Germany: Social security and gardening leave- new rules from 1 July 2009

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Where an employment relationship comes to an end, the employer and employee often agree that the employee need not provide his services until the end of the notice period, although the employer is still obliged to pay the contractual remuneration until such date.

Previous position

In 2005, the social insurance carriers published an agreed minute which confirmed that where such agreements are concluded, the employee is no longer considered to be an employee for social security purposes and therefore both employer and employee are no longer obliged to pay social security contributions.  Consequently, many employees were no longer adequately insured during such periods.  They had to organise their health insurance and pension in-surance payments themselves, despite their employment relationship continuing until the end of the notice period.

The new position - social security now applied

On 24 September 2008, the Federal Social Court (B 12 KR 22/07 and B 12 KR 27/07) ruled that the agreed minute of the social insurance carriers did not comply with social security legislation.  Employees who agree such leave of absences with their employer should be considered as employees under the applicable social security laws and in accordance with public practice.

Recently, the social insurance carriers have decided to follow the decision of the Federal Social Court.  The obligation to pay social security contributions continues until the end of an employment relationship, even if the obligation of the employee to render the contractual services ends earlier.  This change of practice is effective from 1 July 2009 for all termination agreements.

For further information or to discuss the issues raised, please contact Stefanie Andrelang (stefanie.andrelang@keller-menz.de) on +49 89 24 22 30 0.

This article was produced by, and re-produced with kind permission of, our correspondent firm in Germany, Keller Menz Rechtsanwälte.  www.keller-menz.de

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