Employees

An employee is someone who is in an employment relationship and who performs work that is dependent on the employer and the nature and extent of which are subject to the instructions of the employer, i.e. dependent work. Examples in the cultural sector include orchestra musicians and actors who are employed by an ensemble and subject to social security contributions. 

Many artists and creatives would like to work freely and independently. However, due to legal regulations or economic considerations, it may be advantageous to enter into an employment relationship instead. This has a direct impact on the obligation to obtain health, pension, accident, and unemployment insurance, for example (see Social security in Germany). Labour law also affords extensive rights to employed workers that are often not available (or not to the same extent) to the self-employed: they are entitled to statutory minimum leave, continued remuneration in the event of sickness or if a dependent child falls ill, protection against dismissal in some cases and many other rights.

Who is considered employed? Legal criteria have been developed to determine whether an employment relationship is subject to social security contributions. The Statusfeststellungsverfahren (procedure for determining status) can be used to check an activity, sometimes at the request of the competent Deutsche Rentenversicherung Bund (clearing house).

The following criteria are relevant in determining employment status:

  • employer’s authority to give instructions regarding the times, duration, place, and nature of the activity;
  • does not have own place of business or equipment; instead, integration into the enterprise;
  • no authority to delegate duties to others;
  • no business risk, i.e. no use of own capital;
  • leave entitlement and continued remuneration;
  • fixed salary, no share in revenue.

Some aspects that are relevant with regard to employment status are explained below.


Minimum wage

In 2015, Germany introduced a statutory minimum wage for employees. As of January 2017, the gross minimum wage is 8.84 euros per clock hour. Tariff agreements stipulating a lesser rate remained in place for a transitional period until the end of 2017; from 1 January 2018, the statutory minimum wage applies without restriction.
The long-term unemployed (who are not entitled to the minimum wage in their first six months in a new job) and volunteers are exempt from this regulation. For interns, the minimum wage only applies under certain conditions (see also Interns and trainees; for further information, please visit the Praktikum.info website (German language only) or the Absolventa portal (German language only). 

The minimum wage also applies to foreign workers employed by German organisations and businesses in Germany. In general, wages depend on the place of employment. The minimum wage in France (9.67 euros), for example, is higher than that in Germany. 

Questions and answers on the minimum wage in Germany are provided at the webpage Der Mindestlohn wirkt by the Federal Ministry of Labour and Social Affairs (in German language).
The website of the German Trade Union Confederation provides an overview of the minimum wages in Germany and Europe (also in German language only).
Note: Not all European countries have statutory minimum wages. Current data can be found, for example, on the eurostat website (German language only).   


Fixed-term/specified-purpose and open-ended employment contracts

There is a distinction between fixed-term/specified-purpose and open-ended employment contracts.

Example:
An artist concludes a contract with a theatre for one season. The contract is concluded for a fixed term without citing a specific reason. An illustrator works for a publishing house to illustrate a book. Her contract is limited for the duration of the project, i.e. with a specific reason.

A fixed-term or specified-purpose employment contract ends when a certain point (in time) based on which the contract was concluded is reached. This point may be a pre-determined date or the achievement of a certain agreed objective­. In the latter case, the term of the specified-purpose employment contract shall expire no earlier than two weeks after written notification of the achievement of the agreed objective. Fixed-term/specified-purpose employment contracts must be concluded in writing so that the time limit is effective.

A time limitation enters into effect either if there is a specific reason for which it would be warranted or if the maximum period for which the contract may be concluded is two years. Specific reasons justifying the limitation of the contract term could include the need for a temporary replacement or a temporary operational or project-related need for additional workers, for example. If there is such a reason, several fixed-term contracts can be agreed in succession; this is then referred to as Kettenbefristung (repeat fixed-term employment)­. There is no time limit for the total duration of the consecutive fixed-term contracts.
If there is no specific reason necessitating a fixed-term contract, a time limit may last no more than two years. Within these two years, an employment contract may be extended for a further fixed term a maximum of three times.

Part-time work

Example:
A production manager has worked at a theatre for two years and has been responsible for press and public relations. Now, she would like to take over the production management for the projects of a freelance dancer and reduce her working hours at the theatre. A colleague is able to increase her weekly working hours and take on additional tasks so that the theatre can accommodate the production manager’s request. 

The Part-Time Work Directive 97/81/EC of 15 December 1997 introduced legislation within the EU which prohibits discrimination against part-time workers and entitles employees to reduce their working hours. Germany implemented the Directive in 2001. It stipulates that workers in companies with more than 15 employees have the right to reduce their working hours indefinitely and are entitled to request a certain distribution of their working hours throughout the week after they have worked for the company for at least six months – unless operational reasons prohibit this.

The German regulations on parental part-time work also entitle parents to fixed-term part-time work so as to allow them to reconcile work and child-rearing. People with severe disabilities are also entitled to shorter working hours due to the nature or severity of their disabilities.

Marginal/low-paid and short-term employment
A distinction is made between marginal employment and short-term employment. There is no obligation for either persons in marginal employment or short-term employees to be insured under the statutory health insurance, long-term care insurance, and unemployment schemes. They may also be exempted from the obligation to participate in the statutory pension insurance scheme. Although the employer makes fixed payments to the health and pension insurance bodies, the employee does not receive health insurance coverage.

Low-paid employment – also known as a mini job – is defined as employment for which the monthly remuneration does not exceed 450 euros. Employees who do not have a main job requiring insurance can have several mini jobs with different employers. The compensation for each of these jobs must then be added up. If the total remuneration for all mini jobs exceeds the monthly limit of 450 euros, the work is subject to social security contributions.
If the remuneration is between 450.01 euros and 850 euros, the worker falls into what is known as the ‘sliding zone’, so-called because social security contributions are then payable at a reduced rate on the basis of a sliding scale. At an income of 450.01 euros, this contribution amounts to approximately 15% of the compensation, rising to approximately 20% for remuneration of 850 euros. The employer, however, must pay the full share.
If the compensation exceeds 850 euros, the employment no longer qualifies as marginal. 

An employer pays the social security contributions to the collection offices; in the case of marginal employment this is usually the Knappschaft-Bahn-See. The employee must inform the employer of any additional income so that he/she can perform the correct calculations, since if the remuneration for each mini job is below 450 euros but the total remuneration for all mini jobs exceeds this limit, the employment is either subject to social security contributions in the gliding zone or constitutes regular employment subject to standard social security contributions.

Note on payroll tax for mini jobs: The remuneration for marginal employment is always taxable. Payroll tax is usually levied as a flat tax and paid by the employer to the Minijob-Zentrale. Tax law distinguishes between a 2% uniform flat tax and a flat payroll tax of 20% (plus solidarity tax and church tax). The employee does not have to specify a mini job in his/her income tax return.
Information about this topic can be obtained from the Minijob-Zentrale (German language only) or the German Federal Ministry of Finance (German language only).

Employment is considered short-term employment when the activity is limited to not more than three consecutive months (five working days a week) or 70 individual working days per calendar year from the beginning (temporary regulation in effect until the end of 2018).
The work must not be performed in a professional capacity: an activity is considered to be performed in a non-professional capacity if the work is performed in addition to a regular occupation that is subject to social security contributions or if it takes place between graduation from high school and the start of university studies or after retirement. The amount of the remuneration is irrelevant.

Example:
An artist has been working for company A since the beginning of the year under an open-ended contract and earns a monthly salary of 350 euros. In April, she also enters into an open-ended employment contract with company B, which pays her 75 euros per month. In September, she accepts a short-term, limited job offer from company C. She works five days in the months of September and October and earns 400 euros. Finally, the artist works for company D in December, earning 200 euros a month on the basis of an open-ended employment contract.

Since the short-term work for company C was also carried out in a professional capacity, the calculation must take into account the accompanying remuneration. This means that the artist earned 825 euros in September and again in October and 625 euros in December. This means that the artist’s income falls within the sliding zone from September onwards and is thus subject to social security contributions. 

Note on payroll tax for short-term employment: Even short-term employment is subject to taxation. Payroll tax can be levied either on the basis of individual pay-as-you-earn criteria (i.e. depending on the tax bracket) or, under certain conditions, at a flat rate of 25% (plus church tax and solidarity tax).
More information (in German language only) can be found on the Minijob-Zentrale website.

Employees who work a mini job or short-term job are considered part-time employees. In principle, they have the same rights as full-time employees, i.e. they are entitled to take leave and receive continued remuneration in the case of illness, etc.

Occasional workers
Workers who are employed for a period of less than seven days in a row (including Saturdays, Sundays and public holidays) and not always by the same employer are considered occasional workers. Occasional employment is common in radio and television stations, film production companies and theatres.
It is difficult to distinguish this type of work from self-employment. If the labour is made available for different activities and is not linked to the provision of a specific service or the creation of a specific product and if an employment contract is in place, the activity constitutes a dependent employment relationship.

In principle, occasional workers are subject to social security contributions, with the exception of unemployment insurance. One particularity applies to health insurance coverage: the membership and thus the insurance coverage of an occasional worker also continues on days when he/she is temporarily not employed - but only for a maximum of three weeks. In this case, the insurance coverage continues without payment of contributions.

Example:
An actor engages in irregular work for various film production companies. This work never lasts for more than a few days and the breaks in between periods of work are always less than 20 days long. As an occasional worker, he has continuous health insurance coverage.

Additional information can be found on the Bundesverband Schauspiel website (German language only) or, for example, on the Techniker Krankenkasse website (German language only).

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