When I talk to clients, I often ask what the client\u2019s current process is surrounding contractor payments, payroll, onboarding, etc. Recently as we are entering the German market, I have found many clients pay contractors in Germany directly on a gross basis.<\/p>\n
Now this isn\u2019t something your business cannot do, but \u2026 the question is \u201cshould you?\u201d.<\/p>\n
Germany is a market like many others built on a clear(ish) set of legislation and rules many of them aimed to protect worker\u2019s rights and reduce the risk of worker exploitation. Paying contractors directly (as I mentioned before) isn\u2019t illegal or frowned upon when done correctly. But have you considered \u201cBogus Self-employment<\/strong>\u201d? Whilst a much catchier name Bogus Self-employment is very similar to the False Self-employment legislation, we have seen in EU countries and the UK.<\/p>\n In Germany, failure to comply with the legislation could result in either a criminal conviction, a penalty, or both. If you place contractors with your client, you should be asking the client to confirm that Self-employment status has been assessed and is suitable for the role as ultimately, they are the risk holder if it all goes wrong.<\/p>\n Punishment for intentionally or unintentionally having Bogus Self-employed workers is a financial penalty, back payment of social security (including healthcare) for up to 10 years, payment for accrued and untaken holidays (25 days at full pay), payments for the time when the worker was sick and the possibility for the client to be responsible for paying any unpaid income tax if the worker is no longer reachable (i.e. a foreign worker who has finished the assignment and moved out of Germany).<\/p>\n Oh\u2026 and the client could face a criminal charge and imprisonment.<\/p>\n Now that\u2019s a lot of penalties and a bit of scaremongering I know, but let\u2019s look at this practically. Your business places a contractor with a client in Germany, you\u2019re paying them gross directly and the client believes that they are being paid as an employee. An investigation happens and the client is deemed to have been engaged with the worker on a Bogus Self-employment basis. Most recruitment agencies will be in a position where the client will expect the agency to pick up the fines and penalties to keep the relationship intact. The worker will also have the right to claim an employed position with the client and all the rights that come with it.<\/p>\n This leaves the client at risk of a criminal charge and the agency at risk of losing a client, profit and reputation, while the contractor will be in a position to claim funds and benefits owed to them. Doesn\u2019t sound like a fun conversation to be a part of!<\/p>\n What is the answer to this challenge, simply\u2026 if your client in Germany isn\u2019t confirming that they have assessed the role and confirmed the status as self-employed is applicable, then don\u2019t place that candidate on a self-employed basis. Use a provider, such as Sapphire, that will lease the labour to your client and remove all the risk both financially and criminally.<\/p>\n It may cost the client a little more on the rate or the contractor may get less net income but, no one will go to jail (not for this anyway) and everyone can keep their reputation and balance sheet intact.<\/p>\n