Due to the increasingly international orientation of companies, it is becoming more common for a company based abroad to temporarily employ one or more employees in Germany – even without having a branch in the compnay. May it be, for example, for on-site consulting or for the development of market expansion. However, there are several things to consider when posting employees to Germany. In particular, the differences in tax systems can cause difficulties for both employers and employees.
The specific design of the deployment in Germany is of decisive importance for answering the questions arising. For example, it is crucial whether the posting of employees to Germany is limited in advance and how long it will last. For comprehensive and competent legal advice, please contact our lawyers directly.
Compulsory Social Insurance in Germany: Legal Advice
In principle, all employees working in Germany are subject to the provisions of German social security law and have to pay the corresponding contributions (§ 3 No. 1 of the Fourth Book of the Social Security Code, SGB IV). This requirement also applies if the employer has no registered or branch office in Germany. This principle is called the principle of territoriality, whereby only the place of employment is decisive. However, there are exceptions.
An exception to the principle of territoriality is regulated in § 5 SGB IV with the consequence that the social security obligation in Germany does not arise. The first condition is that the employee is posted to Germany for a certain period limited in advance. Thus, after employment in Germany, a return should take place.
A time limit can be fixed by contract or result from the nature of the work. In addition, a continuation of the employment relationship existing abroad is required. This requirement means that the employee must continue to be integrated into the foreign company and receive a salary from it.
If the requirements of § 5 SGB IV are met, the social security system of the state from which the posting is made applies. This also applies if the foreign company has a branch office in Germany. Otherwise, the provisions of the SGB IV on compulsory insurance and entitlement to insurance are applicable.