I realized a few weeks ago how broken IT in Germany is when I talked to a guy who turned out the CIO of a known German retail company. We did not talk about technology, exciting projects, ideas or similar, but about the complexity of the privacy act and "Scheinselbständigkeit" (false self-employment, which is a huge issue for start-ups and self-employed people in Germany). Out brains are so busy thinking about stuff that should just not have that much brains share, that we have not enough time to think about innovation and technology. I really wish they would drastically cut bureaucracy, but I just don't see it.
I think you got this wrong. Laws against Scheinselbständigkeit are protecting individuals from being exploited, and it's one of the things that characterizes the EU.
Don't forget that outside of Europe, most big economies were built on the ongoing exploitation of the working class. I am not saying this didn't happen in Europe, but at least there are efforts to curb this.
So a CIO complaining that he can't exploit people for cheap labour is not an argument for broken IT laws. It's an argument for seeing that it works as intended.
Thank you for giving an insight into the typical German way of thinking by immediately suggesting that the CIO was complaing about not being able to exploit his employees. He was not. I told him that I am running a tiny company and he warned by about the pitfalls of Scheinselbständigkeit.
Germany has really, really strong employee protection. Hard to fire, mandatory vacation, mandatory pensions, mandatory maternity and paternity leave, ect.
If you run a society like that, you immediately face a problem: people try to get around the employee protection measures by relying on the gig economy, by hiring freelancers or by starting small companies.
So, the German tax agency has the additional authority to crack down on that. If you work freelance or run your own company, you need to always have several customers. If your only customer is a single company, the tax agency argues that you aren't actually a freelancer/small company, you are a de-facto employee of that company, and the two of you are violating several laws and owe back-payment on several employee benefit systems. Also, that's fraud BTW, here's your case number.
>Germany has really, really strong employee protection. Hard to fire, mandatory vacation, mandatory pensions, mandatory maternity and paternity leave, ect.
All EU countries have these perks with some variations between them. Only the "hard to fire" part varies more.
Well, if you employ self-employed people in your company and after a while you or they get audited and it turns out that you are their only customer, the will be classified as employees of your company. As a result you may have to pay social insurance, pension fees, etc. for the all time they have been working for you, which can be a hefty sum and may break your neck as a small company. Oh another problem that I had not mentioned is that it's extremely difficult to fire people once you have reached a certain size (I think 10 employees or something).
One of the most important rules in Germany for startups: Employ as few people as possible. And I am not joking.
As someone who was CEO at a German company with more than 10 people: this absolutely overblown. Some people just want to larp US-style at-will firing power fantasies.
It's actually surprisingly easy to still fire people, you just have to have valid reasons: employee didn't come to work, employee works badly (Schlechtleistung), employee yells at customer, lack of work to do at the company etc. You just have to create the paper trail and follow the clearly defined process for firing (i.e. it has to happen at least two times, and you had a stern talk with the employee about it (Abmahnung).
You can also still fire employees without given cause in the first (up to) 6 months of employment.
What you definitely can't do is discriminate against employees, e.g. fire pregnant women because they are pregrant, fire migrants because they are migrants and so on. You have to have an actual, factual cause.
Also let's be clear with the concept of Scheinselbstständigkeit: This is simply a hedge against companies engaging in tax fraud by pushing people to be self employed when they really aren't. Scheinselbstständigkeit only triggers if a person gets over 80% of their revenue from a single customer, over a longer time, and has other things that hint at employee status, e.g. an own desk and company mail account, has to ask for holiday and so on. Simply having a large contract for e.g. 4 months with a single customer won't trigger Scheinselbstständigkeit.
> What you definitely can't do is discriminate against employees, e.g. fire pregnant women because they are pregrant, fire migrants because they are migrants and so on. You have to have an actual, factual cause.
In reality you just cant say that is the reason. If you fire the pregnant woman within the first 6 months you conveniently don't have to say anything.
You also get the inversion, we have to fire the migrants within 6 months.
I think the argument was that if someone worked for you for a few years as a freelancer and they suddenly become your employee you might be stuck with each other. Firing them will be much more suspicious. What to do with the other clients now that you are employed?
What is also kinda lame about the uncertainty is that freelancing may require much more dedication and working strange hours that might not even be legal as an employee.
I don't know what the solution is. Perhaps we need to merge the different formulas and adjust the salary.
No the OP, but Scheinselbstständigkeit is one of the scarecrows of freelancers and their clients in Germany. It is actually not very difficult, but in certain cases it is very limiting. If you can read German, here is a handy reference sheet, which is distributed by virtually all tax advisors [1].
If you are self employed and work a prolonged time for an single customer the german irs can rule that you are effectivly an employed person under the guise of self-employment. The company and the person have to pay then a sum of money for different social security insurances.
Depends what you want to achieve. If you just want to pick a name and open a bank account you can do that, too. You will run as a partnership with personal liability in that case.
If you want to found a limited liability company (i.e. GmbH) you also can start with picking a name and opening a bank. Add "i.G." to your company's name (i.e. GmbH i.G.) and start doing business.
Both approaches require you to register your business somewhere down the line, foremost for tax reasons. And yes, this can take quite some time, I had one occasion where we waited for 16 weeks after filing, but did business all the time. Note that some services are unavailable to you as long as your company is not formally registered, e.g. insurance.
If you are in a real hurry and need a running limited liability company, just buy one. Better tax advisors usually have a few "empty" GmbH in their files they sell you for the price of capital stock plus some handling fees. This gives you all required IDs immediately and you just have to transfer the bank account and, if you want to, change the name. Depending on the availability of a notary, this can be done in a few hours but usually takes a few days. One additional advantage of buying a shell is that you get history, which makes a lot of things easier.
There are also the capital requirements. I think that for a GmbH (the standard limited liability company) the requirement is EUR25,000. Here in the UK, where you can also setup a limited company online in 30 minutes (though not the bank account), and there is no minimum capital requirement though there must obviously be capital so usually the minimum is taken as £1. Cost of incorporating and running a company as also very low, with little paperwork.
IMHO, the British approach is more pragmatic: Why would you not make it as simple as possible to incorporate and run a company?
Why does the government care? People start companies for many reasons and capital amount is a matter for them. There are many small businesses that do not require 25k to start.
Ultimately the state should make it as cheap and straightforward as possible, get out of the way basically, and let people get on with it. It's difficult to find a reason to do differently
Well, yes – you can't typically open a business in 30 minutes here but the process is not exactly complex either. If you cant' figure out the administrative part of opening a company, maybe you shouldn't. It also keeps baffling me how that is of any significance. Are people afraid that their "paradigm shifting industry disrupting" idea will lose validity over the the next week? If so, maybe the idea was bollocks to begin with?
The bureaucracy of opening the business is a proxy for the bureaucracy that the business will endure during this lifetime. Admittedly, opening in 30 minutes is the result of politicians gaming the KPI, no one needs to open a company in 30 minutes. But waiting for 7 weeks is also generally understood to be on the other side of the spectrum, and not really reasonable either.
And that the "easy" part (as we know that it could be done as quickly as in 30 minutes) takes forever does not speak well of the UX of managing a business on that country, because e.g. closing a business, which is by nature more complicated, could end up being a hellish ordeal.
That you (and apparently the German bureaucracy) think people who can start a business and people who can tick administrative boxes are the same type of person explains German economic performance in the last 5 years.
It sounds strange but I believe businesses should bill the government for all work at their regular rates. If the assignment requires expertise that needs to be hired those rates should apply. Set some % fee for urgent work.
Depends on the region and the form of the company. e. K. has next to no protections but you can start at lunchtime to do commercial activities, a seperate bank account is not required, an GmbH takes quite long and needs a lot of money prepared for the company, but if it goes broke you are safe.
It takes months and you’re required to go to a notary at least twice and you have to put down 12500/25000EUR.
This is absolute nonsense. In the UK you can open a limited company with 12GBP in a matter of days. Oh and it’s completely online, something which Germany will never have in the foreseeable future.
Not to mention in Germany the quarterly/or even monthly tax accountant fees that could bleed into a couple thousand easily in the first year of operation.
I'd say in Germany for starting a new GmbH you'd need at least 4-5k set on the side for lawyer/notary/accountant fees, this can be deducted from the 12.5k/25k bank account but it's a pain in the ... for the average startup.
