Wage Escalation Clause in Public Procurement
A wage escalation clause is a contract clause that allows the contract price to be adjusted when wage costs change, protecting contractors against cost increases.
Definition: A wage escalation clause is a price-adjustment clause agreed in public procurement contracts that provides for an automatic or application-based adjustment of the contractor's remuneration when there are documented changes in collectively agreed wage costs and which is permissible on the basis of Art. 72 (1) lit. a of Directive 2014/24/EU and § 2 (7) VOB/B.
Last updated: January 2026 · Legal basis: Art. 72 Directive 2014/24/EU, BVergG 2018, § 2 (7) VOB/B, ABGB, BGB
What is a wage escalation clause?
A wage escalation clause is a contractual stipulation that links the contract price to wage-cost developments and thus ensures that, in the event of substantial wage increases – in particular through collective-bargaining increases in Austria or tariff increases in Germany – the contractor receives adjusted remuneration. It is a sub-form of the more general price-escalation clause, which can also cover other cost factors such as material or energy prices.
The wage escalation clause must be transparently set out and clearly worded in the procurement documents. Typically, a reference index (e.g. a specific wage index of the trade in question or of the statistical office) is defined as the basis for adjustment, a base month is set out, and a minimum deviation threshold is defined above which a price adjustment takes effect (frequently 5% or more). The adjustment formula must be traceable and objectively verifiable for all bidders.
Significance in tendering procedures
Wage escalation clauses are permissible under public procurement law and, in the case of contracts with long durations or significant deployment of personnel, are even advisable, since they fairly distribute calculation risks and prevent contractors from pricing excessive risk surcharges into their bids. The lawfulness of price-adjustment clauses under public procurement law arises from Art. 72 (1) lit. a of Directive 2014/24/EU, which clearly stipulates that contract modifications are permissible where they were provided for in the original procurement documents in clear, precise and unequivocal clauses. In Austria, this corresponds to § 149 BVergG 2018; in Germany, § 2 (7) VOB/B allows for an adjustment of the contract price for works contracts in the event of changes to wages and material prices.
Without a corresponding contractual provision, there is no entitlement to a price adjustment in the event of increased wage costs; the subsequent agreement of a wage escalation clause generally constitutes a substantial contract modification that would require a new procurement procedure. Contracting authorities should therefore consider, for contracts with a duration of more than 12 months and a high wage-cost share, including a wage escalation clause in the procurement documents.
Related terms
Last updated: January 2026 All information provided without guarantee. For legally binding advice, please consult a law firm specialising in public procurement law.
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