15 January 2020

LMIA about the home care services in Germany

At the beginning of this year, a leading Polish legal broadsheet Dziennik Gazeta Prawna published an article drawn up by LMIA experts, Marek Benio Ph.D. and Marcin Kiełbasa Ph.D., about home care services in Germany. You will find the most important issues raised in this article in a nutshell below.

Germany’s home care market.

Invariably, the most of employees in the home care sector in Germany are posted workers from Poland. In this evolving market, unfortunately there is no shortage of creative employers who circumvent the legal provisions. Most often they are so-called letterbox companies registered in Poland by German entrepreneurs. The grey area, which is exceptionally broad in this service sector (already more than 90 percent of carers from Central and Eastern Europe are employed in Germany without paying due contributions and taxes!) has its negative implications for legally operating Polish companies in the sector. In view of the occurrence of this phenomenon, control institutions wrongly tend to revise the same large entities legally operating on the market. At the same time, the control institutions turn a blind eye to letterbox companies, which are usually not large entities, but they often appear on the market.

Changes are coming in German law…

In recent months, preparations are underway for such changes in German law that will affect the home care sector. The Bundestag and the German Ministry of Labor and Social Affairs (BMAS) have begun work on the DIN standards – regulating the rules for co-financing the home care service and introducing minimum standards for this service. The changes called for include proposals to limit own contribution of the person cared for related to paying for home care costs and to reduce the burden on individual carers. Attention was also drawn to the need to set a threshold for own expenses of the person cared for in the entirety of the costs associated with providing them with care. These demands were published in a report published by the SPD on 6September, 2019. [“Positionpapier der SPD-Bundesfraktion vom 06.09.2019 Pflege solidarisch gestalten”].

At this point, it is also worth mentioning about the DGB (Deutscher Gewerkschaftsbund) trade union’s project and BMAS’ one – “Fair Mobility” [Faire Mobilität], addressed to employees posted to Germany. The project involves the creation of a network of counseling offices for carers in Germany.

… and in EU law

The year 2020 will also be marked by changes in EU law. In the context of the home care industry, the revision of regulations on the coordination of social security systems (883/2004 and 987/2009) is of particular importance.

Currently, according to art. 13 of Regulation 883/2004, a person who normally performs paid employment in two or more Member States may apply the legislation of residence or place in which the registered office or place of business of the undertaking or employer is situated. The amendment does not assume changing this provision. The planned change will include implementing provisions that are to clarify the concept of “registered office”. In the proposed wording of art. 14 paragraph 5a of regulation 987/2009, a number of factors have been put forward with regard to the determination the registered office or place of business of the enterprise. These include: turnover, number of services provided by its employees and / or income, working time in each Member State in which the activity is carried out, places where general meetings are held and the habitual nature of the business. In the meantime, this enumeration has undergone a number of changes, with criteria such as ‘turnover’ and ‘working time’ being factors that are constant in the proposed definition.

LMIA’s position – lack of consistency in the proposed definition of the registered office

Undoubtedly, the intention in the project of defining the registered office is to provided for mechanisms allowing to effectively identify entities which circumvent the law – letterbox companies.

As already indicated,  the definition of the registered office currently proposed within the EU institutions’ negotiation  is mainly based on the criterion of turnover, the number of services performed by employees of their income and the working time of employees. In the opinion of LMIA’s experts, the definition based on such indicators is not consistent, and the criteria specified in it will not fulfill their function in the verification of enterprises. Furthermore, the use of such criteria is likely to cause many problems in the future. For example, the question should be posed, how to determine the registered office of a company that has the majority of revenues from member country A, and most of the working time is carried out in country B?

In view of doubts that arise, in the opinion of LMIA experts, the criteria such as turnover and working time should disappear from the definition of the registered office. Instead, a mechanism should be adopted which would be based first of all on controlling the place where key decisions are made in a given enterprise and where its central administration functions are performed. If there is no doubt as to where this place is, then it would not be necessary to examine the other criteria by the competent institution, including the turnover and working time of employees. The LMIA also proposed that the amended art. 14 paragraph 5a of Regulation 987/2009 be applicable only if a company had many plants in different Member States, or if it was related by capital and / or personally to an enterprise with registered office in another country. Such solutions should be considered a compromise. It would allow effective identification of letterbox companies while avoiding negative consequences for honestly trading entrepreneurs.

The home care industry sector and its legal environment invariably remain the subject of interest and activities undertaken by the Labour Mobility Initiative Association. Therefore, during the next seventh edition of the European Labour Mobility Congress, there will certainly be issues regarding this service sector. We encourage you to follow the ELMC website where in the near future news related to the organization of the event will appear.

Katarzyna Węglarz (LMIA)

Zdjęcie: Matthias Zomer (Pexels)

EMPL Committee in Favour of Continuing Work on the Revision of Coordination Regulations

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