International employee assignments (secondment, workation) – less bureaucracy due to the lapse of the written form requirement?

In case of secondments and workations of more than four weeks, the essential conditions applicable to the stay abroad no longer have to be in writing as in the past, but can now also be concluded in text form and transmitted electronically against proof of receipt in most sectors due to the Bureaucracy Relief Act and the associated changes to Section 2 of the Evidence Act. (Nachweisgesetz). The written form requirement only remains effective for the economic sectors or branches of industry pursuant to Section 2a (1) of the Act to Combat Clandestine Employment (Schwarzarbeitsbekämpfungsgsesetz). These include companies in the construction industry, the catering and accommodation industry, the freight forwarding, transport and associated logistics industry and the meat industry. In addition, employees in all sectors can continue to request a written document. 

The general authorization of the text form is to be welcomed in practice, although it should not be forgotten that international employee assignments continue to pose the following legal and tax challenges and therefore entail a certain amount of bureaucracy for employers. This applies in particular with regard to

• Visa & right of residence
• Applicable labour and social security law
• Change of income tax liability / establishment of a permanent establishment abroad

The internal processes, guidelines/company agreements and contractual regulations must be created in such a way that all legal and tax requirements are met, relevant documents such as residence permits or social security confirmations, e.g. an A1 certificate, are available in good time, any reporting obligations are complied with and social security and tax contributions are paid correctly. The text form that is often possible for a secondment contract or contract addendum for work stays of more than four weeks therefore ultimately only provides a slight formal simplification for employers. It should also not be forgotten to adapt any (duplicate) written form clauses in employment contracts. 

Right of residence

In any case, the employee must be legally authorized to stay abroad for work purposes. It should be noted that the free movement of labour only applies to nationals of the European Union (EU), the European Economic Area (EEA) or Switzerland when working in the EU or the EEA. If EU or EEA citizens wish to work in Switzerland, a residence permit is required apart from short periods of workation without any connection to the Swiss labour market. Third-country nationals cannot easily work in other EU states, the EEA or Switzerland with their residence permit issued in Germany. In third countries, each country has its own visa and residence requirements and offences are sanctioned. 

Applicable labour law

In the case of temporary postings within the EU/EEA, the mandatory minimum working conditions of the country of assignment for postings of up to 12 or a maximum of 18 months apply in implementation of the EU Posting of Workers Directives, which must also be pointed out, after which further local labour law regulations apply.

In the case of assignments in Switzerland or third countries, the requirements for the employment contract usually arise from the right of residence. In the USA or China, for example, a contract with a local company is generally required for assignments that extend beyond the duration of a business trip, which must comply with national legal requirements.

If the usual place of work is permanently relocated abroad, the employment contract should also be adapted to the legislation of the country of assignment in accordance with the requirements of private international law. 

Social security law and notifications

In social security law, the territoriality principle applies, i.e. the social security obligation exists at the place of actual work, unless exceptions are provided for in social security agreements or on the basis of special rules such as the broadcasting in accordance with Section 4 of the Fourth Social Security Code (SGB IV). Consequently, an A1 certificate is also required for short business trips, secondments or work assignments within the EU, the EEA and Switzerland in terms of social security law. In addition, EU posted worker notification obligations may also become relevant. 

In non-European countries, a so-called “Certificate of Coverage” or supplementary private insurance is often required. It must also be clarified whether there is a risk of double insurance in the event of missing or incomplete social security agreements. 

Tax law

In terms of tax law, the right of taxation may change either after 183 days in the country of assignment or from the first day of assignment if the employee is resident in the country of assignment and is not a cross-border commuter or the employer establishes a permanent establishment abroad as a result of the employee’s assignment, which bears or must bear the salary. According to the relevant double taxation agreements, a permanent establishment can be assumed, for example, in the case of the deployment of sales employees with at least implied authority to conclude contracts or in certain cases of executive action (management permanent establishment). If this is the case, it must be ensured that registration and tax payment are carried out correctly in the respective country and that an exemption certificate is issued in Germany. 

Conclusion

The Bureaucracy Relief Act has only brought minimal relief in terms of bureaucratic hurdles for foreign assignments by enabling the text form. 

If you would like a legal review of your secondment or workation guidelines, corresponding work agreements or a review of your internal processes, please contact our expert Nadja Roß-Kirsch, who has over 18 years of professional experience in advising on international employee assignments.