International posting of employees
The cross-border deployment of employees can be a profitable venture for all sides. However, companies and their employees are often faced with a number of tax, employment and social security issues. So that companies can take care of their day-to-day business in peace, Ecovis supports them in answering these questions.
What is the difference between a business trip and a posting?
Business trips are regulated in § 2 of the Federal Travel Expenses Act (BRKG). They are used to carry out official business outside the office. The length of the trip is irrelevant. However, if the business trip is abroad, it must be carefully checked whether it is still being considered as a business trip or whether it is already a posting.
Advantages of international employee posting
Costs and salaries of employee posting
The posting of employees can be cost-intensive. This includes salaries, taxes, bonus payments, insurance and other expenses. Careful consideration and planning is essential.
Compliance for employee assignments
Each country has different legal and bureaucratic obstacles regarding the posting of employees. Compliance with these regulations requires thorough review and documentation.
Where ECOVIS is able to support with
Starting with advice on drafting a posting agreement, clarifying the social security coverage of employees, implementing payroll tax requirements and tax advice on avoiding double taxation – there are major challenges in all these areas. In doing so, Ecovis acts both on the employer’s side and as a point of contact for employees. So no one is left alone.
Employee posting: These topics arise
- Preparation of income tax returns in the home and host countries with the support of the international ECOVIS-network
- Preparation of tax equalization calculations (tax equalization/tax protection)
- HypoTax calculations
- Consultation to explain the tax and social security implications of the posting in the respective country
- Development and optimization of your posting policy
- Global Compensation Review
- Preparation of payroll accounting for posted employees (incl. net-gross projections, allocation of wages or shadow payroll accounting for social security)
- Advice on multi-year remuneration and subsequent wages, e.g. severance payments, bonus payments and stock options (e.g. RSUs / stock options)
- Applying for social security certificates (e.g. A1 applications) and applying for child benefit
- Advice and support in the area of the EU Posted Workers Directive (PWD)
- Ensuring compliance with mandatory labor law requirements in Germany and abroad
- Drafting contracts (employment contracts, local employment contracts abroad, posting contracts, …)
- Advice on and application for work and residence permits
FAQ
Will I remain covered by German social security during my posting?
If you are posted to another EU country from a German employment relationship, you will generally remain covered by German social insurance in accordance with Art. 12 of Regulation (EC) 883/2004 as long as your posting does not last longer than 24 months.
However, if you are posted from a German employment relationship to a third country, it must be checked on a case-by-case basis whether you are still subject to social security in Germany in accordance with § 4 SBG IV and bilateral social security agreements.
Do I have to pay taxes and social security contributions in my home and host country during my posting?
Germany has concluded a double taxation agreement with most countries, so that double payment of taxes might be avoided. A case-by-case assessment must be carried out to determine which country has the right to tax which income and the taxes must be paid in the respective country accordingly.
The coordination of social security systems at EU level is intended to avoid double social security liability. As a rule, you remain subject to social security contributions in your home country for posting of less than 24 months. Outside the EU, the obligation to pay social security must be checked on a case-by-case basis.
Which labor law applies to me?
Which labor law applies to postings abroad depends largely on which law the employment relationship is most closely linked to for factual reasons. In this case, we speak of the lex loci laboris, the law of the place of work.
For example, if you are posted to Spain for 18 months and carry out all of your work from there, your employment relationship is so closely linked to Spain that mandatory Spanish employment law may not be circumvented.
As part of the reform of the EU Posting of Workers Directive, since 2020 the full labor law of the host country has even applied after 12 months, in exceptional cases after 18 months.
What effect does a posting have on multi-year remuneration such as stock options or severance payments?
The vesting periods are often used for the taxation of multi-year remuneration. Therefore, the posting can still have an impact on the respective right of taxation in subsequent years. This means that even if the posting has already ended and you are back in Germany, the income may have to be split between your former country of posting and Germany.
Will my employer remain the same for the duration of the posting?
Most posting regulations presuppose a posting from a German employment relationship. Therefore, the employer usually does not change during a posting.
In some cases, however, the host company becomes the economic employer, especially in the case of intra-group postings.
Will the contributions and taxes continue to be paid via my employer?
Yes, if you remain in the German social security system, the contributions will be paid via your German payroll. With regard to the payment of taxes, it depends on the agreement with your employer – if, for example, you are posted abroad as part of a net salary agreement, your employer would pay the actual taxes in the country of posting and you would be charged a hypothetical tax similar to German wage tax.
