Posting workers to Germany: What to watch out for
In our globalized economy, working abroad has become common practice. Posting employees to another EU Member State, EEA country or non-European countries, as well as posting foreign employees to Germany, is now everyday practice in a number of industry sectors. A distinction must be made between those who permanently move to Germany for work, and those who are posted to Germany by their employer. A posted worker is a person who is sent by an employer to Germany to provide services on a temporary basis.
The process is regulated by the German Posted Workers Act (AEntG). The reason behind the distinction is that terms and conditions of work are often different abroad, especially in terms of taxes, wages and social security. In particular, remuneration levels deviate significantly from those in Germany, because many countries have no statutory minimum wage, or it is far lower than in Germany.
From 1 January 2017, there is a minimum hourly wage in Germany, regardless of sector or industry. Existing collective agreements that stipulate higher minimum wage for certain professions remain in effect. The main purpose of the Posted Workers Act (AEntG) was to protect industries that were jeopardized by lower wages of workers coming from abroad, e.g. construction industry. Many other professions and service sectors are also affected, e.g. nursing, building cleaning, and mail delivery services. Posting workers to Germany is therefore subject to certain requirements and criteria being met to guarantee minimum standards.
Posted workers are employees who are sent by their employer to carry out a service in another country on a temporary basis, under a contract of services, but their domicile is abroad.
On the other hand, if you are a foreign entrepreneur who opens a branch office in Germany, and send workers from your home country to work for you there and they live in Germany permanently – they do not qualify as posted workers.
The personal income tax payment obligation of foreign employees in Germany depends on whether they have limited or unlimited tax liability. Tax liability is limited if the employee remains domiciled abroad. On the other hand, if the employee has been living in Germany for a longer time or has been working repeatedly in Germany, they are not considered a posted worker, but someone who moved to stay in Germany for work purposes.
In any case, double taxation treaties prevent people from having to pay personal income tax both in Germany and in their home country. When in doubt and/or in more complex cases, all aspects must be reviewed carefully to decide whether the employee in question qualifies as posted worker or simply a foreign national who moved to work in Germany. Therefore it is imperative to understand and apply German laws and regulations correctly. Our experts are highly knowledgeable in all matters related to posting workers to Germany, and can help you avoid pitfalls and potential problems with the relevant authorities.
Posting foreing workers to Germany – social security A1
Workers posted to Germany remain employed by the sender company and are subject to the Labour laws of their home country. This means that they do not have to pay social security contributions in Germany. But keep in mind that posted workers cannot have their domicile and permanent residence in Germany.
The duration of the posting is also a key factor. If the assignment does not exceed 183 days in one year, the employer is not obliged to register the employee at the German social security administration. However, there must be a valid employment contract, executed in the home country. If, on the other hand, the contract was concluded in Germany, the employee cannot be considered a posted worker, even if the company owners are foreigners or the company’s head office is in another country. Payment for the services provided by the posted worker shall be strictly within the framework of the original contract.
Posting workers to Germany – posting employees and contracts
German bureaucracy can sometimes be overwhelming also for German companies. You may find it particularly difficult to fill in forms if you do not speak the German bureaucratic language.
Also, knowing and following the many different laws and regulations is by no means easy if you do not have a degree in law. For over 22 years, RBO has specialized in supporting foreign employers and companies planning to enter the German market.
Whether you wish to register your employees with social security, prepare a tax return or apply for a work permit at the immigration office, you can count on our experts for help and for taking care of the necessary formalities for you. We also give you tips and advice on how to post employees to Germany. As part of our service, we also provide you with an employee posting contract template.