Placing Contractors in Germany – Without The Compliance Headaches

20 May 2024

Stefanie Cook - MD Workwell International

Stefanie Cook

MD Workwell International

Germany’s staffing market revenue is projected to reach $41.2bn, marking a 6% growth from 2022 when it led the EU at 6% of global staffing revenue.

As the largest economy in Europe, Germany offers a great opportunity for recruitment firms looking to place permanent and temporary workers.

If you’re a recruiter with your sights on overseas expansion, Germany may be the perfect place to start.

 

ABOVE: Account Manager Simon Knox discusses how we can help you place workers quickly and compliantly in Germany.

Placing workers in Germany is relatively straightforward but you must consider the worker classification rules and understand what roles are deemed to be employed or self-employed as penalties can be severe.

Ultimately the decision lies with the end client to ensure the self-employed role meets German regulations. We can help guide you throughout the process of self-employed worker classification.

Correct classification of workers

To ensure the correct classification of workers, we ask that all agency partners request a completed engagement questionnaire from their end client. The questionnaire helps to define how the client will engage with the contractor and helps to demonstrate a process has been followed to define the correct engagement model.

Once the questionnaire has been completed, if the responses to the questions indicate the freelance model is suitable, we will require the contractor to complete a further questionnaire to confirm they are or have the intention to be a genuine freelancer.

We will provide all the questionnaire templates and will assist you to ensure the process is completed swiftly and correctly.

Payment options for self-employed workers

If workers do meet the self-employed criteria, there are two options available to you.

Payment processing solution

Our payment processing solution enables you to engage workers who operate through their own limited company or who are already set up as a freelancer. We ensure you engage these workers safely by undertaking compliance checks, contract administration, and ongoing payment processing. This is a straight-forward and hassle-free way to engage workers.

Full self-employed solution

With this option, we provide contractors with an in-country accountant in Germany. We register them compliantly and take care of tax, social security and any other requirements bound by German law.

In addition to the setup aspects, we will support the contractor throughout their contract. For example, we will help them know what to put aside for tax for future liabilities, advise them what they can and can’t claim as expenses and, when tax returns are due, we will draw up their accounts ready to submit to the German authorities.

Payment options for employed workers

If workers do not meet the self-employed criteria we can offer employment via our own entity, which has the required labour leasing licence (AUG) to compliantly operate in Germany This means your workers can be placed compliantly and we will administer tax, social security and employment rights according to German laws.

Again, this is a very straight-forward solution, with our specialist team taking care of the smooth onboarding of your workers.

Managing the admin

There are several administrative steps that must be followed to ensure compliance when placing workers in Germany.

Freelance workers in Germany must have:

  • Private medical insurance
  • Valid PI insurance from a German provider
  • Link to their professional website advertising their services and showing they are available to take on work (a LinkedIn profile would not be sufficient).

Workers must register their address in Germany within three months of entering the country. Each city has its own Residents’ Registration Office where this can be carried out.

Paying tax in Germany

The tax year in Germany runs from January to December and liability begins on day one of the contract period. Our local entity will work out the tax payable in advance on a quarterly basis (pre-payments are due 10 March, 10 June, 10 September and 10 December).

Genuine expenses can be offset against tax liability, we will confirm all the personal expenses that can be claimed by each worker we support.

When the contract is due to come to an end, we will issue a letter to the tax authorities to confirm de-registration.

What to do next

If you would like to find out more about how to tap into the German market, please arrange a Discovery Call with Stefanie Cook, MD of Workwell International Powered by 6CATS.

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