CMS Workation Guide | FAQ

Mobile working from abroad refers to performance of the work owed under the employment contract outside of the employer’s premises, using mobile devices at a foreign location chosen by the employee (holiday home, hotel, etc.). As a logical development of homeworking and similar arrangements following the Covid pandemic, mobile working from abroad is steadily growing in importance. It differs from previous ways of working abroad both in legal terms and in practice. Existing scenarios include the classic posting abroad, for example. Unlike working remotely from abroad, this occurs at the request of the employer. It may involve (i) working at a foreign branch of the employer’s business, (ii) a temporary task (e.g. assembly/installation work) based on a contract with a service recipient operating abroad, or (iii) a business trip. A distinction needs to be made between these cases and those in which work is performed abroad on a permanent basis or for an extended period of time.

The term “workation” has emerged in the context of working remotely from abroad – a neologism formed from “work” and “vacation”. The focus is in particular on combining work with typical leisure activities at a holiday destination.

Working remotely from abroad generally raises a number of legal issues that pose liability risks for the employer. For example, one of the first matters to check is which (employment contract) law is applicable. In addition, social security and tax aspects must be taken into account as well as residence regulations, where applicable. Finally, insurance law issues also arise, covering eventualities such as the employee falling ill abroad or having an accident at work.

The general rule is that remote working within the EU, the EEA and Switzerland is much easier to handle from a legal point of view than outside these geographical areas. For this reason, many companies now allow their employees to spend a limited period of time in these regions, while remote working beyond these countries is often only permitted in exceptional cases.

This is mainly because freedom of movement does not apply in countries outside the EU, the EEA and Switzerland. Consequently, as is the case for third-country nationals in Germany, gainful employment is only permitted, even in a homeworking scenario, if a residence permit has been issued or the residence regulations of the country in question provide an exception for workation, as has recently become the case in Namibia with its Digital Nomad Visa. Exceptions of this type are, however, extremely rare. Working without a work permit or a special visa that allows a workation is highly risky. Depending on the country, it may constitute an administrative offence or even a criminal offence.

It is also necessary to check separately for each third country whether a social security agreement exists and which types of insurance it covers. Within the EU, the EEA and in Switzerland, regulations are in force which lead to the social security legislation of one state being applied, which then covers all branches of social insurance. If there is no agreement in place with a third country, it is usually possible to ensure that the employee remains part of the German social security system. However, additional contributions may be required in the foreign country, which in some circumstances may even involve deduction and payment obligations on the part of the employer. In the context of this CMS Guide, “abroad” therefore refers to the geographical areas covered by the EU, EEA and Switzerland.

German law does not include any specific regulations on working remotely from abroad. The existing regulations apply, which were developed to cover the forms of working abroad that have been usual up to now, in particular posting. This leads to uncertainty around application of the law, because the existing regulations are not geared towards employees working remotely from abroad at their own request.

The coalition agreement that underpins Germany’s current government includes among its goals the creation of legal regulations for decentralised working throughout the European Union. However, no corresponding legislative initiative has yet been introduced.

It is nevertheless clear that employees do not have an automatic right to work remotely from abroad. This fact was also established by the Munich Employment Court in its ruling of 27 August 2021 (12 Ga 62/21). It stated in particular that even if employees are entitled to work from home within Germany, they cannot demand a similar right to work remotely from abroad.

If the employment contract has a connection with more than one Member State, as is the case when working remotely from abroad, it is necessary to check which national law governs the employment contract. This must be assessed in line with the provisions of Regulation (EC) No 593/2008 (hereinafter Rome I), specifically Art. 8 (1) sentence 1 of Rome I. This states that an individual employment contract shall be governed by the law chosen by the parties in accordance with Art. 3 of Rome I. Regardless of the choice of law, the mandatory provisions of the law where the employee habitually performs their work apply, in order to protect the employee (Art. 8 (2) of Rome I). Working remotely from abroad is typically a temporary activity in another Member State, so the country where the work is habitually carried out does not change. The connection is still with Germany (cf. Art. 8 (2) sentence 2 of Rome I).

As a rule, German employment law continues to apply to persons working remotely from abroad, and the employment contract concluded in Germany remains valid. To this extent, there are no changes compared to the existing application of German employment law to the employment relationship.

In addition to the continued application of German legal norms and the German employment contract, local regulations at the foreign place of work may also apply to some degree. Art. 9 of the Rome I Regulation stipulates the observance of overriding mandatory provisions. An overriding mandatory provision is one that is regarded as crucial by a country for safeguarding its public interests, such that it is applicable to any situation falling within its scope, regardless of the applicable law.

However, Art. 9 (3) of Rome I stipulates that effect may only be given to an overriding mandatory provision of the place of performance (i.e. the foreign state where the work is carried out) insofar as it renders performance of the contract unlawful, i.e. it involves a prohibitive norm that prevents effective fulfilment of the contract. The scope of application of overriding mandatory provisions at the foreign place of performance is consequently narrow and covers the following areas:

• Bans on working
• Maximum working hours, minimum rest periods
• Health and safety
• Protection of special groups of persons (e.g. maternity protection law)
• Public holidays

The employer remains the data controller within the meaning of the GDPR even if the employee is working abroad as part of a workation and is processing personal data there. This will generally be the case if the employee uses their company e-mail account or accesses internal storage systems remotely while working abroad. The deciding aspect for the (continued) applicability of the GDPR is the fact that the controller (in this case: the employer) has its registered office in a Member State that falls within the territorial scope of the GDPR.

From the viewpoint of the German employer, this means that it must ensure compliance with data protection provisions even when its employees are working abroad, and must take all technical and organisational measures necessary to protect personal data. Since the employer’s ability to exert influence and control are reduced markedly when its employees are deployed abroad, compared to working at the “home” location, this can present the employer with special challenges.

If the employee works in another European country (i.e. within the EU/EEA), the data flow between the employee and the German employer is not subject to more stringent requirements. There is no definitive answer yet as to whether this also applies with regard to the GDPR if the employee performs their work in a third country. The literature mostly assumes that this involves a transfer within the meaning of chapter five of the GDPR (“Transfers of personal data to third countries or international organisations”). In particular, the transfer of personal data to a company employee located in a third country would only be permissible if the controller can guarantee an adequate level of data protection (e.g. on the basis of an adequacy decision by the European Commission, or appropriate safeguards such as agreement of standard contractual clauses). The European Data Protection Board (EDPB) does not seem to share this view, however. In its guidelines published in February 2023, it takes the position that the additional requirements of chapter five are only relevant if a transfer is made to an external third party, but not in the case of access to company data by a company employee who is located in a third country. This leaves employers facing a degree of uncertainty around the legal framework they need to comply with when their employees work in third countries. The only way to avoid unpleasant surprises and to play it safe is to comply with the provisions of chapter five of the GDPR.

Regardless of the above, it is always advisable to consider whether having an employee spending time abroad could impact data security. For example, local laws may apply at the foreign location that grant the security authorities wide-ranging access rights to personal data. Employers must take this increased risk to their own data records into account by adapting their technical and organisational measures (e.g. through guidelines for action in the event of “dawn raids” and other investigative measures by foreign authorities, requirements for saving/deleting data on local devices, e-mail encryption and secure communication channels (VPN), etc.).

Where work is performed on a remote basis in another country, the question of the competent court may arise if there is a dispute between employer and employee. If the employee brings an action before a court at the foreign location, this involves risks for the employer that are difficult to calculate. The obvious course of action is to prevent such lawsuits through a mandatory jurisdiction agreement in favour of the German employment location. However, this cannot be done effectively. Under Art. 23 of the EU Regulation on jurisdiction and the recognition and enforcement of judgments, a jurisdiction agreement may only be used to diverge from the general jurisdictions if it grants the employee the right to bring an action in other courts in addition. It is thus only possible to establish an additional place of jurisdiction in favour of the employee. Accordingly, the parties to the employment contract cannot reach an agreement on jurisdiction that overrides the special international jurisdiction. However, a jurisdiction agreement can express the will of the parties to the employment contract that jurisdiction should remain with the German courts. As such, a relevant provision in the employment contract can make sense, despite the fact that it cannot be effectively enforced.

The social security regulations to which a German employee working abroad is subject are governed by EU law on coordination of social security. However, European law does not yet clearly define which regulations serve as the basis for applying social security law when an employee is temporarily working from abroad. Currently, Regulation (EC) No 883/2004, which applies to cross-border work within EU Member States, EEA States and Switzerland, stipulates that cross-border workers within these states should be subject to the social security system of only one state. This stance is based on the place-of-work principle, according to which a person who works in a particular country is subject to the legal requirements of that state. If this principle were to be taken to its logical extreme, any work in another country, no matter how limited, would result in two or more social security systems being applied to an employment relationship.

Regulation (EC) No 883/2004 does allow exceptions to the place-of-work principle. It takes a pragmatic approach to the as yet unclear legal situation surrounding remote working from abroad, recognising that it is comparable to a posting. The German Liaison Agency for Health Insurance Abroad (Deutsche Verbindungsstelle Krankenversicherung Ausland – DVKA) therefore starts from the premise that German social security law will continue to apply when employees are temporarily working from abroad, if

• the employer is aware that the work is being done abroad and agrees to this,
• the employer receives and pays for the service rendered, and
• an application is made to the competent office for an EU posting (A1 certificate).

If these conditions are met, the DVKA believes that it can be assumed that the employee is still subject to the German employer’s managerial authority. In the view of the DVKA, this is the crucial factor that defines a posting scenario.

In the context of concluding a multilateral framework agreement on the application of Art. 16 (1) of Regulation (EC) No 883/04 in the case of ordinary cross-border teleworking (effective from 1 July 2023), the DVKA specifically clarified once again that the fact that a workation involves working in another country on the initiative of the employed person does not preclude it from being classified as a posting.

The principle of territoriality generally applies to accident insurance law. Within the EU, this is enshrined in Art. 11 of Regulations (EC) No 883/2004 and No 987/2009 on the coordination of social security systems. However, it is not intended that a temporary period spent in another state should trigger a change of social security systems. For this reason, Art. 12 of Regulation (EC) No 883/2004 stipulates that German legislation shall continue to apply if the anticipated duration of the posting does not exceed 24 months.

In the case of a period spent in a third country outside the EU, it is necessary to check whether intergovernmental agreements are in place regulating this aspect. The radiating influence of section 4 of the German Social Security Code (SGB), Book IV, applies to non-contracting third countries: German regulations continue to apply in the case of a foreign posting if the posting is time-limited due to the nature of the employment or limited in advance by contract.

As far as the scope of insurance is concerned, the legislature has now aligned the insurance cover for activities in homeworking/mobile working scenarios with that which applies at the company’s premises, by means of the statutory provisions in section 8 (1) sentence 3 of the SGB, Book VII. Insurance now also covers accidents while “on the way to fetch a drink, eat food, go to the toilet, etc. in one’s own household” (Bundestag Official Records 19/29819, 18). In section 8 (2) No. 2a of the SGB, Book VII, the law similarly also covers “travelling by direct route to and from the location where children of insured persons are entrusted to the care of others according to No. 2 letter a, if the insured activity is carried out at the location of the shared household”.

The above principles cannot readily be applied to a workation, though. In particular, specific liability issues arise due to mixed activities. Mixed activities occur when (at least) two activities are carried out at the same time, of which (at least) one is insured. An example would be attending a conference while at the same time engaging in leisure activities. In this scenario, an accident is only considered to be an insured event if it was precisely the insured activity that led to the occupational accident. To make it easier to provide proof and in order to reduce disputes, it may be advisable to agree on fixed working hours for remote working from abroad, insofar as this is practicable. Ultimately, however, it depends on the circumstances of each individual case.

In the case of work-related trips to other countries, which must be taken to include remote working, the employer must pay for the employee’s treatment costs in the first instance (section 17 of the SGB, Book V). Reimbursement by the relevant health insurer is only possible up to the amount that comparable treatment would have cost in Germany. In order to avoid a situation where the employer incurs non-reimbursable costs, it is advisable to require the employee to take out travel health insurance prior to working remotely from abroad. This should specifically include cover for (reimbursement of) costs related to repatriation from abroad.

Yes, remote working from abroad can have far-reaching tax implications for both the employer and the employee. This applies in particular if the employee repeatedly spends extended periods working at a permanent workplace abroad, or if the employee is a managing director or other senior employee (leitende Angestellte).

The key issue is therefore whether working from abroad is limited to a few days/weeks and directly associated with a holiday, or whether the German workplace is relocated to another country for an extended period (e.g. over the winter for three to six months or more) in order to spend leisure hours after work and at the weekend abroad.

A short-term workation abroad of a few days or weeks is generally not a problem from a tax perspective. The employee in question remains liable to pay tax in Germany and does not usually incur any tax liability due to spending a short period of time outside the country. 

The employer must continue to deduct income tax as usual.

An extended workation period in another country of more than three or six months can lead to tax issues. The employee may become liable for tax abroad, especially if the workation period exceeds six months. Any double taxation conflicts can be resolved, if necessary, by means of intergovernmental agreements (double taxation agreements – Doppelbesteuerungsabkommen). There is a risk that an additional tax return and detailed clarification may be required. 

The employer is generally obliged to deduct income tax in Germany if the employee is liable to pay tax in Germany. If the right of taxation switches to another country (e.g. due to spending more than 183 days in the country), only the portion of the salary attributable to Germany is subject to income tax deduction in Germany. However, in order to avoid a liability risk arising from failure to correctly deduct income tax and pay it to the authorities, the employer should always try to obtain an income tax exemption certificate (lohnsteuerrechtliche Freistellungsbescheinigung) or continue to deduct the full amount of income tax. The employee is entitled to a refund from the German tax authorities for excess income tax deducted in Germany. It should be noted that in some cases there may be a requirement to deduct taxes in the other country.

In addition, the employer runs the risk of creating a permanent establishment abroad, i.e. a branch that is generally liable to tax. The existence of a foreign permanent establishment generally results in taxation of the profits attributable to it, which involves effort to make the necessary declarations. It also leads to registration and documentation obligations and potentially to the risk of double taxation in the foreign country. The question of whether a permanent establishment exists is initially determined by local law in the country concerned, and intergovernmentally by any double taxation agreement that may be in place. An employee’s workplace in a foreign country may constitute a foreign permanent establishment of the German employer in specific cases, in particular if space for the foreign workplace is leased by the employer and the employee concerned no longer has a workplace available in Germany during the workation. Some foreign states are of the view that a home-based office constitutes a permanent establishment if it is used on a continuous basis and not just some of the time (e.g. more than 25% of the employee’s total working time).

If the employee acts as a permanent/dependent representative for the German employer while abroad, this raises another critical issue. This will generally be the case if the employee holds power of attorney to conclude contracts and habitually exercises this power. Particular attention should also be given to managing directors or other senior employees working abroad. Their workplace is or could be associated with the company’s management location as a general rule.

There are no regulations on the duration of remote working from abroad either in Germany or at European law level. As the DVKA considers temporary remote working from abroad to be a posting within the meaning of Regulation (EC) No 883/04, the time limits applicable to posting should nonetheless be observed. This means time spent working in another country may not exceed an expected duration of 24 months.

Having said that, this period does not seem appropriate to occasional remote working from abroad. In practice, a time limit that does not exceed four consecutive weeks is likely to be appropriate, in view of the requirements laid down in section 2 (2) of the Law on Notification of Conditions Governing an Employment Relationship (Nachweisgesetz –, NachwG) that must otherwise be observed.

Section 2 (2) of the NachwG requires the employer to provide an employee who is to perform work outside the Federal Republic of Germany for more than four consecutive weeks with certain information prior to their departure. This includes the written record described in section 2 (1) sentence 1 of the NachwG, containing all key information in accordance with section 2 (1) sentence 2 of the NachwG as well as additional information on the country of assignment, the currency in which the remuneration will be paid, any cash or non-cash benefits associated with the time spent abroad, as well as information on whether the employee is expected to return and, if applicable, the conditions of their return.

Under social security law, the employer must apply for an A1 certificate for the employee, which the employee must keep on hand at the local place of work.

Due to the requirements of the Law on Notification of Conditions Governing an Employment Relationship (Nachweisgesetz – NachwG) (see also answer to question 153), the key conditions of the workation must also be laid down in writing if the intended duration is longer than four weeks.

In addition, almost all EU Member States have notification obligations arising from the EU Posted Workers Directive. There are many indications, however, that workers who work from abroad solely at their own request in the context of a workation are not to be regarded as posted workers within the meaning of the Directive; notification is therefore not required. Some Member States (such as the Netherlands and France) have already clarified this matter, but in other countries it is unfortunately still only tacit practice. A residual risk remains in this respect and can only be avoided by examining each case individually.

Nationals of a Member State of the EU, the EEA or Switzerland enjoy freedom of movement within the area formed by these states, giving them the right to work in any of the states without having to apply for a work permit.

The situation is different if third-country nationals wish to work in this area in the context of a workation. In this case, it is necessary to ensure that any right of residence in Germany, including the right to work, also applies to other EU states. This is not automatically the case, as residence permits are issued at national level.

The same proviso applies if employees wish to work in countries outside the EU, the EEA or Switzerland. A workation automatically means that work is performed abroad, which requires a work permit in most countries, just as it does in Germany. Otherwise, employment is illegal.

If employee representation is in place, various aspects of involvement under the Works Council Constitution Act (Betriebsverfassungsgesetz – BetrVG) may be relevant. These, as well as related requirements to conduct negotiations with employee representatives, must be observed ahead of introducing mobile working and the option of remote working from abroad.

With regard to social matters, there is now a separate aspect contained in section 87 (1) No. 14 of the BetrVG, which covers the organisation of remote working performed by means of information and communication technology and requires the involvement of the works council. This naturally also includes remote working from abroad. Many companies are now likely to have internal guidelines or company agreements on remote working within Germany. Remote working from abroad should ideally be included as a sub-case in those arrangements. Importantly, it is solely for the employer to decide whether remote working (whether within Germany or in another country) should be allowed. The works council does not have any say in the matter. The works council only has a right of co-determination with regard to how remote working is organised. As the introduction of remote working generally requires the use of technical equipment, the co-determination provisions of section 87 (1) No. 6 of the BetrVG must also be observed if, as is usually the case, the technical equipment could be used for monitoring employee behaviour or performance.

Remote working from abroad generally does not constitute a transfer under section 99 of the BetrVG that requires co-determination, since it is usually only occasional and alternates with working at the company’s German site. In addition, when permission is given for remote working from abroad at the employee’s request, this does not constitute assignment to a different work area (section 95 (3), BetrVG). If remote working from abroad involves an extended period, this could constitute assignment to a different work area, however, thus requiring approval as a transfer.

The introduction of remote working from abroad should not normally constitute an alteration of business operations that requires a reconciliation of interests and a social compensation plan as set out in section 111 of the BetrVG. In most cases, remote working will already have been introduced by the company within Germany. A geographical extension of remote working to include foreign countries generally does not constitute an important change in how the company is organised or the introduction of entirely new work methods. Depending on the specific circumstances, a different assessment is conceivable, however. If remote working is permitted worldwide and for extended periods, this may also involve a change in the way work is organised because (permanent) working across time zones requires new forms of collaboration. As far as we are aware, however, there is no case law on this as yet.

• Prior to any remote working from abroad, the DVKA should be contacted and the procedure for the specific case should be agreed.
• If an employee is planning a holiday and wishes to work from the holiday country for a few days/weeks before or afterwards, the employer should apply for an EU posting (based on the way the DVKA handles these matters in practice, and after prior consultation with the agency).
• This also applies if the employee wishes to do their work remotely from abroad on a temporary basis unrelated to any holiday.
• The application for the EU posting and the certificate regarding the applicable legal provisions (A1 certificate) should be made to the office responsible for these matters.
• It is important to note that the posting should not be interrupted (e.g. for a short home visit, even if it is on company business), as in this case the posting will usually end. It would have to be re-started upon return, taking all the measures described above.
• All correspondence with the DVKA and with employees, as well as the applications, should be documented and the relevant documents kept on file