Hiring in Germany without a German entity — which duties stay with you

Does German law require a German entity before you hire someone from Albania or Kosovo?

German rules on labour market access name no particular legal form for the employer. Before a national of Albania or Kosovo may start work, the Bundesagentur für Arbeit (Federal Employment Agency) usually has to approve access to the German labour market. The check looks at the concrete job: pay, working hours and the other working conditions. These may not be less favourable than for comparable employees in Germany (§ 39 AufenthG).

You supply those details in the form „Erklärung zum Beschäftigungsverhältnis“ (declaration on the employment relationship). With it you confirm that you are offering a specific job to a named person. Employers can also apply for a Vorabzustimmung (advance approval) online through the employer account of the Bundesagentur für Arbeit.

Whether the approval is granted is decided by the Bundesagentur für Arbeit in the individual case. Whether the visa is granted is decided by the competent German mission abroad. The split of roles is set out in employer vs. authorities when hiring from abroad.

Who registers the employee for social insurance if your company has no seat in Germany?

Employers without a seat in Germany must appoint an authorised representative (Bevollmächtigter) with a seat in Germany to meet their social insurance duties (§ 28f Abs. 1b SGB IV). The business premises of that representative in Germany then count as the seat of the employer. If there are none, the representative's place of residence or stay applies instead.

Compulsory insurance follows the place of work, not your company address: the rules apply to everyone employed within the area covered by the German social code (§ 3 SGB IV). Notifications run through the DEÜV reporting procedure, the standard electronic route for employer reports to the German social insurance system. The Deutsche Rentenversicherung describes the case „employer without a seat in Germany“ in its own glossary for employers, so it is a known constellation and not an exception you have to argue for.

Do you need a Betriebsnummer when your company is based abroad?

Employers with a seat abroad need a Betriebsnummer (company number) when they have to submit reports to the German social insurance system for workers employed in Germany. The Betriebsnummern-Service of the Bundesagentur für Arbeit issues it. If the foreign employer pays the contributions, the number covers all employees reported under it. If it is agreed that the employee takes over the contribution duties, the number applies to that single employee only.

• Clarify before the start date who submits the reports and who pays the contributions.
• Put that agreement in writing, because the scope of the Betriebsnummer follows from it.
• Sort the number out before the first payroll run, not after it.

Company size is a separate question from company seat. Small firms with a handful of staff are covered in can a small company hire a foreign worker in Germany.

Must you deduct wage tax in Germany — and who decides that?

Wage tax is collected by deduction from pay where the wage is paid by an „inländischer Arbeitgeber“ (domestic employer). The law defines that as someone with residence, habitual abode, management, seat, a permanent establishment or a permanent representative in Germany (§ 38 EStG). A permanent establishment in this sense is the business, or the part of a business, in which the relevant wage is calculated. The wage tax return is filed with the Betriebsstättenfinanzamt, the tax office responsible for that establishment, and the tax is paid there (§ 41a EStG).

Whether your set-up meets that definition is assessed by the competent tax office. That assessment is not something you or we can settle in advance. Ask the tax office before the first payday and keep the written answer with your wage records.

Statutory accident insurance: who registers the business and who pays the contribution?

A business must be registered with the competent accident insurance institution within one week of being started. Statutory accident insurance is the employer's matter: you register and you pay the contribution alone, nothing is deducted from the employee's wage. Everyone in an employment relationship is insured, whatever their nationality.

Registration is also the step that produces the Unternehmensnummer, the identifier used in the German accident insurance system. Which institution is competent depends on the kind of business, and that allocation is made on the accident insurance side. If your company already exists abroad and will now employ people in Germany, put the case to the accident insurance institution and let them tell you which registration they need.

Posting your own employee to Germany is not the same as a new hire — what changes?

Posting means an existing employee of yours works temporarily in the other country for your company. Hiring a person for a workplace in Germany is a different situation. Germany has bilateral social security agreements, among them the agreement with Albania in force since 1 December 2017, and for Kosovo the 1968 agreement with Yugoslavia continues to be applied. Their purpose is that employees temporarily employed by their company in the other contracting state do not pay contributions to pension and unemployment insurance twice.

Recruiting someone from Albania or Kosovo for a job located in Germany is a German case from the first working day. Postings also carry separate notification duties towards the customs administration in certain situations. If you cannot tell which of the two situations you are in, describe the plan to the liaison office of the Deutsche Rentenversicherung before you sign a contract.

Which duties apply regardless of where your company is registered?

Employers with a seat in Germany or abroad must pay the minimum wage to their employees working in Germany (§ 20 MiLoG). The customs administration states the principle more broadly: employers seated in Germany or abroad who employ people in Germany have to grant the working conditions generally laid down in Germany, irrespective of the sector.

Checks are part of the system. The Finanzkontrolle Schwarzarbeit (FKS), the customs unit against undeclared work, carries out checks both on specific grounds and without them, and can require documents to be produced. Keep the contract, the working time records and the pay records in a form a stranger can read.

Before the first working day, check that the residence document of the person actually allows this work — see employer obligations when you employ a third-country national. If you want to fill a role in Germany with a candidate from Albania or Kosovo and talk through who carries which duty, you can register as an employer.