China Employment Law Update - October 2017

When Chinese companies consider sending employees to Germany for a limited time in order to establish a German presence, there is always the question whether to assign employees on the basis of their current Chinese employment contract with an addendum governing the engagement in Germany or to conclude a new (German) employment contract directly with the German presence.

What seems to be a formality has relevant impact on immigration, social security and HR relationship aspects:

Generally, all foreign nationals require a residence and work permit to reside and work in Germany. There are different categories of such permits depending on the individual’s profession, qualification and position, the duration and reason of stay, with different prerequisites and different application processes. The most common category for the employment of foreign employees in Germany is the so-called Blue Card, which is a title specifically addressed to highly qualified individuals who (i) hold either a German university degree or a recognized or comparable foreign university degree and (ii) have a concrete job offer for adequate employment in Germany with an annual salary of at least EUR 50,800 in 2017 (or threshold of EUR 39,624 for individuals with a background in maths, IT, natural sciences, technology or physicians).

Where these prerequisites are met, the Blue Card is a fast and easy way to achieve a work permit for employees in Germany (applicants should allow about 6-8 weeks for the application process). However, the Blue Card requires conclusion of an employment relationship in Germany with all social security consequences so that it is not possible to apply for such Blue Card on the basis of a Chinese employment contract. Also, from an employee relationship perspective, conclusion of such new employment in Germany loosens the relationship between the individual and the Chinese mother company as the general set up does not necessarily provide for the individual’s return to China.

In addition, even though the Blue Card will at first be granted for a specific employer and employment, within the first two years of employment any changes to the employer or position will require the consent of the local foreigners’ office (to check that the prerequisites are still met). After 33 months of proper employment and payment of social contributions in Germany, individuals can apply for an ongoing residence title, which allows employment with another employer in Germany. Individuals with sufficient German language skills can apply for such title already after 21 months.

For Chinese companies that wish to keep a stronger relationship with the employee abroad, the preferred set-up is typically an international assignment to Germany on the basis of the existing Chinese contract with the employing legal entity in China. On one hand, this set-up allows for a stronger contractual link to the employee abroad, it qualifies for residence titles in Germany that are specifically addressed to assignment scenarios (which do not allow to switch to another employer) and depending on the duration of the intended stay it may even be possible to benefit from the existing German-Chinese Social Security Treaty to remain subject to the Chinese social security system during the assignment.

With regard to immigration, Germany has recently adopted a new residence title that amends the existing residence titled. The new title is based on a European Directive is specifically targeted at non-EU nationals who apply to be admitted to the territory of an EU-Member State in the framework of an intra-corporate transfer as managers, specialists or trainee employees (so-called ICT-Card). With the new ICT-Card Germany has now adopted an easy way for intra-corporate transfers to gain a work permit for Germany. As application for such title needs to be made at the place of residence outside the EU, the process will take slightly longer than an application for a Blue Card (presumably 8-10 weeks in the initial phase) but due to the formalized process it will in any event be faster and easier compared to secondment arrangements under the pre-existing rules.

Were residence titles usually only grant access to one country, the new ICT-Card also includes the right to stay either short-term or long-term in any other EU-Member States (except for the UK, Ireland and Denmark) and to work in a company that belongs to the same undertaking or group of undertakings under enhanced rules. For example, where Chinese managers are seconded to Germany to oversee operations in Germany, it will now also be possible for them to actively be involved and manage operations in other EU-Member States and work there either short term (90 days within any 180 days period) or even beyond 90 days provided that the stay in the second Member State will not exceed the stay in Germany. This residence title therefore not only combines the advantages as described above but also addresses the needs of multi-national undertakings and facilitates movement for non-EU nationals within the EU.

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