What is "Schwarzarbeit"?
Anyone who works in Germany, in principle, has to pay taxes and make social security contributions. When one doesn't, their employment is considered undeclared and illegal – and undeclared work is no small matter: both employees and employers face severe penalties if employment is not properly registered. Here you will learn how to recognise undeclared work and illegal employment, what you need to consider and where you can find help. You will also find out whether undeclared work could adversely affect your stay permit.
What do I need to know?
"Schwarzarbeit" or undeclared work means working without registration with the social security authorities. For your employment to be legal, your employer must register you for social security and at the Tax Office. Social security refers to different types of social insurance, including health insurance, nursing care insurance, accident insurance, pension insurance and unemployment insurance. Working without such registration is illegal and forbidden in Germany. So, your work is considered illegal if neither taxes nor social security contributions are deducted from your wages.
Exercising a trade or craft without notifying the authorities and proper registration is also counted as undeclared work or "Schwarzarbeit" in Germany. This applies, for example, if you work as domestic help or have an income as a craftsperson but don't issue invoices and pay taxes to the state. In illegal work, payments are often made in cash.
On the other hand, illegal employment is when you work without the required residence permit and a work permit. To be legally employed, you need a work permit; whether you get a work permit depends on your residence status. You can learn more about this topic in our chapter on the work permit. If you are not a refugee or asylum seeker, you can find helpful information on work permits for immigrants in our chapter "Immigration to Germany". Furthermore, you will learn more about admission to the labour market in an information sheet on the employment of foreign workers in Germany published by the Federal Employment Agency.
In addition, illegal employment is spoken of when companies do not pay their employees minimum wage. Since October 1, 2022, this minimum wage has been raised to €12 gross per hour. You can learn more about the minimum wage in our chapter on employment contracts under the question: "What is the minimum wage in Germany?".
To avoid illegal employment, your employer must register you for social security. If they do not do so, they will face a penalty.
For the registration, you have to provide your employer with the necessary documents, including:
- Your social security number
- Your tax number
- A health insurance certificate
- Your Address
If your employer does not ask you for these documents and information, there is a good chance they have not registered you. Another indication can be that you always get your salary paid out in cash. In Germany, wages are often transferred to your bank accounts. You can ask your employer to transfer the money to your account and send you a payslip.
If you suspect your employer has not registered you for social security, you can ask the pension insurance or your health insurance company whether you are registered. After you start work, your employer has six weeks to register you. In some sectors, the registration must take place the latest as soon as you start work – you can learn which sectors on Customs online - registration and obligations.
If you only work a few hours a week, you may be a mini-jobber - but keep in mind that employers must also register mini-jobbers. You can learn more in our Mini-job chapter.
When your employer registers you for social security, you will receive a copy of the registration.
If you are unsure whether your employment is registered, seek advice from a Fair Integration counselling centre. You can also find out whether there is a Works Council ("Betriebsrat") in your company and contact them first.
(Source: Faire Integration)
If you work illegally or without a work permit, you and your employer do not make any social security contributions for your employment. However, these contributions protect you when and if you become ill, unemployed or retire. You can only receive benefits if you have paid into these social insurances.
Having such protection is also crucial if you have an accident at work. In principle, you are then entitled to statutory accident insurance, which covers all costs incurred for treatment, rehabilitation measures or injury benefits. However, if you work illegally and suffer an accident, this statutory insurance protection does not apply to you. Even statutory health insurance does not step in to cover the costs if it is proven that you have worked illegally.
In addition, it will be much more difficult for you to protect your rights if you work illegally. For example, you have no protection against dismissal, which legal employees enjoy in certain cases under labour law. Such protection against dismissal is quite solid in Germany– it protects you from losing your job from one day to the next.
Employers also use undeclared work to circumvent the statutory minimum wage regulations, meaning you would often get paid much less if you do undeclared work. The conditions in undeclared work are often much worse than in legal employment because employers do not comply with legal requirements, such as break times.
In addition, the customs authorities can inform the immigration authorities if you work without a work permit. This could have dire consequences for your stay permit.
Important: Even if you do undeclared work and/or work without a work permit, you are entitled to your wages. If you have problems with your employer, seek advice from a Fair Integration counselling centre or your union (if you are a union member)! They can help you in case you decide to take legal action against your employer.
If you are found to be working illegally, this may also adversely affect your right to stay in Germany because the customs authorities can inform the immigration authorities. That means you may face fines and/or imprisonment, as well as expulsion or deportation. Such expulsion can mean you are not allowed to enter Germany or stay in the country for up to five years. In our "Deportation" chapter, you can find more information on deportation and where to find help.
Your employer would also face adverse consequences: they may have to pay part or all costs of your expulsion if you don't have the money.
Expulsion or deportation is a particularly harsh punishment designated for undeclared work, which applies when the case is severe, for example, in case one works illegally and also employs other people illegally. Expulsion can also result if you are proven to have committed other crimes in addition to undeclared work.
If you do not yet have a residence permit, illegal employment can result in your application being rejected. In this case, you may face expulsion.
In some cases, the Federal Employment Agency has to agree for you to receive a residence permit. If you are proven to be working illegally, the Federal Employment Agency can refuse approval.
If you have a work permit, it is usually valid for a very specific job. Your employer has to describe your job in a form before your work permit is issued, and you can start your work. You can find more information on this topic in our "Work Permit" chapter.
If you are recently promoted, i.e. given a better position, you may have to apply to the Immigration Office to change your work permit. Without an adjusted work permit, you may be considered illegal without you or your employer realising it.
A work permit change is also necessary if you change your employer.
The act to Combat Undeclared Work and illegal employment in Germany is the basis for combating undeclared Work (Schwarzarbeitsbekämpfungsgesetz or SchwarzArbG). The Federal Customs Administration ("Bundeszollverwaltung ") with the "Financial Control of Undeclared Work" unit ("Finanzkontrolle Schwarzarbeit") and the local authorities for combating undeclared work are responsible for inspecting and combating violations of this law.
What do customs authorities control?
The employees in the financial control of illegal work at customs check, among other things, whether:
- Employers have correctly registered their employees for social security (Social insurance includes health insurance, nursing care insurance, accident insurance, pension insurance and unemployment insurance),
- Social benefits, such as unemployment benefits I and “Bürgergeld”, are illegally received,
- Employment certificates or additional income certificates were issued correctly,
- Foreign citizens work without the necessary permits,
- Foreign workers are treated worse than equivalent domestic workers,
- The wage and working conditions for foreign workers who come to Germany from other EU member states and work here are fair and legal per the "Employee Posting Act" (This also includes the payment of the minimum wage according to the "minimum wage law").
- Employees who are subject to tax also pay taxes for their work (e.g. wage and sales tax).
Customs can check work conditions without prior notification or a specific reason. They can also inspect retrospectively and are supported in their inspections by a wide variety of authorities, including the tax authorities, the Federal Employment Agency (also in its function as a family benefits office), or the Federal Network Agency. These bodies constantly exchange information and share any suspicions.
What do the municipal authorities do to combat undeclared work?
The employees of the municipal authorities check whether:
- a trades person has fulfilled their obligation to report the trade or itinerant trade.
- the registration in the register of crafts is available: Anyone who practices a self-employed craft as a business must register (for specific crafts) in the register of crafts ("Handwerksrolle") – this is the directory of all self-employed craftspersons. You practice a trade that requires a licence, for example, if you work as a bricklayer, roofer or painter. You can find a list of all trades that require a licence at the Berlin Chamber of Trades (Handwerkskammer Berlin).
Employers and employees are legally obliged to participate in customs inspections. Above all, you must:
- give the necessary information,
- submit the relevant documents and
- allow customs officials to enter the employer's property and business premises.
Customs officers have the same rights and obligations as police officers. If there is an investigation, they also work closely with the public prosecutor's office, the police and the federal police. They have the power to make arrests and execute warrants.
In the case of undeclared work, both the client and the employee are punished by law. Being unaware of the rules will not protect the perpetrator – you will be punished even if you didn't know that you were working illegally.
The severity of the penalty depends on whether the undeclared work is classified as an administrative offence or a criminal one. An administrative offence is when, for example, you have not registered a trade, have not entered your craft business in the register of craftspersons despite beings obliged to do so, or have not submitted the necessary documents or submitted them past the due time. All of these cases can result in fines of up to €50,000.
If undeclared work is classified as a criminal offence, one can face higher fines or even imprisonment. This applies, for example, to contractors or employers who do not make social security contributions for undeclared workers. They face up to five years in prison or even more in severe cases. These penalties can also be imposed if they employ foreign workers without a permit or residence permit or under conditions much worse than those for German workers.
Finally, if you are caught doing undeclared work, you and your contractor can be prosecuted for tax evasion. Fines and imprisonment are also possible here. If you work as a foreign citizen without the required work permit, you can be fined up to €5,000.
If you receive “Bürgergeld” and are caught doing undeclared work, you face severe penalties. “Bürgergeld” recipients are legally obliged to report all income to the Jobcenter. The undeclared income will be (partially) offset against your “Bürgergeld”. If you did not inform the Jobcenter about it, you would be receiving social benefits by fraud. In addition, “Bürgergeld” recipients who work illegally will be considered guilty of tax evasion.
If customs can prove that you are working illegally as an “Bürgergeld” recipient, you may have to repay part or all of the “Bürgergeld” you have received. In addition, you face a fine or imprisonment of up to five years. In severe cases, this prison sentence can even be ten years.
Undeclared work can occur not only among the unemployed and bogus self-employed, but also among people who are regularly employed. You are committing a criminal offence if you work illegally in addition to your legal job. If your employer finds out about it, this can be a solid reason for terminating your employment contract without notice. In such a case, your employer can fire you because of your conduct, particularly if you have worked illegally for a competitor or have "stolen" potential customers from the company through your undeclared work. However, the specific circumstances of the individual case are essential here, meaning in such disputes, an employment court decides whether termination without notice for undeclared work is justifiable.
If you work for someone and don't get paid for it, it's not illegal employment; it's a favour. This is described in more detail in the Act to Combat undeclared Employment (Schwarzarbeitsbekämpfungsgesetz or SchwarzArbG). It states that there is no undeclared work if the work is carried out:
- by relatives,
- within the framework of neighbourhood assistance,
- by way of self-help (when carrying out a construction project) or
- provided as a courtesy.
This means that if you do voluntary work for family members, friends, neighbours or colleagues without expecting payment, it would not be considered undeclared work. Even if you get some money out of gratitude, it is not undeclared work because the activity was not designed for profit and was not carried out regularly. However, if you regularly mow the lawn for your neighbour and get money for it, it may well be considered illegal work.
Pseudo-self-employment is a particular form of undeclared work: It occurs when you officially work as self-employed but are actually only working for a single company and are not really working there independently and on your own responsibility. This means that you are only self-employed on paper, but are actually treated like an employee. In this case, the company should actually hire you regularly and pay social security contributions and income tax. Pseudo-self-employment is punishable in Germany for both clients and contractors. You can learn more about the difference between Pseudo-self-employment and genuine self-employment on the DGB website.
Undeclared work can occur in almost all fields of work. However, it appears particularly frequently in the construction, restaurants, accommodation, passenger transport, removal firms, transport, acting, forestry, building cleaning, construction and dismantling of trade fairs and exhibitions and in the meat industry. Because the control authorities often come across forms of illegal employment in these areas, the law to combat undeclared work stipulates that those employed in these sectors must always carry ID cards.
If you are unsure whether you are doing undeclared work or do not know whether your employer has registered you, don't hesitate to contact a Fair Integration counselling centre or your trade union (if you are a trade union member).
Undeclared work can endanger regular jobs: Since no taxes are paid for undeclared work, the labour force is cheaper for the employers. In addition, the state loses tax revenue through undeclared work. For the year 2021, for example, the financial control for undeclared work checked more than 48,000 employers, initiated more than 120,000 criminal proceedings and determined almost 790 million euros in tax and social security losses.
You can become a trade union member even if you do not have German citizenship. For most trade unions, however, you need a work permit that allows you to work in Germany, even if you currently do not have a job. You can learn more about trade unions in our chapter "Works Council and Unions".