Labor migration: What is a “domestic employment relationship”?

Anyone wishing to come to Germany as a skilled worker with a visa will repeatedly encounter the concept of a domestic employment relationship in the Residence Act (e.g., in Section 18g Paragraph 1 Sentence 1 of the Residence Act ( EU Blue Card )). But what exactly does this mean? Must the employer necessarily have a registered office in Germany, or does something else apply? In this article, we clarify the definition and show why social security plays a crucial role here.

Practical relevance of domestic employment relationships

The definition of "domestic employment" is of central importance in legal practice, as it often constitutes the basic requirement for the granting or obtaining of certain residence permits . This becomes particularly relevant in two situations:

• Restrictions on remote work in Germany for foreign employers : If a residence permit is linked to employment in Germany (such as with the EU Blue Card according to Section 18g Paragraph 1 Sentence 1 of the German Residence Act), remote work from Germany can be difficult for a foreign employer. If the employer is not based in Germany, employment via an Employer of Record is then the only option .

• Exclusion in the case of long-term secondments : This definition is also highly relevant for companies that wish to deploy employees internationally. A long-term secondment, where the so-called "immigration" provision of Section 5 of the German Social Code, Book IV (SGB IV) applies, does not meet the criteria for a domestic employment relationship. Since, in the case of a secondment, the employment relationship often remains subject to the social security system of the country of origin, the necessary insurance coverage in the branches of German social security (such as unemployment or accident insurance) required for recognition as a domestic employment relationship is lacking.

Many employment models therefore depend on a domestic employment relationship. With the exception of work visas for certain nationals pursuant to Section 26 Paragraph 1 of the Employment Ordinance (BeschV) and certain secondment models, the vast majority of work visas accordingly require a domestic employment relationship. The only exception to this is privileged nationals under Section 26 of the Employment Ordinance (BeschV), as a work visa under Section 26 of the Employment Ordinance (BeschV) can, according to its wording, be issued "regardless of the employer's place of business."

The core definition

According to the common definition, a domestic employment relationship exists when the foreign worker is subject to mandatory social security contributions in Germany . However, there is an important detail to note: it is not necessary for mandatory insurance to exist in all branches of social security (pension, health, long-term care, unemployment, and accident insurance). It is sufficient if the employment is subject to German social security regulations.

When does German social security apply?

The relevant guidelines here are the Federal Ministry of the Interior's (BMI) application guidelines for the Skilled Immigration Act (FEG) and the Federal Employment Agency's technical instructions . A key point is the distinction from so-called "posting" as defined in Section 5 of the German Social Code, Book IV (SGB IV). If an employee is only temporarily posted to Germany by a foreign employer, they often remain insured under their home country's social security system. In this case, there is no domestic employment relationship. In such cases, either a (possibly only formal) business address must be established in Germany, or the employee must be employed through an Employer of Record (EOR).

It is often assumed that a foreign company (e.g., a US LLC) cannot establish a domestic employment relationship. This is a misconception. The decisive factor is the actual payment of contributions in Germany. If a company, for example, pays contributions to unemployment insurance ( Sections 24 et seq. of the German Social Code, Book III) and statutory accident insurance (Section 2 of the German Social Code, Book VII) for its employees working here, then compulsory insurance exists in Germany. This fulfills the official definition of a domestic employment relationship – regardless of the company's registered office.

Conclusion: Domestic employment relationship

For a visa or residence permit, the decisive factor is not the "label" of the employment contract, but rather its classification under social security law. Anyone paying contributions in Germany is generally considered to be employed in Germany. If this is not the case, and if a visa for nationals privileged under Section 26 Paragraph 1 of the Employment Ordinance (BeschV) is not applied for, a formal business address must be established in Germany, or the employee must be employed through an Employer of Record.