Are you planning to work in Germany, or to employ people in Germany for your business? This summary aims to give you some points of reference from a German legal perspective for some of the particularly important questions in this regard. This includes the temporary posting of Australian employees to Germany where the Australian employer does not establish a branch or company in Germany.
1. Is there a residence permit that provides an entitlement to work?
Persons who want to work in Germany need a residence permit that also allows them to perform this work. Such persons would need advice to clarify this status before entering Germany and start-ing to work. This does not apply to persons from European Union and European Economic Association (EEA) countries.
2. Is the employment of a type that carries the obligation to have social insurances?
This question should be answered before you start work. Being employed generally leads to a legal obligation to have social insurances including pension insurance, unemployment insurance, health and nursing insurance as well as accident insurance. In contrast, self-employed persons are only required to have social insurances in exceptional cases. As an employer, there are specific obligations to make social insurance contributions. Breaches of this requirement carry significant penalties and, in certain circumstances, criminal consequences. As an employee you should be interested to know to what extent you have social insurances as part of your employment. For pension insurance, the German-Australian Social Insurance Treaty should be the first port of call. It aims to avoid double insurance. Otherwise, employment in Germany based on a secondment that has a limited term from the outset may be an exception to the general requirement to have social insurances, as long as it is clear from the contract that the employee will return to Australia after the limited term.
3. Am I required to pay income tax on my income from the employment?
This question is critically important in weighing up the economic benefits of the employment. In this regard, the German-Australian Double Tax Treaty 2016 must be referred to. In Germany the principle of taxation of worldwide income generally applies: § 1 Income Tax Act (Einkommensteuergesetz, EStG). A person with their place of residence or usual abode in Germany is subject to tax on their entire income. Germany also generally claims the right to tax income from employment regardless of the place of residence or usual abode of the individual working on German territory (this does not apply to self-employment). The Double Tax Treaty aims to avoid the resulting double taxation by Germany and Australia.
4. Do I have to remit tax on wages as an employer?
This must be clarified before you employ workers in Germany. As an employer in Germany you are fundamentally obliged to retain a part of your employees’ remuneration and to remit it as “wage tax” – comparable to the PAYG withholding system in Australia. The wage tax (Lohnsteuer) serves as a prepayment of the workers’ obligation to pay income tax. If wage tax is not remitted by the employer, there is a risk of significant penalties and, under certain circumstances, criminal law consequences for the employer. Employers resident outside of Germany are only subject to this obligation where they are acting as a lender in a short-term transfer of personnel.
5. Can there be a departure from German employment law by way of exception?
It is fundamentally possible to select a different law to govern the employment relationship by contract. Generally however, this cannot be done to provide a lower level of protection than that af-forded by the national employment law provisions in Germany. With respect to limited term secondments of employees from Australia to Germany the possibility of choosing Australian employment law together with a designation that Australian courts are to have jurisdiction over disputes should be considered.
6. What are the main features of German employment law – what do I need to pay particular attention to?
Employment law in Germany is not governed by a single uniform piece of legislation. Employment law can be found in statutory provisions, collective bargaining agreements and employment agree-ments. Otherwise, employment law is largely judge-made law. A distinction must be made between individual employment law and collective employment law. The former is concerned with the relationship between employee and employer, being contractual employment law. Collective employment law essentially covers the rights of employer and employee organisations and the rights of employees to have a say at an operational level.
6.1 The main features of individual employment law
> Employment contracts
> Employment conditions
> General Security of Tenure
> Special Security of Tenure
> Business transitions
6.2 The main features of collective employment law
> Unions / Collective agreements
> Operational participation
> Business changes
7. What current developments should I pay attention to?
There are many new developments with respect to the privacy of employees due to the European General Data Protection Regulation, which applies from 25 May 2018 in the European Union. At the same time in Germany a new Federal Data Protection Act will take effect which has been adapted to the new legal situation. Breaches of the data protection provisions can and should in future carry significantly higher financial penalties.
Disclaimer: Please note that the content of this leaflet is intended only to provide a general overview on mat-ters of interest. It is not intended to be comprehensive, nor does it constitute legal advice. Please seek professional advice from a lawyer in respect of your particular individual circumstances before acting or relying on any of the content of this leaflet.