German Social Security: Introducing Electronic A1 Filing

Germany has changed the way important social security documentation is filed for cross-border employees - how does the new process work?

In the European Union, employees who are assigned to work in another EU or EEA member state (or Switzerland) must obtain an A1 certificate in order to protect against the double payment of social security contributions. In Germany, however, the application process for the A1 form is about to change: as of 1 January 2019, all employers will be required to file for A1 certification electronically, using a mechanism within their payroll program. With that deadline fast approaching, employers should be taking steps to understand the new system, and ensure that their payroll departments are ready for the change.

How has the A1 application process changed?

Under the current system, it is possible for A1 applications to be filed through the post, or in pdf format by email. Since 1 January 2018, employers have been able to file applications electronically through some payroll programs - from 1 January 2019, that method of application will be mandatory, and will replace postal applications. The change means that payroll providers must be able to integrate this functionality for their clients.

What are the advantages of electronic filing?

The introduction of electronic A1 filing will better integrate business trips into employers’ payroll accounting systems, increasing the efficiency and coordination of the payroll process. Similarly, Germany’s health insurance institutions often have a huge amount of A1 applications to process: electronic filing is a way to reduce the administrative burden and increase their responsiveness for short-term business trip applications.

Who needs A1 certification?

Under EU Regulation EC 883/2004, all employees who travel to another EU/EEA country on a business trip must obtain A1 certification. This rule applies not only for secondments of up to 2 years, but for stays of any length, including meetings and workshops lasting only hours, or even refuelling stops in another country. The regulation does not impose a minimum time-threshold on trips into other EU states. Practically, A1 applications should be filed prior to the start of the business trip, in the following circumstances:

  • Business trips lasting up to 24 months
  • Deployments of civil servants to other EU/EEA countries
  • Special arrangements mandated by Regulation EC 883/2004

The new rules do not apply to employees working across multiple-states (also known as ‘multi-state workers’). In this context, A1 applications can still be filed by post.

Are there penalties for non-compliance?

In the past, many employers have not applied for A1 certificates for short-term business trips, and in doing so risked penalties - ranging from refusal of entry at business events, to severe fines. Employers are reporting an increased incidence of A1 checks - particularly in France and Austria - with traveling employees being intercepted at airports or even hotel receptions.

What if my application isn’t processed in time for a trip?

A1 certificates may not clear in time for a business trip, especially if that trip has to be taken at short notice. Previously, employers have been able to show a copy of their paper application to auditors and authorities as confirmation of their A1 status. Under Germany’s new system however, this will not be possible. Instead, under the new system, Germany’s social insurance organisation intends for payroll departments to be able to print out an automatic confirmation of an A1 application, which can be issued to travelling employees and displayed to authorities when requested.

Are there exceptions to the rules?

The German government has anticipated challenges in the implementation of the new application process. With this in mind, the head of the German social insurance organisation has agreed to extend the transition deadline for paper A1 applications to 30 June 2019 for employers who can provide justification. This exception will include applications to German health insurance institutes, pension institutions and the Deutsche Verbindungsstelle Krankenversicherung - Ausland (DVKA).  

What should employers do now?

Although some payroll programmes already include electronic application functionality, all employers in Germany must become compliant with the new rules by 1 January 2019. Beyond ensuring payroll software is up to date, employers should ensure they have reviewed and identified all employees within their business who are working in a cross-border capacity, and ensure their status in the payroll system is accurate.

When integrating A1 applications into payroll, employers should bear certain important considerations in mind:

  • Payroll interface: It may be necessary for employers to develop interfaces within their existing IT infrastructure which transfer A1 certification information between employees and the social security institutions.
  • Applications to health insurance: A1 applications must be submitted to the relevant health insurance company - with privately insured applications going to the Deutsche Rentenversicherung, and professional insurance applications to the Arbeitsgemeinschaft berufsständischer Versorgungseinrichtungen.
  • Secondment or employment: Importantly, A1 applications must distinguish between employees on secondment, and those engaged in “normal employment”.

To learn more about Germany’s payroll and social security landscape, browse activpayroll’s Germany Global Insight Guide...