There is a clear trend in current court decisions and legislative proposals: compliance is no longer an option, it’s a must. Compliance management is an essential corporate governance obligation and inadequacies in this area can lead to sanctions for the company and the direct liability of its executive management. What makes it all the more compelling is that, at the same time, statutory requirements of controls and processes in various areas of the company, particularly HR, are becoming more stringent.

Generally, when labour law and employment protection principles and provisions are breached, the company (and its management) expose themselves to the risk of severe sanctions and other detrimental consequences, particularly in the following areas:


  • Hiring of self-employed/freelance personnel
    It is a criminal offence (section 266a of the German Criminal Code (StGB) and section 370 of the German Fiscal Code(AO)) to withhold social security contributions or wage tax or to hire a person who is fictitiously self employed and should in fact be categorised as an employee with all employee rights. In these cases the company’s executive bodies are personally liable and the offence is punishable by fine or imprisonment.
  • Hiring of temporary employees
    Unauthorised or unlawful hiring of temporary employees are subject to administrative fines of up to EUR 30,000, and it is a criminal offence to hire foreign nationals without the necessary residence permit/ work permit, punishable by fines of up to EUR 500,000 or imprisonment of up to 5 years for the temp agency company and the company hiring the temporary employees.
  • Hiring of foreign nationals
    Administrative offences are subject to a fine of up to EUR 500,000 EUR, and criminal offences to fines and imprisonment of up to three years (breaches of the German Residence Act/Act to Combat Undeclared Work and Unlawful Employment/Social Code Book III) – if foreign nationals without a residence permit or work permit are hired.
  • Salary payments
    Breaches of the Minimum Wage Act (including indirect breaches involving sub-contractors/temporary employment agencies) are punishable as administrative offences with fines of up to EUR 500,000, exclusion from public tenders and retroactive salary adjustment. Criminal offences, e.g. usury as per section 291 StGB is subject to a fine or imprisonment for up to three years (and in particularly serious cases – wage dumping – up to ten years); embezzlement as per section 266 StGB and inappropriately high payments (e.g. to sub-contractors) are subject to fines and imprisonment of up to five years.
  • Working hours
    Administrative offences are punishable with fines of up to EUR 15,000 and criminal offences such as persistent or deliberateviolations of the Working Time Act which are harmful to health are punishable by fine or imprisonment of up to one year.
  • Equal treatment
    Unlimited compensation for damages and/or compensation for personal suffering in the event of breaches of the General Act on Equal Treatment.


We support clients in the evaluation of HR compliance risks and in setting up a HR compliance structure. We also collaborate with clients to guarantee efficient investigations into suspected fictitious self-employment situations.


If you have any questions about HR compliance, please feel free to mail us.