SECONDMENT OF EMPLOYEES TO GERMANY – POINTS TO CONSIDER

1. Terminology

In this note it is assumed that when a secondment is made to another organisation:

The organisation to which the secondee is to provide their services is referred to as the “host”.

2. Notification obligations

There is a number of notification requirements that employers and hosts might have to comply with (e.g. building / construction services):

2.1 Notification pursuant to the Minimum Wage Act:

Foreign-domiciled employers who post one or more workers to Germany to carry out work or to provide a service, might be required pursuant to section 16 (1), (2) of the Minimum Wage Act (Mindestlohngesetz - MiLoG) in conjunction with section 1 of the Ordinance on Minimum Wage Reporting Requirements (Mindestlohnmeldeverordnung - MiLoMeldV) to give notification of their worker(s) and to submit an assurance.

2.2 Notification pursuant to the Posted Workers Act

Foreign-domiciled employers who post one or more workers to Germany to carry out work or to provide a service covered by the Posted Workers Act (Arbeitnehmer-Entsendegesetzes - AEntG), in which sectors an employer is obligated to grant at least certain minimum conditions of employment and/or make holiday fund contributions, might be required pursuant to section 18 (1) AEntG in conjunction with section 1 MiLoMeldV to submit a written notification accompanied by an assurance pursuant to section 18 (2) AEntG.

2.3 Temporary Employment (Arbeitnehmerüberlassung)

Moreover, temporary employment provosions might apply. For example, a notification requirement might arise pursuant to sections 16 (3), (4) of the Minimum Wage Act (MiLoG), in conjunction with Art. 1 of the Ordinance on Minimum Wage Reporting Obligations (Mindestlohnmeldeverordnung - MiLoMeldV).

2.4 How notifications should be made?

Since 1 January 2017 when the new Ordinance on Minimum Wage Reporting Obligations (Mindestlohnmeldeverordnung) has entered into force, notifications regarding workers posted to Germany should be made online using the Minimum Wage Notification Portal:

3. Mandatory laws that will apply to the secondment

3.1 General

Foreign nationals of the EU or European Economic Area and Swiss nationals do not need a residence or work permit to live and work in Germany.

Regardless of the governing law of the secondee’s contract of employment, the parties must comply with German statute governing minimum working conditions in the following areas:

Concerning labour law, the decisive factor is the parties’ intention to eventually return to the home country. The engagement abroad must be limited in time in advance. The time limit can be the result of the characteristic of the employment or of a contractual agreement.

3.2 Taxes and social security

Wage tax, a form of income tax, is levied on the income from all non-self-employed work in Germany. However, if there is a double tax treaty with the employee’s home country (as is between Germany and Romania), Germany usually will not levy any tax if the secondee has been in Germany for 183 days or fewer within the 12-month period of the calendar year or tax year. Multiple stays within a 12-month period must be aggregated. The 183 days includes times spent in Germany for other than business purposes.

In Germany social security payments are not treated as taxes. A secondee from within the EU can stay in their home country’s social security system for a limited period (usually 24 months). It is advisable to check an individual case with the competent authorities beforehand.

If the secondee remains employed by the seconder, it is standard practice for the seconder to continue to pay the secondee’s salary and wages during the secondment.

Seconder

Tax

In general, if the seconder remains the employer, the seconder must withhold and pay the secondee’s income tax. This applies even if even the seconder is not subject to taxation in Germany.

Social security

In general, if the seconder remains the employer, the seconder must contribute the employer’s portion of the secondee’s social security insurance and must withhold and pay the secondee’s portion of social security dues.

The general rules regarding both tax and social security contributions are subject to certain exceptions. These exceptions may apply, depending on various circumstances including the duration of the secondment, the original country, and where the secondee is working.

Host

Tax

The host is liable for VAT (section 13b, paragraph 1 and paragraph 5, Value Added Tax Act (Umsatzsteuergesetz) (UStG)).

If the host is the employer (that is, there is an employment contract between the host and the employee), the host is also responsible for withholding and paying the secondee’s income tax.

Social security

If the host is the employer (that is, there is an employment contract between the host and the employee), the host must contribute to the secondee’s social security insurance. Additionally, the host is responsible for withholding and paying the secondee’s income tax and discharges its own and the employee’s part of social security payments.