Job Offers from Foreign Employers (in EU) Offering Full Time (but Freelance!)

[Olea 7]

Would appreciate some thoughts on my current working situation and attempts to get on the right side of the law (and perhaps ahead in my field of work...). 

 

The back story: I'm married to an EU citizen and therefore have longterm residency in Germany and can work throughout the EU. After graduation I was offered a full-time job with a consulting company based in a different country within the EU. They offered full-time remote possibilities (as essentially we're knowledge workers and just need a computer and internet to function in our work duties). I asked how it would work to be a full-time employee -- how would they pay my social security, pension, etc.? They didn't really know, but after I laid out how much I would be required to pay into pension, social security etc. in Germany, they offered a higher salary for me to be able to pay my contributions here. I found out (through my own research, and no help from HR) that the proper way essentially requires you (or rather, a Steuerberater) to request a company number from the Arbeitsamt, get a login for an online system where you submit payroll receipts, etc, and basically collect money from your foreign employer in order to pay their share of contributions here. While I was fine to do these admin things (even though it wasn't technically my job), I got so much pushback from people at AOK and other institutions who basically refused to deal with me and instead wanted me to deal with a Steuerberater as an intermediary. When I couldn't find one (let alone get my company to pay for one), and dealt with other contractual issues, I decided to step down to part time, take on other clients, and register as a freelancer in order to continue working with the company. It was more a precarity move, because at this point I was seriously frustrated with all the wasted time I had spent trying to work full time for them in a legal way.

 

Currently: In my search for new clients as a freelancer, and now that I'm working my way up and gaining more experience, I've been approached by two of my company's competitors offering me work. However, they both want to offer me full-time roles on a freelance contract. I flagged the difficulties of this arrangement (because of Scheinselbstaendigkeit), and noted that I could not work for one company full-time as a freelancer, but they insist offering "B2B" contracts have worked for them in the past with other employees (after pressing them on how this works for some people, I realized it has a lot to do with individual circumstances... some people are students, some work one day a week elsewhere, some are based in EU countries where they don't really care if the freelancing income comes from one source... etc.). At the same time, they also don't want me to work with their competitors (because it's an industry that sometimes you're partnered with other orgs, and sometimes you're competing against them). I'm frustrated because I don't see any way forward in this industry, if no one is willing to offer me a full-time work the "right" way, but also don't want me to be a true freelancer working with multiple clients because it would mean taking contracts from their competitors sometimes.

 

The question: How on earth do people working for employers based outside of Germany actually deal? Do they get their companies to hire EoRs (Employers of Record) and Steuerberaters on their behalf? If so, that rules out working for any employers based in EU countries with lower costs of living and lower salaries (my situation). Do they just "freelance" for one client and hope they don't get caught? What is with all of these companies acting like this is totally legal and above board, when it absolutely screws the employee (no pension contributions, no sick leave or care insurance or guarantees to vacation time, etc.). As remote work is becoming increasingly the norm increasingly after the pandemic, and technically freedom of movement should apply in this case, how is it that there are still so many issues with working arrangements like these? 

 

Thanks for your thoughts and answers - much appreciated. 

[karin_brenig 712]

well, very simple....

 

You are an independent contractor (= freelancer)
That means you decide how much, for whom, on what project(s), under what terms.... and for how much money you want to work.

 

No potential customer of yours can "pressure" you into doing anything.

 

You seem to have enough work currently, freelancing part time for one customer. If you want to avoid this "Scheinselbständigkeit" stuff, you can either look for more customers who "understand" the legal ramifications, or you can take up some secondary part-time job as a regular employee for any company in Germany.

[Olea 7]

1 hour ago, karin_brenig said:

You are an independent contractor (= freelancer)
That means you decide how much, for whom, on what project(s), under what terms... and for how much money you want to work.

 

No potential customer of yours can "pressure" you into doing anything.

 

this is well understood, thanks.

 

1 hour ago, karin_brenig said:

You seem to have enough work currently, freelancing part time for one customer. If you want to avoid this "Scheinselbständigkeit" stuff, you can either look for more customers who "understand" the legal ramifications, or you can take up some secondary part-time job as a regular employee for any company in Germany.

 

This is exactly the issue - I do not have "enough" work. I work part time for one client because I am obligated to, not because I want to. As it stands, I am having to scramble to find other clients for one-off work for an average of 20% of my working time just to avoid being Scheinselbständigkeit, which is either leading me to full-time job offers (from foreign clients, that, because they have no capacity to register as a taxable entity in Germany, wish to pay my gross salary in a lump sum, where I would call myself "freelance"... so the same situation I'm in now), or to less than ideal one-off small contracts with random clients that require time and energy to chase down. I would prefer to work full time for one company and clock out at the end of my work day, rather than always be hunting for new clients.

 

The real question gets a deeper legal issues related to cross-border remote working. Germany seems to have no way of understanding this relationship unless 1) I'm a posted worker (Article 12, 883/2004), 2) my company registers as a taxable entity here and hires a Steuerberater here to handle the bureaucratic side, which being small they can't afford or 3) I am freelancer with multiple clients. Given the ubiquity of remote working these days, and given that not all companies have the resources to hire tax professionals in a country they don't operate in, it seems like many companies are trying to circumvent the administrative difficulties by offering "full time", but "freelance" roles (since I keep getting these offers). So I'm mostly wondering... what gives? How should a company be proceeding in these cases? 

[karin_brenig 712]

...now I am really curious... what is the industry you are working in?

Aren't there any companies operating in Germany in that field?

Could you try to work as a regular employee for a company located in Germany - maybe still "remote", from your home office?

 

Or, if your line of work is really something non-existant in Germany, just work any regular (part time) day job that you feel capable to do - and keep your freelancing as a side-gig to supplement the income.

[optimista 5,891]

What gives ? I am guessing that the contractor is tempted by the immediate gains, i.e. gross salary to do as he likes with... to pay contributions or not... possibly in a state of semi ignorance. And the temptation of trying to outsmart the system in the short term. You are faced with a catch 22 situation. My BIL has been in this situation a couple of decades. A right mess... his wife ended up sorting out when she realised he had not been paying pension contributions. So what are they going to live off when he retires ?

[Eric7 555]

What about setting up as a GmbH?
Then you can work for whoever you want, as much as you want, without worrying about Scheinselbstständigkeit.

[karin_brenig 712]

12 hours ago, Eric7 said:

What about setting up as a GmbH?
Then you can work for whoever you want, as much as you want, without worrying about Scheinselbstständigkeit.

I think you have to come up with a chunk of money up front to register a 1-person-GmbH - but, maybe, that way you can let yourself be gauged by one powerful "customer" who dictates your life without really providing a life.

[Eric7 555]

48 minutes ago, karin_brenig said:

I think you have to come up with a chunk of money up front to register a 1-person-GmbH - but, maybe, that way you can let yourself be gauged by one powerful "customer" who dictates your life without really providing a life.

 

Mini-GmbH (1 Euro GmbH). 

Steuerberater costs are higher than as a freelancer though.

[Olea 7]

1 hour ago, karin_brenig said:

I think you have to come up with a chunk of money up front to register a 1-person-GmbH - but, maybe, that way you can let yourself be gauged by one powerful "customer" who dictates your life without really providing a life.

21 hours ago, karin_brenig said:

 

Important context - I'm a new graduate making a career shift from academia to industry, so while I do have work experience I'm kind of a newbie when it comes to this new job (therefore it's not like I'm a well known expert/sought out consultant). I have boundaries and regularly remind my employer that as a freelancer, I also have certain "rights" when it comes to deciding my work.

 

And it's not even like my employer was trying to get out of any obligations... More like there is no real system for foreign companies to employ people unless they are very big and can afford legal guidance, or unless they are hiring a freelancer. When I accepted the offer, we both (me and employer) imagined it as a full time job - they even offered to pay my contributions for pension and social security on top of the suggested salary (with the understanding that I could contribute their part for them, separately). From what I've read, this is technically possible (ie I pay my part and employers part of pension, social security, etc.) However, we ran into a lot of administrative hurdles because AOK would refuse to talk to anyone about my Beiträge that wasn't a Steuerberater (the amount changed slightly each month depending on # of working days, and they wouldn't calculate this for me or tell me how I might do it myself); we couldn't get guidance on what my family benefits would be like or how I could claim them; there was contractual confusion about whether I would receive paid holidays in Germany or in the country of the employer, etc. You can apparently hire a Steuerberater or employer of record to manage this all, but the extra expense was too much for my small employer. 

 

Anyway, I feel like this is just a case where laws and systems haven't caught up to how people actually work now. Its not that this job doesn't exist in Germany, but my skills are more competitive in a foreign market (where I have other language skills and work experience). My goal is to go fully remote at some point and I don't want to be in Germany forever, so "Just getting a job in Germany" defeats the purpose... Although that's starting to look like the only way. 

[optimista 5,891]

7 minutes ago, Olea said:

 ... laws and systems haven't caught up to how people actually work... 

 

Possibly. It may also be the other way around. So many jobsworths cannot answer hard questions. Sounds like AOK is still the pits. If you changed to another KK you might get the answers you are looking for. Your employer is also not up to the mark, clearly. Doesn t bode well. Could you have a one off chat with a Steuerberater and put these questions to them ?

[travelerworker 116]

Hi,

I totally agree that in many areas Germany haven't caught to the modern times, in my city we still have a shop that rents VHS's...

Anyways, did you explore this? :

https://www.consultinghouse.eu/solutions/employing-in-germany/employing-as-a-foreign-company/

https://www.payroll-service-germany.com/

https://www.paychex.de/en/

 

Or an umbrella company that does the billing for you and get's a share of your invoices:

https://remote.com/lp-contractor

https://germanumbrellacompany.de/

 

Good luck!

 

[PandaMunich 16,709]

3 hours ago, optimista said:

Sounds like AOK is still the pits. If you changed to another KK you might get the answers you are looking for. 

Exactly.

Change to Techniker, they are even willing to communicate in English: https://www.tk.de/en

 

Once you have the Betriebsnummer, Techniker will do most of the payroll accounting for free, as long as you are the only employee in Germany of that non-German employer.

As an employee of a non-German employer, you will not have wage tax deducted every month, but instead have to pay your tax through the mandatory yearly tax return.

Techniker will do payroll accounting for all social security contributions they collect, which means for all social security contributions except for public accident insurance. 

 

Public accident insurance only gets paid once a year, you would have to contact the Berufsgenossenschaft that is responsible for the area your non-German employer works in (if it is IT, then it's VBG), get them registered there and then pay public accident insurance (usually around 150€) once a year by letting them debit either your bank account or your employer's bank account.

 

The only downside to Techniker doing the payroll accounting is that they do not use the normal channel that Steuerberater use to report to the Finanzamt database how much you paid in social security contributions.

Which results in the Finanzamt using social security contributions that are a few hundred € "off" from what you really paid.

But that is a bridge to cross when you get to your income tax return, worst-case, i.e. if the amount should be too low, you will just have to prove to the Finanzamt how much you had really paid by sending them the yearly certificate that Techniker provides:

[Olea 7]

A million thanks, @PandaMunich, this is extremely helpful! I got as far as getting a Betriebsnummer, and entered in two months of contribution receipts myself through the sv.net system (or whatever it was called)... but with getting 0 replies to my queries from AOK representatives and the HR of my company clueless as to how to proceed, I decided to step back to "freelance" a few months ago. I'm not really motivated to restart that process with a different KK, but maybe it will make sense in the future depending on how things go.

 

I wonder, though, about other tax/legal considerations of having a foreign employer. For example, I've heard a lot about the risk of creating a "permanent establishment" (i.e. some kind of taxable entity) in Germany through having employees operate there... but I guess this depends on the nature of the job you do/whether you're making decisions critical to the company's strategy/whether your place of work is available to company employees... etc. Also, I wonder if companies are obligated to model their contracts in certain ways that mirror what a German contract would be (e.g. paid German holidays)? For example, one problem I ran into with my company when structuring a contract was that they did not know that they had to pay 6 weeks of sick leave before coverage by the Krakenkasse kicked in... In the Member State where they're based, the health insurance takes over from day 1 and so doesn't imply any extra costs to the employer. So I imagine at some point, it is necessary to get some kind of "employer of record" or intermediary to handle these admin issues? 

[PandaMunich 16,709]

 

6 minutes ago, Olea said:

For example, I've heard a lot about the risk of creating a "permanent establishment" (i.e. some kind of taxable entity) in Germany through having employees operate there... but I guess this depends on the nature of the job you do/whether you're making decisions critical to the company's strategy/whether your place of work is available to company employees... etc. 

Yes, exactly.

See here:

• Your non-German employer would only establish a permanent establishment in the tax sense (which would mean owing German tax on the part of their profits generated in Germany!) if they fulfill the conditions set down for that in the double taxation agreement between their country and Germany. Most of these conditions are logical, e.g. if your non-German employer has an office in Germany through which they carry out business, that would be a permanent establishment and therefore taxable in Germany. However, there is also a more insidious condition that also leads to a permanent establishment: it’s enough if you as their employee “have, and habitually exercise, an authority to conclude contracts on behalf of your employer” and they will suddenly have a permanent establishment in Germany.
  So if your employer wants to avoid taxing a part of their profits in Germany, they had better not give you such authority.

6 minutes ago, Olea said:

Also, I wonder if companies are obligated to model their contracts in certain ways that mirror what a German contract would be (e.g. paid German holidays)? For example, one problem I ran into with my company when structuring a contract was that they did not know that they had to pay 6 weeks of sick leave before coverage by the Krakenkasse kicked in... In the Member State where they're based, the health insurance takes over from day 1 and so doesn't imply any extra costs to the employer. 

They have to adhere to German labour law and offer you all the benefits like paid sick leave for up to 6 weeks and minimum 20 working days off as paid holiday (for a fulltime employee who works 5 days a week) that employees of German employers have.

If they don't want to bother with that, they cannot have an employee in Germany.

[Olea 7]

@PandaMunichbrilliant, thanks for this clarification