What needs to be considered when using subcontractors from Eastern Europe in Germany?

If you are a company operating in Germany, you will certainly have already experienced the shortage of skilled labour. Whether it is logistics, the Construction industry or the Industry everyone complains about the lack of skilled labour. Subcontractors from Eastern Europe give you the opportunity to fulfil your orders on time. We would like to show you here what is important for you as an entrepreneur and what obligations you have.

What are your obligations as a client in Germany?

In comparison to the United States, German residency law is basically not undergoing any drastic changes. New laws such as the Skilled Immigration Act are intended to facilitate access to the German labour market for skilled workers from third countries in particular. For German clients, it is more of a challenge to find a reliable subcontractor from Eastern Europe who correctly completes all the necessary registrations. It is also important to register each individual employee with customs to ensure that they receive the statutory minimum wage. In addition, all employees are subject to social security contributions, regardless of whether they are based in Germany or another EU member state.

The relevant regulations can be found in the EU Implementing Regulation. A German company must apply for a company number to employ workers from other EU countries, which is required by the Federal Employment Agency. Employees also have the option of choosing which health insurance fund they wish to be insured through. It is important to provide the necessary proof and pay all contributions on time. Since 1 January 2021, it is required that every foreign employee in Germany with foreign employers has an authorised representative who can keep and store the remuneration documents in German in the event of a tax audit.

What you should look out for when hiring foreign subcontractors

• Workers of the foreign subcontractor have a valid employment contract and are allowed to work in Germany.
• You are insured accordingly and have a confirmation from the insurance company (A1 certificate).
• Workers from foreign subcontractors must be paid according to the German minimum wage.

If you employ foreign subcontractors, you as the employer apply for the A1 certificate. This application is now usually made online. The important thing here is where the application is made and this depends on how your employees are insured.

If employees have compulsory, voluntary or family insurance, you should apply to the health insurance fund. Even if you have private supplementary insurance, the health insurance fund is the right place to go.

If the employees have private health insurance or are not covered by an occupational pension scheme, you should submit the application to the pension insurance provider. Otherwise, the application is submitted to the Arbeitsgemeinschaft berufsständischer Versorgungseinrichtungen (ABV).

Minimum wage and documentation requirements

Since the introduction of the Minimum Wage Act (MiLoG), the German minimum wage regulations apply to all employees working in Germany - regardless of the employer's or employee's country of origin. As the client, you are liable under Section 13 MiLoG as a guarantor for ensuring that your subcontractor pays its employees the statutory minimum wage.

The following documentation obligations must be observed:

• Time sheets for all deployed employees (start, end, duration of daily working hours)
• Retention of documents for at least two years
• Provision of documents for inspections by customs (financial control of illegal employment)
• Authorised representative in Germany for the retention of payroll documents (mandatory since 2021)

More on the obligations to provide evidence in detail: Travelling as a subcontractor in the EU - proof required.

Avoid bogus self-employment

An often underestimated risk when using Eastern European subcontractors is the Bogus self-employment. If employees of a subcontractor are de facto integrated into the client's business - fixed working hours, authority of the client to issue instructions, working exclusively for one client - this can be classed as covert hiring out of employees. The consequences are back payments of social security contributions and severe fines.

We would like to stand by your side

Global Business Recruiting has been active as a personnel service provider for more than 25 years and specialises in the placement of employees for companies in Germany. Our focus is on the provision of Skilled labour from Eastern Europe, EU countries and third countries for various sectors such as trade, construction and industry, Electrical engineering, engineering, industrial assembly, machine relocation, medicine, automotive industry, metal and steel construction as well as production and logistics.

Our core competences include in particular Welding, The production of metal structures, assembly work and the construction and maintenance of industrial plants. We also provide reliable production assistants, assembly line workers, inspectors and other skilled labour.

Our subcontractors and temporary workers from abroad are active in various areas, including the series and individual production of metal structures and parts for mechanical engineering, road construction, shipbuilding and for use on railways and in the construction industry.

Frequently asked questions about the use of Eastern European subcontractors in Germany