To China with a German Employer - How does my work contract look?

by Thomas Batsching

You are already working in Germany and your boss would like to send you off to China for a few years? How does that work? Do I have to be nervous about any disadvantages? Here is some information.

If you are to be working in China, or elsewhere abroad, for a long period of time then there is a lot to take care of. These include questions about your work contract and compensation, but also the topics of social security and taxes - and that is not always so easy!

Over three entries you will be informed of the basics of an expatriation abroad, tax topics and questions on social security.

To start, here are the fundamentals of an expatriation abroad:

There are regularly three models for sending employees to a foreign country: the Foreign Assignment (also called 'delegation'), the Foreign Delegation and the Transfer.

What now? Which work model is suitable for me? Where would I have any advantages or disadvantages? Does the contract influence my German social security? What about insurance in China?

Most 'expatriates', or employees sent abroad by their employers, are abroad for Foreign Assignment purposes. This means that based on the working contract existing between the employee and the German employer, a supplementary agreement is concluded. This supplementary agreement is the legal basis for a dispatch abroad.

The minimum contents of such a supplementary agreement are:

• Name and address of the contract parties
• Beginning and duration of the period to be executed in China
• Determination of the work location in China where you will be working. If you will be working in multiple locations, this should be stated
• Description of your assignment in China
• Summary, extent, currency and due date of your work compensation
• Will supplements, perks or premiums be paid? Ex.: mobility premiums, supplement for living expenses
• Will additional material costs be taken care of? Costs for the apartment, children's school or trips to Germany?
• What is paid after returning to Germany? Ex.: travel and moving costs, support when searching for a home or cost acceptance for private lessons for the children
• What is the standard work time? How much vacation time do I have?
• What are the valid cancellation terms?

The original supplementary agreement must be provided to you (not electronically!) before the trip.

The second model is the so-called Foreign Delegation. The transfer is regularly managed by two agreements: One is the so-called suspension agreement. The agreement dictates that the mutualobligations of the work relationship are suspended. Put more simply, this means that for the duration of the dispatch abroad your obligation to work at the German company is suspended. At the same time, the German company's obligation to pay your wages is also suspended.

Crucial contents of a suspension agreement are:

• Beginning and duration of the period to be executed in China
• Terms for your future return to Germany (acceptance of moving costs, support in searching for a home, private tutoring, etc.)
• Naming the German work agreement in question and suspension
• Under whom will you be working in China? Will you continue to have a boss in Germany?
• How are you going to be insured in China? Ex.: health insurance, nursing care insurance, pension, unemployment, accident insurance, both during and after your stay in China!
• Who is responsible for paying taxes in China - you or your employer?
• If you have an occupational pension in Germany, does this continue to exist during your time in China?
• Who will pay the expenses for your departure and return? Does your company also incur the costs for a potential premature termination of your rental agreement in Germany as you must be quick in starting your new assignment in China?
• Orderly termination of the domestic work agreement, etc. is (legally) possible during the sojourn overseas
• What happens if the German work agreement is terminated? Does the Chinese work agreement end as well?
• What happens after returning from China? Are you provided similar employment (e.g. income, responsibility, location)?

Along with the suspension agreement, you and the Chinese company finalize a work contract based on Chinese law.

In the third model, the Transfer, the existing working contract with your German employer is terminated and your new Chinese employer finalizes a working contract with you. The German working contract can be terminated by a declaration expressed by either the employer or the employee, or via a mutual termination agreement.

But be forewarned: Terminating a German work contract has negative ramifications in many respects. Among others, you relinquish the 'German dismissal protection' (and Germany has a very good dismissal protection globally!), you will no longer pay into German social security (thereby losing your claim to services from care insurance!), and so on, and so on.

However: Perhaps you would like to work in China long-term, maybe to be closer to your family? Then the Transfer is absolutely the right choice!

Part 2:  To China with a German Employer – What do I Need to Know about Social Insurance?
Part 3: To China with a German Employer –What do I Need to Know about Taxes?