Before the end of the last legislative period, the legislature amended Section 7a of the German Social Code, Book IV (SGB IV), which governs the so-called Status Determination Procedure.
The Status Determination Procedure serves to clarify whether an employment relationship subject to social security contributions exists between a customer and a person providing services in order to protect against the risks of an incorrect assessment. Those risks include in particular the subsequent claim for social security contributions in the course of a company audit by the German Pension Insurance Association (DRV Bund).
The new provisions, which will come into force on April 1, 2022, are intended to provide all parties involved with a more rapid and simpler certainty in this regard. Unfortunately, the German legislator did not create a long-awaited and urgently needed formulation of differentiation criteria as to when a dependent employment relationship exists and when a self-employed activity is to be assumed, which could actually have contributed significantly to legal certainty.
We have summarized the most important law changes for you in the following:
- In the future, the object of the determination will change. Up to now, the DRV Bund has determined whether an insurance obligation exists. This will now change. From April 1, 2022, only a decision on the employment status (dependent or self-employed) will be made. The determination relates to a specific contractual relationship. A separate determination of the insurance obligation will not take place. This will only be necessary in special individual cases.
- Unlike in the past, a corresponding application can also be made before the start of the activity. The DRV Bund then makes a so-called forecast decision on the basis of the abstract agreements and the ideas of the contracting parties as to how the contractual relationship should be lived in the future. If changes occur within one month after the actual start of the activity, the DRV Bund must be informed immediately. The DRV Bund can then, under certain circumstances, revoke the forecast decision for the future. The aim of the forecast procedure is to achieve the earliest possible legal certainty for all parties involved.
- Another new feature is the possibility of a so-called group determination. This can be considered if the contracting parties are identical (e.g. framework agreement) or if different parties are involved, if the agreed activities are of the same type and are subject to the same contractual conditions. This is intended to avoid the expense of a large number of identical Status Determination Procedures. Since the group determination can also extend to future contractual relationships, it can only be likened to an expert opinion (no binding effect).
- Furthermore, up to now, if several contractual parties and several contractual relationships were involved, several Status Determination Procedures had to be initiated, e.g. if a person providing services was employed by a person receiving services under a contract for services or a contract for work with the customer. Now the DRV Bund can examine an activity comprehensively and not only limited to the respective legal relationship. The prerequisite for a determination in the triangular relationship is that there are indications that the person providing services is integrated into the work organization of the person receiving services and is subject to its instructions. An assessment of the triangular relationship is also carried out if only one of the contracting parties applies for a status determination, i.e. it can also be carried out against the will of another party.
- For better clarification of the circumstances, the possibility of an oral hearing was also included, but only in the appeal proceedings. Previously, the procedure was conducted exclusively in writing.
The changes are initially limited until June 30, 2027 and are to be evaluated by the DRV Bund during this time. Acceptance of the regulations in practice, their accelerating and simplifying effect and their contribution to legal certainty must be determined. We will keep you informed about possible developments.