Independent Contractors (ICs) can play a very important role in your business, but it’s equally as important that they are treated with care, which includes paying and classifying them properly to protect your business from making risky decisions. Further complicating things, the country where you operate can have laws and regulations that affect the method by which payment and classification can occur.
One example of how employment practices can vary by country is how ICs are addressed in Germany. This Western European nation decides whether a person is an employee or an independent contractor in the eyes of the law by depending on numerous, sometimes confusing, criteria. In differentiating between ICs and employees, German courts look at the parties’ agreement and whether the contractor can freely determine how, when, and where to perform its services. But it’s important to note that key practices such as whether the IC is a registered business or submits standard invoices are typically overlooked when it comes to a final ruling. These types of nuances are important to remember as you consider taking on ICs in Germany. After all, if an independent contractor is misclassified there can be criminal liability for failure to make social security contributions or civil liability of individual managers, which can be very scary for your business.
If you’re planning to hire ICs in Germany, there are a number things to consider, including:
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Disclaimer: The content in this blog post is for informational purposes only and cannot be construed as specific legal advice or as a substitute for legal advice. The blog post reflects the opinion of PRO Unlimited and is not to be construed as legal solutions and positions. Contact an attorney for specific advice and guidance for specific issues or questions.