Social insurance: No double burden on intra-group managing directors of limited liability companies
12/12/2018 - Reading time: 2 minutes
Attorney at Law
Hiring out personnel of a group company (the leasing company) to other group companies (hirer companies) is usual practice in groups of companies. In the past, this practice also included managing directors (Geschäftsführer) of group companies. In such a case, the leased employee was appointed managing director of the hirer company. As a rule, no separate contract of employment was concluded with the leased managing director as the managing director remained in an employment relationship with the leasing company. The managing director received his/her salary from the leasing company, on the same terms as before, and the hirer company refunded the financial expenditure to the leasing company.
In the past, only the leasing company, the official employer named in the contract of employment, paid over social insurance charges because only that company was regarded as the employer in terms of social insurance law.
In a ruling issued in 2017, the Supreme Administrative Court (Verwaltungsgerichtshof, VwGH) found that a hirer company (also) had to pay social insurance charges for the managing director hired out from its sole shareholder because, for the purposes of social insurance law, also the hirer company must be regarded as employer. The VwGH found this although no contract of employment existed between the hirer company and the managing director.
In its statement of reasons for the decision, the VwGH explained that the general principle relating to temporary work relationships, viz. that the leasing organisation had to be regarded as the employer under social insurance law, did not apply in cases where the leased employee exercised the office of managing director because, by the act of appointing that person managing director, the hirer company acquires a direct right to the managing director’s work. With reference to Supreme Court case law establishing the principle that the relationships under the law of obligations involved in the function of (managing) director are missing only in exceptional cases, the VwGH regarded the start of work as a managing director in the hirer company as acceptance of an offer to enter into a contract of employment, which thus created a (further) employment relationship within the meaning of social insurance law.
Based on that ruling, employees of group companies who were appointed managing directors in other group companies thus had to be registered for social insurance with the respective other group companies. This caused a double burden.
The parliamentary committee for labour and social matters now introduced a motion to modify the amendment of the General Social Insurance Act (Allgemeines Sozialversicherungsgesetz, ASVG). The amendment is to make it clear that, if personnel is hired out within a group of companies, the hirer company will not be deemed an employer in terms of social insurance law so that there will be only one employer for the purposes of social insurance law.
Attorney at Law