Our team can help navigate the obligations of employers who post workers to Germany and Ireland
We often receive queries about the regulation of posting workers to Germany and Ireland and are happy to offer you its advisory services relating to all the requirements of posting workers.
Germany and Ireland have different rates of social contribution. The standard employer social security contributions in Ireland are up to 11.05% and employee contributions up to 4% of income. Meanwhile in Germany, the contributions are split 50/50 between the employer and the employee and different rates apply for national insurance (7.3%), unemployment insurance (1.25%), insurance for professional care (1.525%) and national pensions (9.3%).
Posted employees should apply for the A1 Form before posting. If this is not done, the social security contributions of the host country will have to be paid on income earned. The A1 Form is a standardised piece of documentation issued by the social security authority of the country of origin. The form obligates the relevant authorities of the host country to recognise the individual’s social insurance payments made towards the country of origin. The form obligates the relevant authorities of the host country to recognise the individual’s social insurance payments and as a result not to charge social insurance contributions in the host country.
Registration of Posted Workers
In both Ireland and Germany, posted workers and their activities must be registered. In Ireland, this registration takes place through the Workplace Relations Commission (WRC). A specific ‘Form of Declaration’ is filled out where the employer is required to enter information based on which the WRC will monitor the workers’ employment conditions and ensure compliance with the posting requirements. In Ireland, such a notification is required in the overwhelming majority of postings as there are no specifications on any occupations which are exempt of this duty.
In Germany on the other hand, the registration of posted workers happens through the German customs authority and there are more specific standards for the registration of workers only in specified key sectors. This approach leads to a lesser need to register all business activities in Germany. However, more industry specific regulations must be followed. The main sectors, where a posting notification is necessary, are industries in which the exploitation of workers is deemed to be more likely. Examples of this include the construction and professional care industries.
Liability for Income Tax in the Host Country
The liability of posted workers to pay income tax outside of their country of origin is governed by the Double Taxation Agreements (DTAs) that exist between the host countries and the country of origin.
The DTA between Ireland and Germany states that in general, if a worker spends more than 183 days working in either country, their income becomes taxable in the host state. In Germany this means that the employees worldwide income from all sources can be taxed in Germany while in Ireland if the employee spends less than 183 days but more than 60 days in the State, an exemption must be applied for to not pay income tax in Ireland and for the rules of the DTA to apply.
There are exemptions and tax credit available to avoid double taxation resulting from these regulations.
Vacation procedure of SOKA Bau (social fund of the construction industry)
Mode of operation:
This is the joint vacation and wage compensation fund of the construction industry. It was established for the purpose of securing vacation pay for construction workers.
Due to the high turnover of employees in the construction industry (more than half of all employees are employed by the same employer for less than twelve months in a calendar year), employees often do not have the opportunity to take their vacation consecutively. The Federal Vacation Act in Germany stipulates that vacation must generally be taken contiguously, but a full vacation entitlement only arises after half a year of employment.
To solve this SOKA-Bau holds the money in trust and pays it back to the construction companies after the worker has taken his vacation. This also relieves employers of the risk of having to pay for an employee's full vacation entitlement even though he or she is not actually employed by the company for the entire year.
SOKA-Bau also carries out the vacation procedure for industrial workers who are sent to construction sites in Germany by foreign companies. This is intended to create equal opportunities between German and foreign construction companies. It is also intended to guarantee basic employee rights.
There are wage-related contributions for blue-collar workers, which are paid by the employer as additional non-wage costs.
For salaried employees, flat-rate contributions are payable.
- Western Germany: 20.8
- East Germany: 18.7%
- West-Berlin: 25.75%
- East-Berlin: 23.65
Tax reliefs in Ireland include:
PAYE Exclusion Order
A PAYE Exclusion Order allows employers not to deduct income tax and the Universal Social Charge (USC) from an employee’s salary as long as the employee is working abroad and is in Ireland for less than 183 days. The posted workers’ host country must also have a DTA in place with Ireland.
Ireland has many workers who travel to destinations every week and return for the weekend. Therefore, they pay income tax and social insurance abroad, but they are still Irish residents. The Transborder Relief was designed to avoid double taxation. In order to be eligible for the Transborder Relief, the taxpayer has to be present at least one day of each week in Ireland, must be a tax resident in Ireland, the host country must have a DTA with Ireland and the foreign income must have been subject to taxation.
Foreign Earnings Deduction (FED)
Workers who are resident in Ireland for tax purposes but spend some time working abroad may be able to claim FED. This allowance is based on the number of qualifying days worked abroad and the total income earned. The amount of allowance cannot exceed €35,000 per annum. However, there are certain conditions that one must meet in order to qualify. One must work in a relevant State for at least 30 qualifying days in twelve months and only postings to certain countries qualify for this relief.
Unlike the three reliefs mentioned above the Special Assignee Relief Programme (SARP) was implemented for workers being posted to Ireland, and not for Irish workers moving abroad. For this relief to apply, the employer must be established in a country with which Ireland has a DTA. Persons eligible for such reliefs must have worked for the employer outside of Ireland for at least 6 months before being posted to Ireland, the employee must not have been a resident for tax purposes in Ireland for the last 5 years and earn a minimum salary of €75,000.
Due to the recent coronavirus pandemic the free movement of labour within the EU has become much more restricted. DEinternational Ireland’s team is also available to advise on the up to date standards of entry into the two countries.
Our services include:
- Information on tax benefits such as: FED - Foreign Earnings Deduction, PAYE Exclusion Order, Transborder Relief, SARP - Special Assignee Relief Programme, Bike to work etc.
- Registering the posted workers for income tax and completing income tax returns
- Consultancy on the regulated entry of posted workers into Ireland and Germany
- Constant updates on the requirements for entry into the two countries during the COVID-19 pandemic