More and more professionals in Germany are receiving job offers from foreign companies. Am I allowed to work for a foreign employer in Germany and what do I need to watch out for? This blog post is intended to give you a brief overview of the most important legal pitfalls.

Would you rather work as a self-employed person (so-called: Contractor) in Germany for a foreign client? Then read this blog post.

1. As an employee, can I work in Germany for a foreign employer?

Of course you can work for a foreign employer from Germany.

Technically, this is possible without any problems anyway: you need a stable internet connection, a laptop and knowledge of English. This means that you, as a software developer, programmer, digital artist (such as a web designer or interface designer) or even in scientific fields, have access to a global employer market.

From a legal point of view, it is also permissible to work for an employer abroad, even if the foreign employer has no office or place of business in Germany. Many foreign companies employ professionals in Germany utilizing so-called remote work, i.e. the employer is based abroad and the employee works from their home office for the foreign employer in the employer’s digital IT infrastructure.

 2. How can a foreign employer hire me as an employee in Germany? 

In the same way as you would be hired by a German employer: an employment contract must simply be concluded. You can conclude the employment contract under German law or under the foreign legal system (for more information, read this blog post).

However, foreign employers often specify the legal system under which the employment contract is to be concluded.

Practical note: Employees should be aware that enforcing the law against a foreign employer in Germany or abroad is often hardly realistically feasible because legal proceedings against a foreign employer are legally highly complex and involve very high legal fees. Therefore, both parties should consider in detail during the contract negotiations which points they want to regulate in order to avoid a legal dispute. In my practical experience, this aspect is more important than the question of which legal system the employment contract should be subject to.

3. What needs to be considered when hiring?

The difficulty lies in the payroll accounting: The foreign employer will most likely have to pay social security contributions in Germany and must therefore register its Company in Germany in accordance with social security law. Often, foreign employers shy away from the administrative burden associated with this (the so-called payroll accounting) and therefore consider hiring the professional as a freelancer (so-called Contractor). This is not advisable for various reasons, unless you, as a professional, are seriously planning to become self-employed and work as an entrepreneur in the long term. Hiring a professional in Germany as a freelancer (so-called contractor) can in fact establish a bogus self-employment under social security law (for more details, see this blog post).

Practical tip: The country in which employers and employees have to pay income tax and social security contributions depends largely on where the employee lives (i.e. is domiciled) and from where the employee works. Both parties should clarify which party pays taxes and social security contributions in which country before (!) the start of the employment. Mistakes here can cause immense economic damage. If taxes and social security contributions are paid in the wrong country (e.g. abroad), this can constitute tax evasion and, under social security law, the withholding of social security contributions in Germany (§ 266a of the German Penal Code (StGB) with regard to the employer). Both are criminal offences and not trivial offences!

4. Employees are liable for social security contributions in case of a foreign employer! 

Employees should never rely on the assumption that their foreign employer will take care of these matters. While employees in Germany are accustomed to their German employers automatically deducting and paying wage tax and social security contributions, this is not the case with foreign employers!

An almost forgotten regulation in the German Social Security Code can expose employees with foreign employers to serious financial risks:

Employees are liable for the total social security contribution if the employer is based abroad in accordance with § 28m (1) SGB IV. 

This regulation is very atypical of German employee protection. In principle, the German employer is liable for unpaid social security contributions and the employee is only liable to the employer under labour law within very narrow limits.

It is all the more surprising that this 36-year-old provision is actually applied by the public health insurance authority and the courts, as the proceedings before the LSG Berlin-Brandenburg of 11 January 2024 (L 14 KR 139/22) show:

In this case, an Israeli citizen worked from Germany for her Israeli employer for private reasons, on a temporary basis, by means of so-called remote work, i.e. only via the internet, for her Israeli employer’s American customers. The only connection to Germany was that the employee lived in Germany and physically worked here on her laptop. The Israeli employer did not pay any total social security contributions in Germany. After the public health insurance authority became aware of this, it demanded the total social security contribution (i.e. employee and employer contributions to health, long-term care, pension and unemployment insurance) of almost EUR 10,000 for a period of almost 1,5 years from the employee (!) , citing § 28m (1) SGB IV.

The reasoning: The German state is effectively unable to enforce claims for payment of total social security contributions against foreign companies, either within the EU or, a fortiori, in third countries. That is why the German-based employee is liable not only for the employee’s share but also for the employer’s share. In 2025, the total social security contribution will be around 40%!

The regulation itself came into force on 1 January 1989, at a time when remote work was virtually unheard of. This regulation could now become controversial because, at the latest since the coronavirus pandemic, remote work relationships with foreign employers have increased massively.

The wording of this provision does not really give the courts any room for interpretation. Nevertheless, it remains interesting to see whether the Federal Social Court will decide differently in this case (currently pending at the Federal Social Court, B 12 KR 4/24 R).

What is not convincing about the ruling, however, is the reasoning that it is ‘easier and therefore reasonable’ for the employee to enforce the social security contributions by way of ‘offsetting, withholding or claiming benefits’ against the foreign employer (1.,e of the grounds for the decision).

Why? If you have worked for a foreign employer in the USA for two years and then the health insurance company takes action against you for unpaid social security contributions, you have already performed your work. As a rule, you have nothing that you can withhold or offset against your employer in the US. If your US employer simply refuses to pay the employer’s share, your only recourse is to sue the employer in the US. As a private individual, you will generally not have the financial means to file a lawsuit in the US and to collect tens of thousands of euros from the company in court. As a private individual, your funds will be even more limited than those of the social security authorities in Germany.

This small ‘old’ regulation in § 28m para. 1 SGB IV therefore harbours considerable potential for conflict in the future in remote work relationships with foreign employers! It can lead to the private insolvency of employees in Germany if they work for a foreign employer for several years at a high gross salary and no social security contributions are paid in Germany.

At present, it cannot be ruled out that this regulation will also be applied to bogus self-employed, namely if you work as a so-called contractor for a foreign client and this contractual relationship is later classified as bogus self-employment by the German Social Security Authorities (see here for details).

5. So what can employees in Germany do, if they want to work for an employer abroad? 

Nevertheless, this does not mean that you should reject an offer of employment from an interesting foreign employer.

What is technically possible should not fail because of bureaucracy! 

• Make sure that your foreign employer registers in Germany for social security and pays social security contributions for you. Clarify this directly when negotiating the employment contract, i.e. before signing the contract.
• If you have been working for a foreign employer for some time, talk to them about paying social security contributions in Germany as soon as possible for the future and paying the contributions for the past retrospectively.
• In the case of contractors: If you have been working as a contractor, get a written assurance that your employer will cover the employer’s share of contributions in the event that your status as a contractor is found to be bogus. With this assurance, it is more likely that you will be able to take legal action in a foreign country.
• If you are considering becoming self-employed anyway and perhaps already have other clients lined up, then working as a freelancer (or contractor) is also an option, but only if you can rule out the possibility of bogus self-employment! It is therefore highly recommended that you carry out a status assessment procedure (for more information, read here) before starting work.
• In my experience, you should also have the contractor agreement checked by a lawyer before (!) signing the contract, because it often contains clauses that indicate bogus self-employment, because contractors abroad are subject to different requirements than under German (Social Security) law.
• Have yourself and your employer legally advised. In the course of a consultation (by video call in English), I can describe the legal pitfalls to you and your employer in detail and point out possible solutions, tailored to your personal case.

What clients say about my work on anwalt.de and Google. 

As a lawyer, I am specialized in cross-border mobile working (so-called Global Mobility Law) and advise digital companies, self-employed professionals and employees on legal issues in this area on a daily basis.

5. Are you a tax consultant?

Do you work as a tax consultant (e.g. a specialist consultant for international tax law) in the field of international tax law? Please feel free to contact me!

In order to provide my clients with the best possible service, I am happy to network with tax consultants who can take over the tax declaration obligations for my clients and are interested in a professional exchange.

I look forward to hearing from you!

Your lawyer
Romy Graske

← zurück zur Blog-Startseite