Foreign Enterprises

Infor­ma­ti­on for for­eign com­pa­nies pro­vi­ding con­struc­tion ser­vices in Ger­ma­ny. Ope­ra­ti­ons car­ri­ed out by for­eign con­struc­tion com­pa­nies in Ger­ma­ny are sub­ject to man­dato­ry con­tri­bu­ti­ons to SOKA-Bau.

1. What is SOKA-Bau?

SOKA-Bau is a fun­ding sche­me in the con­struc­tion indus­try that was set up to safe­guard workers’ ent­it­le­ment to lea­ve, becau­se their claims are often jeo­par­di­sed by very short peri­ods of ser­vice with any given com­pa­ny. This is done by collec­ting various con­tri­bu­ti­ons from tho­se employ­ers who are clas­si­fied as con­struc­tion com­pa­nies.

SOKA-Bau is not a government insti­tu­ti­on; ins­tead, it is run by the par­ties to the wage and sala­ry agree­ments app­ly­ing in the con­struc­tion indus­try. It does not the­re­fo­re have any access to the funds of public insti­tu­ti­ons or soci­al secu­ri­ty agen­ci­es. No offi­ci­al “con­tri­bu­ti­on assess­ments” are made – ins­tead, strai­ght­for­ward char­ges are levied which can­not be enforced by the admi­nis­tra­ti­ve aut­ho­ri­ties.

2. Mandatory contributions

SOKA-Bau’s ser­vices are finan­ced by con­tri­bu­ti­ons in accordance with the Ger­man collec­tive agree­ment on soci­al secu­ri­ty in the con­struc­tion indus­try (Tarif­ver­trag über das Sozi­al­kas­sen­ver­fah­ren im Bau­ge­wer­be – VTV).

All com­pa­nies that pro­vi­de con­struc­tion ser­vices main­ly in Ger­ma­ny are requi­red to pay con­tri­bu­ti­ons. This also app­lies to for­eign com­pa­nies only working in Ger­ma­ny tem­pora­ri­ly.

The size of the con­tri­bu­ti­on depends on the gross wages paid to an indus­tri­al employee, and also varies depen­ding on whe­ther the company’s head offices or ope­ra­ti­ons are loca­ted in the new or old federal sta­tes. The total con­tri­bu­ti­on to the soci­al secu­ri­ty sys­tem in the calen­dar year of 2018 amounts to 20.4% in the old Län­der, 17.2% in the new Län­der, and 26.55% and 23.35% in Ber­lin (West) and (East) respec­tively. The main por­ti­on of the con­tri­bu­ti­on (15.1%) is ear­mar­ked for the lea­ve fund.

3. Leave scheme

The most important aspect is the lea­ve sche­me. The collec­tive agree­ment sti­pu­la­tes here that an employ­er is requi­red to pay an employee who takes lea­ve an allo­wan­ce covering that employee’s ent­i­re lea­ve ent­it­le­ment. The lea­ve fund respon­si­ble (Urlaubs­kas­se – ULAK) then reim­bur­ses the employ­er for the lea­ve allo­wan­ce it has paid to the employee.

If SOKA-Bau demands con­tri­bu­ti­ons from the com­pa­ny, any lea­ve allo­wan­ce alrea­dy paid to the work­force may also be off­set at a later date. This is sub­ject, howe­ver, to the fol­lo­wing pre­con­di­ti­ons:

  • Pri­or noti­fi­ca­ti­on has been issued (cf. sec­tion 12 (1) VTV)
  • Lea­ve allo­wan­ce has actual­ly been paid (cf. sec­tion 12 (1) VTV)
  • Con­tri­bu­ti­ons have been paid in full (cf. sec­tion 12 (2) VTV) .

4. Scope of application of VTV

Com­pa­nies in any given enter­pri­se that are clas­si­fied as “con­struc­tion com­pa­nies” (cf. sec­tion 2 (2) clau­se 1 VTV) are obli­ged to pay con­tri­bu­ti­ons irre­spec­tive of any asso­cia­ti­on mem­bership. This in turn depends on whe­ther it falls wit­hin the scope of the VTV. Like other collec­tive agree­ments, the VTV dis­tin­guis­hes bet­ween the geo­gra­phi­cal and the ope­ra­tio­nal scope of app­li­ca­ti­on.

In geo­gra­phi­cal terms, the VTV’s scope of app­li­ca­ti­on covers the ter­rito­ry of the Federal Repu­blic of Ger­ma­ny. Whe­re a for­eign ele­ment is invol­ved this must always be veri­fied on a case-by-case basis, alt­hough lia­bi­li­ty for con­tri­bu­ti­ons will often be affir­med.

Clas­si­fi­ca­ti­on in ope­ra­tio­nal terms poses major dif­fi­cul­ties. In short, the com­pa­nies must pre­do­mi­nant­ly pro­vi­de con­struc­tion ser­vices, i.e. more than 50% of the hours worked. This is defi­ned more pre­cise­ly in sec­tion 1 (2) VTV, which in turn is divi­ded into seven sub-sec­tions.

The exami­na­ti­on begins with sec­tion 1 (2) sec­tion V VTV, which lists 42 typi­cal examp­les of indi­vi­du­al con­struc­tion sec­tors who­se ope­ra­ti­ons are sub­ject to the VTV as man­dato­ry mem­bers. If the rele­vant tra­de is not listed here, it may still be clas­sed as a con­struc­tion com­pa­ny in other sec­tions, becau­se accord­ing to sec­tions I and II com­pa­nies are also sub­ject to the VTV if their pur­po­se – as iden­ti­fied by the natu­re of their ope­ra­ti­ons and their ope­ra­tio­nal equip­ment – is the com­mer­ci­al con­struc­tion of buil­dings of all kinds, or the pro­vi­si­on of con­struc­tion ser­vices ser­ving the erec­tion, repair, main­ten­an­ce, alte­ra­ti­on or remo­val of buil­dings.

Howe­ver, even if an obli­ga­ti­on to pay con­tri­bu­ti­ons is estab­lished, the mat­ter still has to be cla­ri­fied. This is becau­se the so-cal­led “reset excep­ti­on” may now app­ly under sec­tion 1 (2) sec­tion VII VTV. If con­struc­tion work accounts for more than 50% of ope­ra­ti­ons, the com­pa­ny may cite the reset excep­ti­on under sec­tion VII pro­vi­ded it meets 20% of the cri­te­ria spe­ci­fied the­r­ein: thus at least 20% of the company’s over­all working time must be spent on tasks which can only be attri­bu­t­ed to tho­se tra­des which are exclu­ded from its own ope­ra­tio­nal scope, such as pain­ters, var­nis­hers, scaf­fol­ders, plum­bers or gla­ziers.

In the case of com­pa­nies which car­ry out not just one but several activi­ties (mixed enter­pri­ses), this will depend on which activi­ties are main­ly pur­sued, i.e. for more than 50% of the hours by head­count (Federal Labour Court ruling of 25.1.2005 – BAG, Urt. v. 25.1.2005 – 9 AZR 146/04). If activi­ties are allo­ca­ted to sepa­ra­te (orga­ni­sa­tio­nal­ly inde­pen­dent) divi­si­ons, the ques­ti­on about the main activi­ty will app­ly to each divi­si­on (cf. sec­tion 1 (2) sec­tion VI VTV). It may then also be the case that only one inde­pen­dent divi­si­on of a com­pa­ny is sub­ject to SOKA-Bau con­tri­bu­ti­ons, while the remai­ning parts are exempt. Only the working hours of employees sub­ject to soci­al secu­ri­ty con­tri­bu­ti­ons are coun­ted in the cal­cu­la­ti­on. Self-employ­ed per­sons and sub­con­trac­tors, etc. are not inclu­ded in the eva­lua­ti­on. It is the­re­fo­re pos­si­ble that a com­pa­ny which is seen to “build” pre­fa­bri­ca­ted turn­key homes and the­re­fo­re also recruits staff accord­in­gly is not a buil­ding com­pa­ny as defi­ned in VTV, becau­se it is enga­ged exclu­si­ve­ly in plan­ning and sel­ling. Only when work is car­ri­ed out under one and the same manage­ment wit­hin a sin­gle orga­ni­sa­tio­nal unit will sub-con­trac­tors then be taken into account by way of excep­ti­on (Federal Labour Court ruling of 14.3.2012 – BAG, Urt. v. 14.3.2012 – 10 AZR 610/10).

A dis­tinc­tion is drawn in respect of clas­sic auxi­li­a­ry and secon­da­ry activi­ties, such as trans­por­ting mate­ri­als to the con­struc­tion site, clea­ring ope­ra­ti­ons or clea­ning work. The time spent on the­se tasks does not con­sti­tu­te a sepa­ra­te pur­po­se; ins­tead, it is deemed part of the main activi­ty of the com­pa­ny and the­re­fo­re counts as pure con­struc­tion work. Accord­ing to con­sis­tent prac­tice of the Federal Labour Court (Bun­des­ar­beits­ge­richt – BAG), the preli­mi­na­ry, fol­low-up and ancil­la­ry tasks which are requi­red for pro­per exe­cu­ti­on of con­struc­tion work and are the­re­fo­re inter­re­la­ted with it must be taken into account when asses­sing what con­struc­tion work inclu­des. This has to be assu­med in the case of con­struc­tion site clearan­ce and jour­neys to and from the site for merely dis­po­sing of rub­ble and exca­va­ted earth that result from the buil­ding contractor’s own work, sin­ce the distan­ces invol­ved are usual­ly wit­hin its ope­ra­tio­nal scope. This also app­lies if the exca­va­ted earth could be dis­po­sed of by exter­nal trans­port com­pa­nies. If the­se secon­da­ry activi­ties account for more than 50% of the total working time, howe­ver, then a thres­hold is reached after which a con­struc­tion com­pa­ny other­wi­se sub­ject to con­tri­bu­ti­ons is sub­se­quent­ly clas­si­fied as a trans­port com­pa­ny exempt from con­tri­bu­ti­ons.

The manage­ment can often put orga­ni­sa­tio­nal mea­su­res in place to “tailor” com­pa­nies and divi­si­ons. In doing so, it can signi­fi­cant­ly redu­ce the num­ber of per­sons liable to pay con­tri­bu­ti­ons or even eli­mi­na­te the obli­ga­ti­on to pay con­tri­bu­ti­ons ent­i­re­ly.

5. Liability of the principal for foreign sub-contractors

Under sec­tion 14 of the Ger­man Posted Workers Act (Arbeit­neh­mer-Ent­sen­de­ge­setz – AEntG, a princi­pal domici­led in Ger­ma­ny is held liable for the soci­al secu­ri­ty con­tri­bu­ti­ons of its for­eign sub-con­trac­tors. It will the­re­fo­re always ensu­re that each sub-con­trac­tor has duly paid its con­tri­bu­ti­ons.

Our services

  • Introduction to issues arising in connection with liability for contributions; calculation of possible contributions
  • In-depth analysis as to whether there is actually a duty to pay contributions, taking into account the main areas of activity abroad and the specific operating conditions; assessment of the extent to which social contributions paid abroad can be offset against contributions to the German SOKA-Bau scheme
  • Advice on matters to which the Posted Workers Act applies
  • Negotiations with the German social security funds • Litigation

Ihre persönlichen Ansprechpartner

Rechtsanwalt Jörg Hennig

Rechtsanwalt Ole Bödeker

Rechtsanwältin Anika Nadler

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