approval, foresee another hike to €14.60 per hour from 2027, as per recommendations of a special commission which regularly proposes adjustments to the level.

First introduced in 2015 under a centrist government led by former chancellor Angela Merkel, the pre-tax minimum wage has since been raised multiple times from its initial level of €8.50.

It currently stands at €12.82.

The Minimum Wage Commission, made up of top representatives of unions and employers, as well as an independent president, votes on adjustments every two years, taking into account the growth in wages.

Its latest proposal fell well short of the €15 demanded by the Social Democratic Party (SPD), the junior partner in the coalition government of conservative Chancellor Friedrich Merz that took office in May.

According to the German Trade Union Confederation, some 6 million workers currently receive minimum wage.

In its justification for the directive, the government estimates that the move could result in additional wage costs of around €2.2 billion for employers in the coming year and around €3.4 billion in 2027.

Prices for individual goods and services could rise moderately “if the wage increases are passed on in full,” it said.

However, no significant impact on the overall price level, especially the consumer price level, is to be expected, according to the government.