Experts estimate the number of managing partners and/or family members “wrongly” classified as liable for social security contributions at 1.5 to 1.8 million.
It makes sense to obtain legally binding notices.
The problem:
Employees who are dependants of the employer may not be entitled to social security benefits (e.g. unemployment benefits) even though they have paid social security contributions for years.
*Background:
The basis for compulsory insurance in health, long-term care, pension and unemployment insurance is employment for remuneration, i.e. the qualification of a person as an employee in the sense of social insurance law. If there is no employment relationship subject to social security contributions, the employee is regarded as a co-entrepreneur or employee on a family law basis (family assistance). Consequently, regardless of the social security contributions actually paid, he is not entitled to social security benefits. In principle, family relationships between the contracting parties do not exclude an employment relationship that is subject to compulsory insurance.
However, in the case of family workers, it is often difficult to distinguish between employees and co-entrepreneurs or family helpers. This is all the more true as tax law and social security law base their assessment on different criteria. Otherwise, the assisting family member will only find out that he or she is not entitled to benefits when the alleged benefit case occurs (e.g. unemployment).
This is all the more serious as the social security contributions paid in are refunded only to a limited extent and without interest. Binding effect: In the case of employment relationships that have been established since 1 January 2005, the social insurance classification, the so-called status determination, is carried out ex officio. The qualification of the employee is binding for the Federal Insurance Institution for Salaried Employees (BfA) and the Federal Employment Agency (BA). In the case of other employment relationships (old cases), it is up to the parties involved to submit an application for status determination to the collection agency (health insurance fund) or the BfA.
Forms (V027 and V028) can be downloaded from the Internet at www.bfa.de. The status determination of the collection agency is binding for the BfA. The status determination is not binding for the BA. Determination of status: We will not go into detail here on the principles of status determination. However, the following criteria are fundamental prerequisites for the status of employee: Integration into the company and the employer’s right to issue instructions, employment in place of an external worker and appropriate remuneration. The list is not exhaustive and the overall picture of the circumstances is decisive. Conclusion: A thorough diagnosis of the actual condition is essential, on a case-by-case basis. Pre-flat-rate statements are expressly warned against at this point.
The assessment of employment relationships under social security law can also be problematic in the case of shareholder-managing directors of a limited liability company (GmbH) and of co-operating partners of a partnership.
Practical tip: We recommend that you clarify the social security classification of the employment relationship as early as possible when it is established.
by Johannes Fiala, Lawyer (Munich), M.B.A. (Univ.Wales), M.M. (Univ.), Certified Financial and Investment Advisor (A.F.A.), EC Expert (C.I.F.E.), Banker (www.fiala.de)
(Shoe market, issue no. 12, 1 June 2006)
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About the author
Dr. Johannes FialaPhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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