Could your agency expand into Germany?

21 June 2023

If you’re a growing recruitment business looking for international expansion opportunities then Germany may be the ideal place to start.

Jon ClarkeEarlier this week, Jon Clarke, MD at 6CATSPro hosted a webinar focusing on how to approach the German market.

Why is Germany a good expansion opportunity?

It’s a relatively untapped opportunity. Germany has experienced long-standing stability in the Eurozone not least because the market is varied – Germany still makes and builds things so fields like engineering, technology, pharma, life sciences and energy are still strong. Despite this, it has significant skills shortages and an ageing population which is fuelling demand for temporary workers.

What’s the recruitment sector like in Germany?

Relatively untapped. There are 7,000 recruitment agencies in Germany which is small compared to 33,000 in the UK. Lots of recruiters are put off by the compliance complexities but that need not be the case. You just need a good guide like 6CATS to help you do everything right!

What are the main risks for UK businesses offering services to clients in Germany?

The compliance landscape is similar to the UK with our IR35 inside/outside rules, but the German government doesn’t have an equivalent to CEST. This places a reliance on manual questionnaires which are designed to capture relevant information from clients and candidates alike – they’re subjective with nuances based on the present but equally on future intentions such as working with multiple clients to keep revenue from any one client below the threshold of 5/6th or 83%.

Critically the incorrect payment of employee and employer social security (circa 20% each) is a criminal offence and there is a retrospective liability. The German authorities take a relatively aggressive approach so any recruitment business must have a dedicated, robust and uniform process which is sponsored and reinforced by the senior team to ensure the whole business acts compliantly.

Ultimately, there will always be a financial risk associated with placement in Germany, but these risks can be mitigated by understanding the compliance landscape, putting all the correct safeguards in place and ensuring compliance standards are set and maintained from the top down in your agency.

How do you pay temporary workers in Germany?

Because of the difference in regulations in Germany, it’s not possible to use 360-degree solutions we deliver in the UK and elsewhere whereby a worker is supported in their onboarding and deployment journey for tax registration, sourcing private healthcare policies required in law, VAT and tax returns, professional insurance policies and deregistration where applicable at the end of the contract.

Where an established contractor is sourced for a role it’s common to see objections from them to being paid via an intermediary. They will be aware that there’s no reason they can’t be paid directly and will say that if the intermediary is for the benefit of the recruiter or the end hirer, they can foot the bill.

When this happens, we can still provide good protection for your agency with our one-off vetting service where we provide due diligence for your agency and an encrypted overview is delivered with guidance around the compliance and suitability of the worker’s proposed billing mechanism.

How it works

What are the crucial factors for success in Germany?

Because of the criminal liability and the relatively aggressive nature of the tax authorities in Germany, you’ll find end hirers are generally well-informed about compliance issues. This means your sales teams, and your frontline staff, must be one step ahead when it comes to talking to clients about this subject. Again, we can help to train your sales teams so they have all the information they need to work with German end clients.

How can we help?

6CATSPRO is the consultancy arm of 6CATS International and primarily supports recruitment agencies via its dedicated retained services support function for ad hoc technical international compliance queries.

Services include:

  • Retained support
  • Compliance process builds
  • Supplier audit & PSL builds
  • Overseas company incorporations
  • Contractor book audits
  • One-off vetting for direct pay contractors
  • Contract reviews
  • Compliance training & workshops


To find out more, please contact Jon to discuss your requirements or to request the webinar recording.

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