What the law allows
The Preisklauselgesetz (German Price Clause Act) prohibits linking a price directly and automatically to prices or values that are not comparable with the goods or services agreed (§ 1(1) PrKG). Under § 1(2), the following are exempt from the prohibition:
- Performance reservation clauses: the new amount is determined on equitable principles, with room for discretion.
- Tension clauses: the goods or services being compared are essentially of the same kind or at least comparable.
- Cost element clauses: the price is linked to costs only to the extent that these directly affect the provider’s own costs.
- Clauses that can only lead to a reduction.
A wage adjustment clause is a cost element clause. It is exempt from the prohibition only to the extent that it links the wage share to collectively agreed pay; if the whole price is adjusted, it goes beyond this. Under § 8 PrKG, however, such a clause only becomes invalid once a court has established the breach in a final judgment. Until then, it remains in effect.
If the clause is part of standard terms and conditions, courts review it for unreasonable disadvantage under § 307 BGB (German Civil Code), even between businesses. Most of the clause prohibitions in §§ 308 and 309 BGB do not apply directly between businesses (§ 310(1) BGB). In 2014, the Bundesgerichtshof (Federal Court of Justice) upheld a clause that linked the gas price for commercial customers solely to the price of heating oil, reasoning that a business can judge for itself whether such a link is appropriate (VIII ZR 114/13). What this means for you: do not rely on a court – settle the clause in the negotiation.
This page describes the legal position in general terms. It is not a substitute for legal advice in individual cases.
How a wage adjustment clause is structured
- Wage share b: taken from the costing and written into the contract. The remainder a = 1 − b remains constant.
- Index: the benchmark wage of a specified pay group in a specified collective agreement, or an index of collectively agreed pay from the Statistisches Bundesamt (Destatis). The base value is the level at the time of costing.
- Threshold: the price is adjusted only once the index has changed by a set amount, equally upwards and downwards.
- Frequency and evidence: for example annually on a reference date, with a notice period and supporting evidence.
P1 = P0 × (a + b × I1 / I0)
P0 is the existing price, I0 the index at the time of costing and I1 the index on the reference date.
Worked example
A service contract costs €120,000 per year, and the wage share is 60%. If the index rises by 4.0%, the price rises by 2.4% to €122,880. If the whole price were adjusted, it would be €124,800, i.e. €1,920 more per year. If the index falls, the price falls according to the same formula.
| Scenario | Index | New price | Change |
|---|---|---|---|
| Starting price | 100.0 | €120,000 | – |
| Index +4.0%, adjustment on the wage share only | 104.0 | €122,880 | +2.4% |
| Index +4.0%, adjustment on the whole price | 104.0 | €124,800 | +4.0% |
| Index −3.0%, adjustment on the wage share only | 97.0 | €117,840 | −1.8% |
| Index +1.5%, below the 2% threshold | 101.5 | €120,000 | no adjustment |
Which indices are suitable
- Wages: the benchmark wage of a specified collective agreement or the Destatis index of collectively agreed pay. Specify whether the calculation includes or excludes special payments; the two series diverge.
- Materials and energy: producer prices (statistic 61241) at the appropriate level of detail.
- Traded goods: wholesale selling prices (61281).
- Construction and maintenance work: the construction price indices, including maintenance (61261).
Seven mistakes that cost money
- Adjustment on the whole price. Overheads and profit rise as well, even though only wages have changed. In the example, that is €1,920 too much per year. Under the Preisklauselgesetz, a cost element clause is exempt from the prohibition only “to the extent” that the costs concerned directly affect the provider’s own costs.
- Upwards only. No reduction, or a threshold that applies only to increases.
- Double counting. Adjustment for both agreed wages and consumer prices on the same share, or wage and material indices that overlap.
- Base month before the costing. If the base value predates the costing, increases already included in the price are paid for a second time.
- Unclear reference. Which collective agreement, which pay group, with or without special payments?
- No rule for the index. What applies if the index is rebased, revised or discontinued?
- No evidence. Wage share without supporting evidence, retroactive adjustments, no obligation to disclose the calculation.
Frequently asked questions about price adjustment clauses
Is a price adjustment clause permitted between businesses?
Yes, within the limits of the Preisklauselgesetz (German Price Clause Act). Permitted clauses include cost element clauses, which link the price to costs only to the extent that these directly affect the provider’s own costs (§ 1(2) no. 3 PrKG). If the clause is part of standard terms and conditions, it must also withstand review under § 307 BGB (German Civil Code).
Does a price adjustment clause also have to pass on reductions?
The law does not expressly require it. However, if a clause in standard terms and conditions only allows increases, it may unreasonably disadvantage you and be invalid under § 307 BGB (German Civil Code); between businesses, courts apply less strict scrutiny. So agree on reductions explicitly, with the same threshold as for increases.
What wage share should be used?
The one from the provider’s costing, backed by evidence and written into the contract. Without a fixed share, no adjustment can be checked.
How does it differ from indexation to the consumer price index?
A price that automatically follows an unrelated index such as the consumer price index is prohibited in principle under § 1(1) PrKG; the Act provides for exceptions. A cost element clause, by contrast, links the price to costs that the provider incurs for precisely this service.
Sources
- Preisklauselgesetz (German Price Clause Act), § 1
- Preisklauselgesetz (German Price Clause Act), § 8
- § 307 Bürgerliches Gesetzbuch (German Civil Code)
- § 310 Bürgerliches Gesetzbuch (German Civil Code)
- Rechtslupe on BGH (Federal Court of Justice) judgments of 14 May 2014, VIII ZR 114/13 and VIII ZR 116/13
- Statistisches Bundesamt (Destatis): collectively agreed earnings and collective bargaining coverage
- Statistisches Bundesamt (Destatis): producer prices in September 2026, press release of 20 October 2026
- Statistisches Bundesamt (Destatis): wholesale selling prices in September 2026, press release of 14 October 2026
- Statistisches Bundesamt (Destatis): construction prices in August 2026, press release of 9 October 2026
