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Germany and Poland compete to fill labour gaps

Already desperately short of workers, Polish businesses are worried that hundreds of thousands of Ukrainians on whom they have come to rely may be tempted by higher wages further west as neighbouring Germany opens its doors.

Germany and Poland compete to fill labour gaps
A new draft legislation aims to attact skilled vocational workers from abroad. Photo: DPA

“The panic is affecting mainly businesses in the farming and construction sectors relying on Ukrainian workers,” Krzysztof Inglot, head of the Personnel Service employment agency, told AFP.

“People are often illegally employed in these sectors and these workers will go to Germany,” said Inglot, whose agency recruited 9,000 Ukrainians on behalf of Polish employers.

“But for those who are legally employed in Poland, there will be less incentive to move given the higher cost of living in Germany,” he added.

With many working for a few months and then going home, it is difficult to pin down exactly how many Ukrainians work in Poland, but cautious estimates suggest more than a million.

They fill a yawning labour gap that emerged when some two million Poles sought better-paid jobs in western Europe, mainly Britain and Germany, after their country joined the EU in 2004.

Poland's Union of Entrepreneurs and Employers (ZPP) first sounded the alarm about a possible fresh labour exodus in November when it got wind of German moves to open the job market of the EU's largest economy to non-EU nationals.

SEE ALSO: 'Historic Day' as Germany takes step forward in relaxing rules for foreign workers

Eagerly anticipated by German business groups, the draft legislation aims to attract from abroad skilled vocational workers with German language skills and promises them eased visa procedures and reduced red tape.

Those looking jobs such as cooks, metallurgy workers or IT technicians would be allowed to come for six months to try and find employment, provided they can financially support themselves.

The Bundestag is expected to consider the legislation later this year.

Official statistics show that around 140,000 Ukrainians currently work in Germany, although the real number is likely higher as those who have obtained Polish visas can cross into Germany, where salaries can be up to three times higher depending on the type of job.

Worst-case scenario

With their workforces ageing, Poland and Germany are competing to fill labour gaps experts believe are bound to grow in the coming decades.

Poland has experienced expansion each year since it shed communism in 1989 and is one of the EU's fastest growing economies.

While its right-wing PiS government forecasts a 3.8 percent growth in 2018, international institutions like the OECD are more bullish, predicting 5.2 percent but warn that a labour crunch could slow that to 3.3 percent by 2020.

But according to a worst-case scenario set forth by Polish employers, Poland's GDP could decline by an estimated 1.6 percent should half a million Ukrainian workers leave.

Germany currently has 1.2 million vacancies on its labour market.

The nation of 81 million people is expected to need 12 million new workers over the next three decades.

The ZPP employers association estimates Poland, which currently has a population of 38 million, will need five million migrant workers by 2050.

Citizenship

For many Ukrainians, working abroad has become a lifeline.

Living standards in Ukraine are well below that of its western neighbours and the nation is struggling with the economic and social fallout of an armed separatist conflict in its east.

Officials estimate 3.2 million of the country's 45 million population have permanent jobs abroad while seven to nine million find work on a seasonal basis.

They sent about 10 billion back home to their families last year, according to Sergei Fursa, a Ukrainian economist working for Dragon Capital investments.

Poland is a popular destination for Ukrainians seeking work abroad because it is close and has a similar culture and language.

“Poland is our first natural destination,” Igor, a bicycle mechanic who has been working in Warsaw for four years, told AFP.

“The language is easier for us than German or English, it's closer to home, we can make friends easily.”

But higher wages are tempting many to leave.

Nearly 40 percent of Ukrainians working in Poland said they are considering seeking work in Western Europe, according to a survey by the OTTO Work Force employment agency quoted by Poland's Rzeczpospolita daily.

To avert a possible exodus, the ZPP wants the government to streamline procedures for hiring foreigners, to offer them permanent residence and even a path to citizenship.

Poland is slated to extend work visas from the current six months to a full year, Inglot said, adding that he hopes for a further extension to 18 months.

Similar measures are being prepared or have already been adopted in the Czech Republic and Slovakia, two smaller EU economies that are reliant on car production and are also facing shortfalls of workers.

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WORKING IN GERMANY

7 tips for how to survive as a freelancer in Germany

Taking the decision to go it alone and freelance in Germany can be a daunting prospect. But, if you do it right, it can be an exciting and liberating path. Here are some of our top tips on how to survive.

7 tips for how to survive as a freelancer in Germany

1. Get a tax advisor

The German tax system is complicated, even for Germans. All the associated paperwork uses the Amtsprache (authority language) which is more like legalese than ‘normal’ German, and mistakes when filling out tax forms can cause you, at best, a massive headache and, at worst, a costly fine. So it’s best that you employ someone who knows what they’re doing to help you out.

That person is called a Steuerberater (tax advisor) in Germany. They will help you register with the tax office, correspond with them and submit your tax declarations.

Be aware that, in Germany, different deadlines apply for tax returns depending on whether you employ an official tax advisor or not. If you are doing the tax return on your own, the deadline for submitting your annual tax return is earlier than if you use a tax advisor’s services. 

READ ALSO: What NOT to do when you’re freelancing in Germany

When looking for a tax advisor, a top tip is to use your network to get recommendations. Ideally, you want someone who will do more than just fill in the forms for you, but who will actually advise you on how best to manage your business finances so that you can make tax savings.

2. Keep your accounting in order

The better you keep your own accounts in order, the easier it will be for your tax advisor to compile your tax declarations and therefore the cheaper their services will be.

As a freelancer, there are a lot of costs you can deduct from your taxes – from train tickets, working materials, to meals out – so it’s best to keep hold of all your receipts and to keep them in good order.

2 euros and 50 cents lie on a receipt in a beer garden. Photo: picture alliance/dpa | Peter Kneffel

In Germany, you’re obliged to keep hold of receipts for two years, in case of a tax inspection, so it’s a good idea to photocopy the type of machine-printed receipts you get from restaurants so that they stay legible for a long time.

There are also a few things to be aware of when writing your own invoices. Firstly, make sure that you include your tax number. This isn’t the 11-digit Steueridentifikationsnummer that everyone gets when registering in Germany, but the 10-digit Steuernummer you get from the Finanzamt after registering yourself as a freelancer. 

Most companies won’t pay you if you don’t have this on your invoices so make sure you include it.

You should also make sure that you number your invoices properly – ideally in ascending order so that you can easily keep track of them. You are not allowed to issue two invoices with the same number and if you do so and the finance office notices, you could face an inspection of your whole accounting system.

There are numerous great accounting software programmes you can use to help you, such as Lexoffice and Sevdesk and, even if you have to pay for them, the costs will be tax deductible!

3. Find out if you’re eligible for financial support

In Germany, there are several opportunities for freelancers to gain financial support and to cut their outgoings, and its worth finding out if you’re eligible for them.

If you’re claiming unemployment benefits under ALG 1 and are thinking about becoming a freelancer, the employment office offers a special type of financial support to help you to get your freelance business off the ground.

Called the Grundungszuschuss (“foundation grant”) the payment is a six-month grant equalling your monthly entitlement under ALG 1 plus €300 towards your insurance costs can be applied for those in receipt of this unemployment benefit.

READ ALSO: Will freelancers benefit from Germany’s €300 energy allowance?

If you are engaged in some form of artistic profession in Germany – which can include journalism to pottery – you may be entitled to membership to the Kunstlersozialkasse (artists’ social insurance).

Being a member of the KSK means you only have to pay half of your health insurance and pension contributions, and the KSK will pay the rest.

4. Work out how much you think you will earn

As with starting any business, you need to have some idea of your expected earnings from the outset.

If you’re just starting out as a freelancer, or have some freelance gigs on the side of an employment position, then it might be worth considering registering yourself as a Kleinunternehmer (“small business”).

As a Kleinunternehmer, you can currently earn up to €22.000 per year without having to charge VAT and having to submit only yearly tax declarations. 

An income tax declaration form lies on a table. Photo: picture alliance/dpa/dpa-Zentralbild | Hans-Jürgen Wiedl

Be aware that if you are registered as this kind of freelancer, you must include the following sentence in your invoices: ‘Gemäß § 19 UStG wird keine Umsatzsteuer berechnet’ which means ‘In accordance with Paragrah19 of the German VAT law, no VAT has been added to this invoice.’

READ ALSO: Everything you need to know about your German tax return in 2022

If you think you will earn more than €22.000 per year, you will need to pay Umsatzsteuer (VAT) and will have to submit tax declarations in advance and more often. Depending on how much you earn, this could be every month or every quarter. 

5. Get your insurance in order

In Germany, it’s a legal requirement to have health insurance.

If you’ve just made the move from employment to being a freelancer and want to keep the same health insurer, you should get in contact with your health insurance provider straight away to tell them about your change of circumstances. They will ask you to re-register and to tell them your projected freelance earnings for the year, so they can amend your monthly fees.

If you don’t keep your health insurer provider updated, you could continue to be charged the higher rate that you had from your previous salary.

The insurance cards of the health insurance companies DAK, AOK, Barmer and Techniker-Krankenkasse TK lie with euro notes under a stethoscope. Photo: picture alliance / dpa | Daniel Karmann

It’s not just health insurance you need to think about as a freelancer. It’s also wise to think about protecting yourself from any sort of claims that could arise as a result of any working mishaps. 

If, for example, you lose your laptop which contains confidential client information, you need to be protected against claims.

That’s why it’s good to have both Betriebshaftversicherung (business liability insurance) and Rechtschutzversicherung (legal protection insurance).

6. Plan your time wisely

All of these bureaucratic obligations take time. So it’s really important that you take account of that when planning your time. For example, planning half a day a week to deal with your invoices, filing, emails to clients, and conversations with authorities can be really beneficial when scheduling your working time. 

7. Grow your network

As a freelancer, networking is absolutely crucial to success. 

Keep an up-to-date profile on websites like LinkedIn and German equivalent XING and keep in contact with anyone you’ve ever worked with, no matter how brief the contact was. 

Having a network is not only about getting more clients, but also about building a support network in your field to exchange advice, tips and generally for your own enrichment. 

Participating in workshops related to your field, going to seminars, and meet-ups, can be great ways of broadening your network. 

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