Where the obligation comes from — the Posted Workers Act, not membership
The key is the German Posted Workers Act (Arbeitnehmer-Entsendegesetz). Under sec. 3 sentence 1 no. 1 AEntG, the generally binding collective agreements of the construction industry — including the VTV, the agreement on the social fund procedure — extend to employers based abroad and their workers employed in Germany. Sec. 8(1) AEntG obliges an employer with its seat in Germany or abroad to pay contributions to the joint institution of the collective bargaining parties, which is SOKA-BAU. Not belonging to any German employers’ association and never having signed anything changes nothing — if the company performs works covered by the VTV in Germany, the contributions are owed by operation of law. The Court of Justice of the EU confirmed that the tightened posting rules comply with EU law, dismissing Poland’s action (judgment of 8 December 2020, C-626/18).
Whether a business falls under the VTV at all — decided by the majority of working time spent on construction activities, with ancillary activities counted in — is covered in detail in our article on who falls under SOKA-Bau. Here we focus on the posting company’s situation.
The A1 certificate does not shield you — two separate systems
This is the most common and most expensive misunderstanding. The A1 certificate, issued under art. 12(1) of Regulation (EC) No 883/2004, determines only which country’s social security system applies to the posted worker. With a proper posting, pension, health, accident and unemployment contributions stay in the home country — and that is where the function of the A1 ends.
The holiday fund contribution, however, is not a social security contribution. It is a collectively agreed condition of employment, listed expressly in sec. 5 sentence 1 no. 3 AEntG as the collection of contributions and the granting of holiday-related benefits by a joint institution of the collective bargaining parties. The German customs administration puts it plainly: holiday fund contributions do not constitute social security contributions. That is why the A1 simply does not touch this obligation. The only way for a foreign employer to be released from the holiday fund is to show that it pays contributions to a comparable holiday institution in its home country — a mechanism accepted by the CJEU in Finalarte (C-49/98). Poland, for example, runs no such holiday fund for construction, so Polish posting companies pay into ULAK.
In practice: carry the A1 for site inspections, because it protects you from German social insurance contributions. It does not switch off the SOKA-BAU obligation.
Which works pull you into the system — from demolition to awnings
The notion of construction activities is broad. A business carrying out demolition and wrecking works was held to be a construction business and ordered to pay contributions despite never signing any agreement (BAG 3.7.2019, 10 AZR 498/17). Even repairs and servicing of windows in buildings and the mounting of awnings and insect screens are construction activities — even if performed exclusively with the materials, tools and methods of the joinery or glazing trade (BAG 14.7.2021, 10 AZR 135/19). Installing prefabricated windows and doors bought from manufacturers pulls a business in as well. That is a warning for companies doing demolition, drywall, window installation, thermal insulation and finishing works.
Photovoltaics and “dual” activities — a defence is possible
The limits of the system are well illustrated by the BAG judgment of 27 April 2022 (10 AZR 263/19) on the installation of rooftop photovoltaic systems. Mounting and installing PV systems is construction work on the one hand and typical work of the electrical installation trade on the other — so-called “Sowohl-als-auch-Tätigkeiten”, activities belonging both to construction and to an exempted trade. What decides is who gives those activities their character. In the case decided, all works were supervised by two master electricians — the business stayed outside the VTV and the fund lost its claim for 102,423.13 euros. The BAG also prohibited the artificial splitting of combined work steps: the mounting of the modules must not be assessed in isolation from the cabling carried out in parallel under the VDE standards.
In the BAG’s own words: „Die Abgrenzung richtet sich insbesondere danach, ob die »Sowohl-als-auch-Tätigkeiten« von Fachleuten des ausgenommenen Gewerks angeleitet oder verrichtet werden. Werden sie von Fachleuten eines Baugewerbes oder von ungelernten Arbeitskräften angeleitet bzw. durchgeführt, ist regelmäßig eine Ausnahme vom Geltungsbereich der VTV abzulehnen” (10 AZR 263/19, para. 34). In English: the demarcation depends above all on whether the “dual” activities are directed or performed by specialists of the exempted trade. Where construction specialists or unskilled workers direct them, the exemption is regularly denied — and the business falls under the VTV. For companies installing photovoltaics, air conditioning or other building systems, the structure of qualifications and supervision — and its documentation — is decisive.
What a posting company pays — 14.7% and the holiday fund only
An important and little-known distinction: a posting company takes part only in the holiday scheme and pays only the holiday contribution. Since 1 July 2026 it amounts to 14.7% of the gross wage bill (previously 15.1%). The contribution is an employer cost, is not deducted from the worker’s pay, and is due monthly by the 28th of the following month.
For comparison, the full domestic employer contribution since 1 July 2026: West 19.8% (14.7 holiday + 1.9 training + 3.2 supplementary pension), East 18.3% (14.7 + 1.9 + 1.7), with higher rates in Berlin due to an additional component. Rates change with new versions of the VTV — always verify the current figure for the period in which the work is performed.
The training levy is financed by all domestic employers with blue-collar workers — including those who train no apprentices themselves. It is a solidarity model: everyone pays into a common pot and training businesses recover a large part of their costs from it. A posting company does not pay it separately. A one-person business without any employees does not fall under the VTV at all — the former minimum levy of roughly 900 euros per year was abolished after the BAG decision of 1 August 2017 (9 AZB 45/17) and the fund refunded the amounts paid. Note: hiring a single worker or posting employees to Germany brings you into the system.
Registration, monthly reports — and criminal risk when underreporting
A posting company has two independent notification duties. The first is the written notification of the posting to the customs administration under sec. 18 AEntG — in German, before each service begins, with the workers’ details, the period and the site. The second is a separate registration with SOKA-BAU through its international service, after which the company receives an employer number and access to the customer portal for the monthly wage reports. The customs notification does not replace the registration with the fund — these are two parallel tracks.
The monthly reports must be truthful and complete. The Federal Court of Justice upheld the conviction of a businessman who for almost three years underreported gross wage totals and paid correspondingly reduced contributions: each such report is fraud (sec. 263 of the Criminal Code) to the detriment of the fund, and the electronic form changes nothing (BGH 23.12.2020, 1 StR 310/20). The damage is the uncollected contributions, regardless of any later refunds. In that case the aggregate sentence — alongside charges of withholding social security contributions and tax evasion — was four years and seven months’ imprisonment. Underreporting is not a saving but a personal criminal risk for the person running the company.
The general contractor is liable like a surety (sec. 14 AEntG)
Sec. 14 AEntG makes the principal liable for its subcontractor’s obligations like a surety who has waived the defence of prior recourse. The liability covers the net minimum wage and the SOKA-BAU contributions of the subcontractor and all further subcontractors, essentially regardless of fault. If the subcontractor does not pay, the fund can turn directly to the general contractor. The liability does not, however, extend to a building owner commissioning works for its own purposes, including commercial ones (BAG 16.10.2019, 5 AZR 241/18) — it targets the chain of contractors, not the party ordering the building.
The risk is managed with the right documents from the subcontractor — and here a terminological mix-up circulates, because two documents from two different institutions are involved. The Freistellungsbescheinigung under sec. 48b of the Income Tax Act is a tax document from the tax office: without it, the principal of construction services must withhold 15% of the remuneration as construction withholding tax. For Polish businesses the competence is centralised by the first letter of the company name: A–G Finanzamt Hameln-Holzminden, H–Ł Oranienburg, M–R Cottbus, S–Ż Nördlingen. SOKA-BAU issues no “Freistellungsbescheinigung” at all. From the fund you obtain a certificate of proper participation in the fund procedure (formerly Unbedenklichkeitsbescheinigung) and — as the real limitation of the sec. 14 AEntG liability — the Enthaftungsbescheinigung, ordered free of charge through the fund’s portal. Vetting a subcontractor at the start is far cheaper than paying its debts later.
Solo self-employed subcontractors — what the model really achieves
SOKA-BAU contributions are calculated from the gross wages of your own workers. Invoices of a genuinely independent subcontractor do not enter that base — in this narrow sense, properly structured subcontracting indeed generates no contributions on the principal’s side. The subcontractor is then responsible for its own participation in the system, and a one-person business without employees does not fall under the VTV at all.
That is where the good news ends. First, for the contributions of a subcontractor employing workers the principal is liable like a surety anyway (sec. 14 AEntG). Second — and more dangerous — if the “subcontractor” turns out to be an employee in reality, its invoices are treated as wages: the fund adds them retroactively to the wage bill and claims contributions, the German pension insurance assesses social security contributions with the net amounts grossed up, and criminal exposure under sec. 266a of the Criminal Code comes on top. Before the LSG Hessen (26.1.2023, L 8 BA 51/20) a written subcontractor agreement saved nothing — the contract was not performed like one between businesses, and the total claim came to 103,624.46 euros. The subcontractor model does not remove the risk, it shifts it — and doubles it where the self-employment is bogus.
The fund is not an authority and issues no administrative decisions — it pursues civil claims, drawing its findings from customs inspections on sites, from pension insurance audits and from its own reviews and reports. What is examined is how the cooperation actually worked, not the paperwork. Pointing towards hidden employment: working under the principal’s instructions as to time, place and manner, working in its crew next to its employees, no equipment, capital or premises of one’s own, a single principal, hourly billing instead of payment for a defined work. Pointing towards genuine independence: real entrepreneurial risk, own tools and premises, several principals, own pricing and advertising, a defined work with acceptance and warranty, invoices to different customers. Whoever wants certainty in advance can apply for a status determination to the clearing office of the German pension insurance (sec. 7a SGB IV) — the procedure is free and even a prognosis decision before the cooperation starts is available (a temporary instrument, in force until 30 June 2027).
Retroactive claims — the SokaSiG and the limitation rules of sec. 21 VTV
In 2016 the BAG held the earlier declarations of general applicability of the VTV (2008–2014) invalid (10 ABR 33/15 among others). The legislator responded with the SokaSiG, which ordered the retroactive application of the VTV, and its constitutionality was confirmed by the BAG (20.11.2018, 10 AZR 121/18) and the Federal Constitutional Court (11.8.2020, 1 BvR 2654/17). The line is settled — for example, on 24 September 2019 the BAG (10 AZR 531/18) awarded the fund 119,039.51 euros in contributions for 2008–2011 precisely on the basis of the SokaSiG, despite the invalidity of the declarations.
The limits are set by sec. 21 VTV: the fund’s claims lapse and become time-barred, as a rule, after three years, with the clock starting under sec. 199 of the Civil Code. The often-quoted “four years” applies only to claims that fell due by the end of 2014. The fund’s application for a judicial payment order stops the clock — the mere passage of the dispute does not.
Letters, payment order, default judgment — how the fund enforces
First come the letters: a request to register and report, an assessment of contributions (where reports are missing — from estimated figures, for example average construction wages) and payment demands. Without a reaction the case goes to the labour court — often as a judicial payment order (Mahnbescheid), against which the objection must be filed within one week of service (sec. 46a ArbGG), or directly as a claim. Against employers seated abroad, sec. 15 AEntG expressly allows the fund to sue before a German labour court. Further inactivity ends in a default judgment, against which the objection is again available only within a one-week cut-off period (sec. 59 ArbGG) — after that comes enforcement. Both routes show up in the case law: in the photovoltaics case the fund started with two payment orders, in the SokaSiG case a default judgment came first. The one-week deadlines are merciless and all correspondence arrives in German — letters from Wiesbaden must not be put aside.
The other side of the system — refunds from the holiday fund
Contributions paid into the holiday fund are not lost. An employer who has paid holiday remuneration to a worker recovers the corresponding amounts from ULAK. Foreign companies often fail to claim because of the language and paperwork barrier — and leave their own money in the fund. The mechanics of the refunds are described in our article on the SOKA-BAU system and refunds.
A demand from SOKA-BAU — first steps
Do not put the letter aside — the objection against a payment order or a default judgment has a one-week deadline. Check the business scope: does the company really spend the majority of working time on works covered by the VTV, does an exemption for an excluded trade apply, and who supervised any “dual” activities. Examine the period claimed and the limitation rules of sec. 21 VTV. Check the amounts and their breakdown by month, because estimates based on average wages are rebutted with real payroll data. Assess the bogus self-employment risk if you engaged solo subcontractors. Collect the records: contracts, working-time records under sec. 19 AEntG, A1 certificates, fund certificates and the subcontractors’ Freistellungsbescheinigungen, plus the correspondence. And respond within the deadlines — inactivity ends in a default judgment and enforcement.
Frequently asked questions
Does the A1 certificate exempt us from SOKA-BAU contributions?
No. The A1 determines only the applicable social security system — those contributions stay in the home country. The holiday fund is a separate, collectively agreed system based on the AEntG and the A1 does not switch it off.
How much does a posting company pay to SOKA-BAU?
A posting company pays only the holiday contribution — 14.7% of the gross wage bill (as of 1 July 2026), by the 28th of the following month. It pays neither the training levy nor the supplementary pension contribution.
Can we avoid SOKA-BAU by using solo self-employed subcontractors?
Invoices of a genuinely independent subcontractor do not enter the contribution base, but the principal is liable for the subcontractor’s contributions like a surety under sec. 14 AEntG, and where the self-employment is bogus the fund and the pension insurance assess contributions retroactively on those invoices.
Is a general contractor liable for a subcontractor’s contributions?
Yes, like a surety without the defence of prior recourse — through the whole subcontracting chain. The liability does not extend to a building owner commissioning works for its own purposes.
How do we get a Freistellungsbescheinigung from SOKA-BAU?
SOKA-BAU issues no such document. The Freistellungsbescheinigung under sec. 48b of the Income Tax Act is a tax document from the tax office, releasing from the 15% construction withholding tax. From the fund you obtain the participation certificate and the Enthaftungsbescheinigung.
Does installing photovoltaics in Germany fall under SOKA-BAU?
It depends on the character of the business. PV installation is both construction and electrical installation work. Where specialists of the electrical trade perform or supervise the works, the business can stay outside the VTV. Without such supervision the contribution risk is high.
Does SOKA-BAU sue immediately?
No. Letters and assessments come first. Without a reaction the case goes to the labour court — often as a payment order with a one-week objection deadline, and continued inactivity ends in a default judgment.
This overview draws on the judgments of the BAG of 27.4.2022 (10 AZR 263/19), 14.7.2021 (10 AZR 135/19), 24.9.2019 (10 AZR 531/18), 16.10.2019 (5 AZR 241/18), 3.7.2019 (10 AZR 498/17), 20.11.2018 (10 AZR 121/18) and 1.8.2017 (9 AZB 45/17), the order of the Federal Constitutional Court of 11.8.2020 (1 BvR 2654/17), the order of the BGH of 23.12.2020 (1 StR 310/20), the judgment of the LSG Hessen of 26.1.2023 (L 8 BA 51/20), the CJEU judgments C-626/18 and C-49/98, and secs. 3, 5, 8, 14, 15, 18, 19 AEntG, secs. 46a, 59 ArbGG, secs. 7, 7a SGB IV, sec. 48b EStG, secs. 263, 266a StGB and sec. 21 VTV. Rates per SOKA-BAU as of 1 July 2026 — verify for the period of the work. This article is for information purposes and does not replace legal advice in an individual case.