Servus #16

September 2023

We bring you this special edition of our Servus newsletter specially dedicated to HR topics.

The topics covered in our current newsletter are: “Workation: when “work” and “vacation” merge and “The Obligation to Record Working Time: what’s the status in Germany?”.

Table of Contents

Workation – when “work” and “vacation” merge

While it was not an option for most companies in the pre-Corona era, many employees increasingly want to combine work and vacation or work from a home office abroad long-term. “Working from anywhere” is no longer a new trend, but already a benefit sought after by many employees – and employers have a few things to consider when implementing it. 

Employees in Germany do not have a general right to work from home without a corresponding clause in their employment contract, collective agreement or works agreement. However, if an employee has been working from home for a long time – which is the case for many due to the pandemic – and there is no other agreement that excludes this or contains a revocation clause, a right to do home office can also result from so-called company practice.

But what about working from abroad? In this case, it is mainly a matter of duration and also of the location of the workation. Four possible situations are listed below:

Case 1

If the employee does not want to work from abroad for more than four weeks, there is in principle no major need for action under employment law; however, it should be checked in each case whether a residence title and/or a work permit is required. If the place of workation is within the EU, the issue is settled for EU citizens due to the basic freedom of movement. However, the labor regulations of the respective country, such as working and break times, must be observed.

Case 2

As soon as an employee wishes to work abroad for longer than one month, a supplementary agreement relating to social security and tax conditions is recommended. Such an agreement also typically determines how long and in which country the workation is permitted, at which times the employee must be available, and under which conditions there is an obligation to return. As long as the principle focus of the employment relationship German labor law is generally applicable. However, there are exceptions: for example, German public holidays do not apply, but those of the country in which the work is actually performed. With regards to the tax implications, the regulations of the respective double taxation agreement must be observed and the possible tax liability abroad or the question of a possible permanent establishment must be examined.

Since 2021, there is a relief for workation-seekers: according to an announcement on the part of the social security institutions, temporary work abroad can be seen as a posting, even if in most cases it is requested by the employee and not by the employer. This means that employees remain socially insured even during the workation abroad. What “temporary” means here is not (yet) legally set in stone. However, there seems to be a consensus – also based on the 183-day rule in tax law – to speak of a maximum of six months. When working abroad in the EU, employees should in any case carry an A1 certificate with them.

Case 3

If an employee wants to move their place of work abroad permanently, a supplementary agreement under German labor law is usually no longer sufficient. There are clear limits to “working from anywhere” in terms of both labor law and tax and social security law. Some companies then resort to the option of an independent contractor agreement. However, employers should be cautious: in this case, the employee is no longer an employee, but is considered a freelancer over whom the employer no longer has any rights of instruction. The issue of bogus self-employment could also become a problem in this case.

Case 4

For so-called cross-border commuters, the previous (i.e., pre-pandemic) regulation should apply again as of July 2023, according to which working from home leads to a change in social security law if the employee does not reside in the state where the employer is located or if the employee does more than 25% home office work. However, because working from home is widespread even after the pandemic, the follow-up rule, effective July 1st 2023, states that the Social Security law of the state in which the employer is located will continue to apply even if the employee works between 25% and 50% of their time from home.

Concrete recommendations for action:

Summing up, to minimize complexity and risks, it is advisable for employers to offer workation only in other EU countries and to limit the duration to a maximum of 182 calendar days with regards to social security and tax implications. In practice, 20 to 30 working days per calendar year is currently more common.

The Obligation to Record Working Time: what’s the status in Germany?

On September 13th, 2022, the Federal Labor Court (BAG) in Germany confirmed with its landmark ruling 1ARB 22/21 a ruling on the recording of working hours already adopted by the European Court of Justice (ECJ) on May 14th, 2019 – the so-called “time clock ruling.”

In Germany, it was thus recognized that all employers are obliged, as in the rest of Europe, to record the working hours of their employees consistently and systematically. The basic ideas of “occupational health and safety” and “transparency” with regards to working hours are to be more firmly anchored in the future, in that working hours can be verified by employees and checked by employers.

An obligation to document working hours therefore already exists, but a concrete legal basis for implementation is still outstanding. It can be assumed that the legislator will make corresponding provisions in the national Working Time Act and possibly also in the European General Data Protection Regulation. Employers should already start thinking about the specifics of the issue today and introduce systems for recording working time.

Is the recording of working hours new in Germany?

The answer is “yes and no”. Previously, only certain working hours or working hours for specific groups of employees had to be recorded.

The working hours:

– in the context of overtime and on Sundays and public holidays (i.e. on non-working days),

– of mini-jobbers (keyword: obligation to provide evidence based on the Minimum Wage Act),

– at companies in so-called immediately reportable industries, such as the construction industry,

also had to be recorded in the past. As of September 2022, the recording obligation applies to the entire working time, for all groups of employees and in all industries.

What are the requirements for time recording?

– Companies are (still) free to decide whether working hours are recorded digitally or in analog form. However, the new draft of the Ministry of Labor envisages electronic recording of working time in the future. In certain cases, exceptions to electronic recording are planned, e.g. in handicraft businesses or in companies with up to 10 employees (it is still open whether this lower limit will apply to individual establishments). Note: Digital does not equal electronic and vice versa. Electronic means paperless. Digital means paperless and no longer changeable manually.

– According to the new draft law, the start, end and duration of work must be recorded daily, i.e. the actual daily working time.

– Employers can delegate their duty to record working hours to employees or third parties (e.g. supervisors). This makes sense for organizational reasons.

– If employers do not record working time or do not explicitly delegate the obligation to do so to employees or third parties, this is already an administrative offense. However, a corresponding catalog of fines has not yet been adopted.

– Employers should inform employees about the recorded working time.

– So-called trust-based working time is still a gray area; and it is not prohibited. However, the new draft of the Ministry of Labor provides for a change in the understanding of trust-based working time. It is conceivable, for example, that certain occupational groups (e.g., managers, experts, scientists) will not necessarily be required to be present at the workplace at set times but will be able to decide for themselves the scope and scheduling of their own working time. In other words, employers can refrain from prescribing the start and end of working time in the aforementioned cases. However, the recording of working time would remain mandatory.

Concrete recommendations for action:

Find out about possible time recording systems; the minimum standard should be an electronic recording system. In the course of further digitalization trends in HR work, it is worth examining the use of digital systems. Also consider the degree of mobile work and associated recording options in your company. Inform employees about the system that applies to them and transfer the basic duty to record time to your employees or to third parties. The mere introduction or provision of a corresponding system is currently sufficient to fulfill the obligation until the legislator introduces potential further requirements.

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