Employers are obligated to pay social security contributions for their employees. With the outbreak of the coronavirus, they now have the option to defer these contributions.
Many businesses are seeing orders dry up as a result of the crisis surrounding the coronavirus, yet nothing has changed on the cost front. Wages, salaries, and social security contributions for employees need to be paid. This is particularly challenging when experiencing liquidity shortages. We at the commercial law firm MTR Rechtsanwälte can report that employers therefore have the option to defer social security contributions.
Failure to pay social security contributions for employees on time normally leads to surcharges being imposed for late payment. The cause of late or nonpayment is irrelevant. The application of the surcharge is determined solely by the deadline being missed, even if only by one day. However, with the spread of the coronavirus pandemic, it is possible under certain circumstances to defer social security contributions as a way of easing the burden on the business.
A press release dated March 25, 2020 from Germany’s National Association of Statutory Health Insurance Funds, the GKV-Spitzenverband, stated as a complement to the extensive support measures implemented by Germany’s federal government that it would also be possible under certain circumstances for statutory health insurance funds to temporarily defer social security contributions.
The current plan, according to the press release, is for deferral to be limited to the months of March and April, and for it to only be an option if all other support measures within the federal government’s package of measures have been exhausted.
It will therefore be necessary in the coming weeks to keep a close eye out for when and how quickly businesses struggling financially due to the coronavirus crisis will be able to take advantage of the support measures legislated for by the federal government. If the assistance will not be available to businesses until it is too late, the arrangements for the deferral of social security contributions might also be extended.
Social security contributions can be deferred if prompt payment would cause the business significant hardship, e.g. in the form of serious cash flow problems. The employer needs to be able to demonstrate this.
No interest or surcharges for late payment are due in the event of a deferral. The contributions must be paid at a later date. For this reason, employers should first prioritize other options as a means of weathering the crisis, such as applying for permission to introduce reduced working hours. Lawyers with experience in the fields of labor and employment law can offer advice.
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