Employment and pensions

Mobile work abroad and its legal challenges for German businesses

Published on 25th Jun 2021

With more employees remote working in other countries amid the pandemic, businesses need to keep an eye on the social security, employment and immigration law, and tax implications


Businesses during the pandemic have gained experience of employees engaging in remote work from home – with some working from another country – and many employers are now faced with requests from their employees to continue to work from abroad.

For the employees, this new approach to work can open up the opportunity to work in places where others might go on vacation; for employers, this option for employees to work from and in another country could offer an attractive way to retain or attract qualified labour and talents.

Before deciding to agree on this type of regular cross-border remote work, the parties of the employment contract should consider the legal issues around social security, employment and immigration law, and taxation to avoid any pitfalls in each of these areas.

Social security

The parties will have to check whether the employee intends to work in another European Union or European Economic Area member state, in a country that has closed a bilateral agreement on social security with Germany, or from a country where an international agreement on social security does not exist.

The employee will become subject to social security of the country where the work is pursued. The employee will not be covered by the German social security system any longer, because of not being posted “on behalf” of the employer (but on his own initiative) to the other country. Therefore, the health insurances are not obliged to issue a certificate of coverage, which proves that German social security continues to apply. Even though they have been quite flexible and issued the certificates of coverage for employees working from their second home abroad during the pandemic, this will likely not apply beyond 30 June 2021.

Generally, the employee will also not work in two or more EU member state on a regular basis as defined in Article 13 of the Regulation (EC) No 883/2004. Therefore the employee will likely not get (after 30 June 2021 and the end of some special pandemic exceptions) a certificate of coverage A1 from German social security.

For the contribution of social security contributions, it will probably be sufficient to have a payroll service abroad where the employee works instead of involving an employer of records (EOR) or professional employer organisation (PEO). However, this has to be checked in the individual country. In some countries it might even be illegal to use an EOR or PEO.

Employment law

If the employee started the employment in Germany, typically the German employment law regulations will apply. This would also continue to apply, if the employee would only be temporarily employed in another country. However, the statute of law might change if the parties agree that the employee is allowed to work in future permanently from another country.

Also the Revision of the Posting of Workers Directive (2018/957/EC) and the national implementation of the respective host EU Member State might be applicable, if the employee is working for 12 months (on application after 18 months) from abroad, even if the employee was not posted by the employer to the other EU Member State.

In some of the EU countries the implementation of the Posting of Workers Directive even might be applicable, even if there is no real “posting by the employer” and no real cross-border provision of services to the host EU Member State. Already the initiative of the employee to work from the other EU Member State cross-border for his employer – without any “service recipient” in the host EU member state – might already suffice.

According to the Court of Justice of the EU , the Posting of Workers Directive is a special conflict of law rule in the meaning of article 23 of the Rome I Regulation, and might, therefore, regulate the applicable law.
The parties of the employment relationship should clarifiy the individual country where the employee intends to work, the local regulations and collective bargaining agreements that might become applicable, and the notification duties that might exist for this form of cross-border work. They might decide to agree for the future in a change of the statute of law and on the employment regulations of the host country.

Immigration law

Businesses should also make sure they check if there is a right to work for the employee in the country, and where he or she performs that work in order to avoid any illegal employment of foreigners.
Even though work is performed for an employer in Germany, local immigration rules likely request a work permit in the specific country.


The company should also check if there is a realistic risk that the employee who is working abroad from home will create a permanent establishment. This very much depends on the individual facts of the case and especially on the position and authority of the employee.

The employee might even become tax liable in the country abroad and the employer should clarify in which country the employer is liable to withhold the taxes on the paid remuneration. Also for tax purposes, it is recommendable to use the services of a payroll provider to ensure that the taxes are withhold and transferred to the competent tax authorities.

Even though this might be challenging, especially in times of shortage of skilled workers and where companies want to maintain their key employees, employers have to be prepared for these scenarios.


* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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