Non-payment and misuse of wages and salaries, § 266a German Penal Code (Punishability of bogus self-employment)


The offence of withholding and evasion of social security contributions (§ 266a StGB) has gained considerably in importance in recent years.

For defence lawyers in criminal law, such accusations pose a particular challenge. The cases are at the borderline of many different legal areas, in particular criminal law, tax law, social security law, labour law and insolvency law.

Non-payment and misuse of wages and salaries Punishability of bogus self-employment § 266a German Penal Code

1. bogus self-employment and payment reductions

266a StGB occurs in various constellations. On the one hand, the criminal offence concerns constellations in which no social security contributions are paid at all, although there is a statutory obligation to do so. This is particularly the case with so-called “bogus self-employment“, i.e. in cases in which persons work “on account” as “bogus entrepreneurs”, although the activity is an employment relationship subject to social insurance contributions. In the case of such bogus self-employment, punishability according to § 266a StGB regularly goes hand in hand with the evasion of taxes, in particular wage tax.

266a StGB is also fulfilled if an employment relationship has been registered but the amount of the wages received is not fully disclosed. This is the case, for example, if holiday pay or Christmas bonuses, which are wages, are paid out in cash and are not reported. Such reductions are also regularly accompanied by the evasion of income tax.

Typically, withholding pay also occurs in the preliminary phase of insolvency. Entrepreneurs who get into economic difficulties often neglect their payment and reporting obligations to the social security authorities.

2. Sector-specific Investigations

As criminal defense attorneys, lawyers repeatedly encounter “waves” of investigations that relate to certain, always new, industries. Similar to the tax authorities, who are always looking for new topics in criminal tax law, the customs investigators, who are responsible for investigations according to § 266a StGB, like to concentrate on certain “fashion topics”.

In this context, investigations have been carried out in recent years in the following sectors, among others:

– Foreign “migrant workers” employed in agriculture or on construction sites

– Fee-based Physicians

– Temporary Employment Agencies

– Cleaning Companies

– Market Research Institutes

– Telephone Switchboard

– Joint Practices of Dentists

– Transport Industry

– Driving Services

In all these cases, the core question is always the same: Is there a gap between the actual activity and the contractual design? Or to put it another way: Are the contractors who account as freelancers, subcontractors, freelancers or project partners entrepreneurs or in reality employees bound by instructions?

3. Employment subject to social security contributions

The question as to whether an employment relationship under social insurance law exists or whether it is subject to social insurance is governed by the provisions of social insurance law (§ 7 ff. SGB IV). An employment relationship subject to social insurance contributions does not exist in the case of marginal employment (§ 8 SGB IV).

As a rule, an employment relationship subject to reporting requirements exists if the activity is carried out in accordance with instructions and integration into the work organisation of the instructing party has taken place.

The case-law has developed a number of criteria for assessing the social insurance status, which are also used by German pension insurance (Deutsche Rentenversicherung) as a social insurance carrier. The following points, among others, are of importance:

– Is the gainfully employed person bound by instructions (in terms of time, content, organisation)?

– Does the gainfully employed person employ his own employees?

– Is the person concerned permanently and essentially only working for one client?

– What is the relationship with other gainfully employed persons who perform comparable activities? Is one and the same activity (e.g. transport services or construction work) partly performed by salaried employees or has this been the case in the past?

– Does the worker take any entrepreneurial risk of his own? For example, does he have his own expenses for advertising, work equipment (tools, computers), internet presence, business cards, tax consultants, lawyers?

– How are holiday and sick leave periods regulated?

– Who steps in when the employee is absent?

– Does the employee allocate his time freely?

– Who instructs the employee within the company what has to be done when and where?

– How many other clients does the employee have? How high is the turnover of other clients in relation to the potential employee?

Ultimately, it depends on an overall view of all characteristics. Only the actual conditions are decisive.

All in all, the standards are strict. Thus a relevant employment relationship under social security law can be assumed even if only a small amount of work is done (for example, a cleaning woman who comes only once a week, or an Eastern European craftsman who is employed on a construction site for a few weeks).

In the case of highly qualified jobs, which are typically performed as freelancers (lawyers, doctors), the yardstick is generally somewhat higher. However, there is no general legal principle that particularly qualified professions can never be bogusly self-employed.

4. Employers

Only employers can make themselves liable to prosecution for “withholding and embezzlement of remuneration” (= special personal characteristic within the meaning of § 28 Abs. 1 StGB). It is a so-called special offence, i.e. a criminal offence that can only be committed by a certain group of persons.

The employer is the one who employs another person. Employment is in particular employment, typically within the framework of an employment relationship. Also included are persons who are equal to the employer, such as certain clients (§ 266a Abs. 5 StGB). In the case of legal entities or partnerships, § 14 Abs. 1 StGB applies, i.e. the managing director is generally responsible (and thus potentially liable to prosecution).

Difficulties of demarcation may arise if a managing director has delegated the fulfilment of social security obligations. In principle, such delegation is possible. Under certain circumstances, however, monitoring obligations may arise, for example if there are indications that the tasks are not being performed properly.

Disputes about responsibility may also arise in the case of the allocation of tasks between several managing directors (e.g. technical area / commercial-organisational area). On the other hand, there is also defence potential here, e.g. if there are clear, written regulations on the areas of responsibility in the articles of association.

The responsibility for the management or the body authorised to represent can also be assumed by the de facto managing director.

5. Employee and employer contributions

The largest practical meaning has the non-payment of the employee social security contribution. As far as it concerns the employee contributions, already the bare non-payment is punishable according to § 266a Abs. 1 StGB. Background for this is that the employer acts after the legal organization as a kind trustee, for money, which is actually entitled to the employee (even if it may not keep it).

The employee shares within the meaning of para. 1 include:

– Contributions to health insurance

– Contributions to long-term care insurance

– Contributions to pension insurance

– Contributions to unemployment insurance

Since 2004, non-payment of employer contributions has also been punishable under § 266a (2) StGB. Here additionally always a deceptive element is necessary, i.e. the bare non-payment does not lead yet to the punishability.

The non-payment of retained remuneration to a third party regulated in § 266a Abs. 3 StGB has hardly any practical significance.

6. Gross, net and phantom wage

As soon as an employment relationship subject to social insurance contributions within the meaning of § 7 SGB IV has been established between an employer and an employee, the employer must pay half of the employee’s contributions to health, pension, long-term care and accident insurance. Social security contributions must be paid when the entitlement to remuneration for work has arisen. The basis of assessment is the gross wage.

The term “pay” (“Arbeitsentgelt”) under social insurance law is decisive for the basis of assessment. This must be distinguished from the tax concept of “wages” (“Arbeitslohn”).

When determining the social security pay, it is not important whether the employee has actually received money. It is sufficient (also for criminal law!) if he should have received it. While in tax law the so-called inflow principle applies (cf. § 38 Abs. 2 EStG, § 38a Abs. 1 EStG, cf. also § 11 Abs. 1 EStG), in social insurance law the so-called origin or claim principle applies. I.e. it depends for the social insurance-legal assessment basis in principle on what is owed contractually or legally, not on what is actually paid to the employee. This is expressed, inter alia, in the wording of § 266a StGB (“irrespective of whether remuneration is paid”).

Specifically, differences between social security law and tax law may arise in the following cases, for example:

  • – „Phantom wage” or “fictitious wage” – If, for example, holiday pay and continued payment is not made in the legally mandatory amount in the event of illness or on a public holiday.
  • – In the case of tax concessions, for example Sunday, public holiday or night work surcharges (cf. § 3b EStG).

In this context, disputes have arisen in recent years, for example in connection with basic wage supplement agreements in the catering sector. While the BFH considers such arrangements to be fundamentally permissible (see judgment of 17.06.2010, Az. VI R 50/09), they are subject to social insurance law – and also to criminal law! – as a rule not recognised (see § 17 Abs. 1 S. 1 Nr. 1 SGB IV in conjunction with § 1 Sozialversicherungsentgeltverordnung (SvEV); see BSG, Urteil vom 07.05.2014, Az. B 12 R 18/11 R; s.a. LSG München vom 16.11.2015, Az. L 7 R 707/15 B ER).

  • – Differently than § 266a StGB attaches the facts of the tax evasion (§ 370 AO) with reference to the wage tax to the fact whether wages and content were actually paid (inflow principle). The income tax concerns the employee’s tax liability. The employee is a taxpayer. The employer is only obliged to collect this tax on a fiduciary basis. The employer is obliged in a fiduciary capacity to pay this part of the employee’s salary, which is deducted from the gross salary, to the tax authorities in order to fulfil the employee’s obligation to pay the tax.

In practice, § 266a StGB often coincides with the evasion of income tax. Then the question arises, among other things, whether it is a procedural act – which among other things has consequences for the jurisdiction of the tax office as an investigating authority, as well as for interruption of the statute of limitations (cf. e.g. BGH of 24.10.1989, Az. 5 StR 238-239/89).

With black wage payments and/or illegal employment relations a so-called net wage fiction takes place in accordance with § 14 Abs. 2 S. 2 SGB IV. The promised total amounts which an employee is to receive “black” are extrapolated to a fictitious gross wage. This also applies to criminal law (cf. BGH of 02.12.2008, Az. 1 StR 416/08). The so-called net wage fiction can have drastic consequences, since it leads partially to exorbitantly high additional payment amounts – which are also the basis for the punishment measure!

The due date of the employee shares generally occurs on the third last bank working day of the contribution month in accordance with § 23 (1) SGB IV. Deferrals before the due date are possible.

Since 1st January 2003, the contribution claims of the social insurance institutions have arisen in the case of a one-off payment of wages as soon as this has been paid out, § 22 Abs. 1 S. 2 SGB IV. This means that the inflow principle has been introduced as an exception for one-off payments. Decisive for the obligation to pay contributions for one-off remuneration is therefore whether and when the one-off payment was received. Contributions cannot therefore be levied if the one-time pay has not actually been paid. This is relevant, for example, for the calculation of vacation bonuses and Christmas bonuses.

7. Intent

According to § 266a of the German Penal Code (StGB), the withholding of contributions is only punishable by intent. It is necessary to be aware and willing not to pay the contributions when they are due. If the employer trusts on its continuing liquidity and e.g. its account is not covered in the debiting-substantial time nevertheless unscheduled, is usually no resolution to be accepted.

With judgement of 24.01.2018 (Az. 1 StR 331/17) the first criminal senate of the BGH pointed out that regarding the intent with tax evasion and § 266a StGB at present still different yardsticks are put on. A change of the iurisdiction is to be expected in this respect:

“According to the case-law of the Federal Court of Justice, the following differentiation is made with regard to the subjective side of the facts in § 266a of the Criminal Code: The intent must extend to the quality as employer and employee – but only to the actual prerequisites justifying the status, not to the legal classification as such and the own obligation to pay contributions – and to all additional actual circumstances justifying the social security obligations. If this knowledge of the actual circumstances is present, the offender, if he believes he is not an employer or has to take care of the payment of contributions, is not subject to an offence excluding intent, but (at most) to a – generally avoidable – error of prohibition (BGH, Beschlüsse vom 7. October 2009 – 1 StR 478/09, NStZ 2010, 337 f. and of 4 September 2013 – 1 StR 94/13, wistra 2014, 23, 25 marginal 16 each mwN; judgment of 15 October 1996 – VI ZR 319/95, BGHZ 133, 370, 381).

On the other hand, according to the settled case-law of the Federal Court of Justice, the intent of tax evasion is that the offender knows the tax claim in terms of its basis and amount or at least considers it possible and also wants to shorten it (see BGH, judgments of 13 November 1953 – 5 StR 342/53, BGHSt 5, 90, 91 et seq. and of 5 March 1986 – 2 StR 666/85, wistra 1986, 174; Decisions of 19 May 1989 – 3 StR 590/88, BGHR AO § 370 Para. 1 Intent 2; of 24 October 1990 – 3 StR 16/90, BGHR AO § 370 Para. 1 Intent 4 and of 8 September 2011 – 1 StR 38/11, NStZ 2012, 160, 161 Rn. 21 f.). If the taxpayer erroneously assumes that a tax claim has not arisen, according to the case-law there is an error of fact which, according to § 16 Abs. 1 Satz 1 StGB, excludes intent (cf. BGH, loc.cit.). Accordingly, an error about the employer status in § 41a EStG and the resulting tax liability, to which the tax claim and the criminal offence of § 370 (1) no. 2 AO are linked, is to be treated as an error of fact.

Since no objective reason for the differentiation can be discerned and since each case concerns (normative) constituent elements, the Senate is considering – contrary to the considerations in the Senate’s decision of 8 September 2011 – 1 StR 38/11, NStZ 2012, 160, 161 para. 23 et seq. – in future also treating the misconception about employer status in § 266a StGB and the resulting obligation to pay as a whole as a (constitutive element excluding intent) error.”

8. Impending Insolvency

Problems arise when a company is about to become insolvent.

According to criminal case-law, any funds still available must be used primarily and primarily to pay employee shares – also within the 3-week period of § 15a InsO. The possible later contestability (§ 129 InsO) does not stand in the way of this. The civil courts have meanwhile accepted this “absolute precedence” of the employer’s shares to the extent that no claims for damages are postulated in this respect according to § 64 GmbHG or § 92 Para. 3 AktG.

Specifically this means for the managing director in the crisis:

  • – In the case of payments to the social security funds within the 3-week period, an explicit and unambiguous repayment provision should be made that the payments should be used to settle the employee shares currently due or becoming due. If there is no such repayment determination, the benefits are initially offset against older arrears.
  • – It is even better to create provisions in good time, e.g. in a liquidity plan

9. Self-denunciation and status assessment procedures

According to § 266a VI StGB, punishment may be waived if the employer notifies the responsible collection agency in writing of the amount of the withheld contributions at the latest on the due date or immediately thereafter and explains the reasons for the non-payment.

The scope of this provision is very limited. The possibilities for the correction after § 266a Abs. 6 StGB stand in particular far behind those of a fiscal self-disclosure (§ 371 AO).

In those cases in which a potential false self-employment problem is to be proactively corrected, there is, however, the possibility of a status determination procedure pursuant to § 7a Abs. 1 Satz 1 SGB IV. In such a procedure, the Clearing House of the German Pension Insurance will be informed of all facts that are relevant for the assessment of a possible false self-employment.

Even if such a procedure comes to the result “social security obligation”, criminal law often “both eyes are closed”. If this is successful, a status assessment procedure has at least the effect of a voluntary reporting that exempts the offender from punishment. Of course, there is no guarantee for this. A corresponding step should therefore be carefully considered in advance.

10. limitation period

Contribution claims under social insurance generally expire four years after the end of the calendar year in which they became due. If the conditions for criminal liability according to § 266a StGB are met, the limitation period is extended to 30 years.

Due to the links between the criminal and social security statutes of limitations, some events can be traced back very far in time.

11. consequences of a conviction

If a conviction is handed down for evasion of social security contributions, there is a risk of non-criminal secondary consequences.

Of particular practical relevance is the prohibition to act as managing director of a GmbH (§ 6 Abs. 2 S. 2 Nr. 3e GmbHG). This so-called register block occurs already with a conviction to one year (!) imprisonment (also on probation).