Well, that's what the problem is. When all you as an US startup want is to hire a single or maybe a dozen Europeans, you can either go and pay them in cash or as sole-proprietors and leave the employees to deal with the rest (as long as the US gov't gets its taxes, you're in the clear from the IRS point of view), you hire some intermediate body-shop, or you do it the proper way and pay a loooooot of money for a subsidiary.

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StopDisinfo910 3 days ago | parent [-]

I think it makes a lot of sense personally.

You can contract with companies wherever you want as a company but you can only have an employment contract with a company based where the employment laws of your country applies.

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oytis 3 days ago | parent [-]

It does make sense, but it also is pretty hard to work as a contractor being located in Germany. The main issue is that contractors don't by default pay pension contributions, so the pension fund hunts down those it considers "fake contractors" under a complicated and ambiguous set of rules.

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mschuster91 3 days ago | parent [-]

> The main issue is that contractors don't by default pay pension contributions, so the pension fund hunts down those it considers "fake contractors" under a complicated and ambiguous set of rules.

It's not that complicated. The rules are relatively easy: as soon as you're embedded into the organization of the client (aka, you get laptops/desktops from them, get directed by their staff what you have to do) and/or the dominant part of your time / income is one single client, the assumption is that the client only does "contracting" to avoid the obligations (in wages, social security contributions and employee protection laws) that regular employment would bring with it.

The only issue that I have with the current regulatory framework is that the individual "sole proprietors" are held financially accountable for the social security contributions, not those who actually profit from this kind of abuse.

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StopDisinfo910 3 days ago | parent [-]

That seems extremely backward to me. Is that specific to certain contracting status or is that the case for any kind of contracting?

People should be free to contract if they want. Obviously that means they are now acting company-like and have to pay social contribution like a company would but that should be on the contractor not on the client. That’s how things work everywhere in Europe I had to deal with contracting.

Germany really is a puzzling country.

	▲	mschuster91 3 days ago \| parent \| next [-]
		> Is that specific to certain contracting status or is that the case for any kind of contracting? It's specific for "sole proprietor" contractors. Multi-person operations, consultancies and bodyshops are exempt as long as the employees get their contributions paid. > Obviously that means they are now acting company-like and have to pay social contribution like a company would but that should be on the contractor not on the client. That is possible, indeed, you can voluntarily pay pension contributions (and that's the stuff that the pension fund claws back). You can also voluntarily contribute to the unemployment benefits. As long as you at least pay the pension contributions, you're fine. The unemployment benefits is voluntary, no penalties if you don't pay these, but also, no payouts when you gotta close down shop. The problem is, good luck finding a client willing to pay appropriate rates - too much unfair competition from those who just hope that neither they nor the client end up in a colonoscopy-level tax audit in 10 years (the time frame in which the statute of limitations for tax crimes expires), and the sad reality is that this gamble often enough pays off.
	▲	pjmlp 3 days ago \| parent \| prev [-]
		Not really German specific, this is also the same situation in many European countries. The main goal is to prevent contracting with a single client as means for companies to get rid of employees and their social security responsabilities. Anyone contracting with a single client can eventually go to court and demand to be employed by the client, proving that the relationship has been one of employee/employeer, even though the contract was a freelance one.