Employment and social security law risks often arise not from isolated errors, but from unclear responsibilities, evolved processes and a lack of coordination between HR, payroll, specialist departments and external service providers. The consequences range from significant back payments to personal liability risks for managing directors and other responsible corporate bodies.
The Employment and Social Security Law Health Check creates transparency, prioritizes risks and supports companies in structuring their organization in a legally compliant and audit-proof manner.
What is an Employment and Social Security Law Health Check about?
Employment and social security law are among the areas associated with high financial and personal liability risks. Errors usually have retroactive effects, affect large groups of individuals and are systematically uncovered during audits.
Key focus areas include, among others:
- Use of external personnel (false self-employment, temporary agency work)
- Compensation models, variable components and benefits
- Cross-border activities, secondments and workation models
- Unclear roles and responsibilities between HR, payroll, specialist departments and management
The Health Check is a structured, risk-oriented assessment of all employment and social security law–relevant processes and decision-making structures – practical, efficient and designed to serve as a starting point for further measures.
Why is a Health Check in this area particularly relevant?
Liability risks not only for the company, but also for executive bodies
Violations of social security obligations can result in substantial back payments. Under certain conditions, managing directors, board members and other responsible individuals may also be personally liable – particularly in cases of organizational deficiencies or failure to remit contributions.
Increased detection rates through data- and AI-driven audits
Audits conducted by the German Pension Insurance are increasingly digitalized. AI-supported data analyses enable irregularities to be identified more quickly and reviewed in a targeted manner. Inconsistencies relating to compensation components, the use of external personnel or status issues are therefore much more likely to be identified at an early stage.
Complex legal requirements meet operational reality
Legal requirements are only effective if they are properly implemented in day-to-day operations. The Health Check therefore deliberately takes actual workflows and practices within the company into account.
How does an Employment and Social Security Law Health Check work?
The Health Check follows a clearly structured approach:
1. Kick-off and identification of relevant risk areas
Joint identification of relevant topics, such as the use of external personnel or compensation systems.
2. Collection and analysis of documentation and actual practices
Review of contracts, guidelines, payroll logic and typical scenarios, compared with actual implementation.
3. Process analysis of relevant workflows
Identification of deviations, inconsistencies and potential risks – particularly in historically evolved processes.
4. Assessment of organization, responsibilities and interfaces
Analysis of responsibilities, decision-making paths and interfaces between HR, payroll, tax departments and specialist units.
5. Results, prioritization and recommendations for action
Clear presentation of risks, their impact and – where required – concrete, prioritized measures.
Employment and Social Security Law as part of a combined Health Check
Many risks can only be managed sustainably if employment law, wage tax, social security and VAT aspects are assessed together. This is particularly true for the use of external personnel, compensation structures and benefits, where isolated assessments are often insufficient.
A combined Health Check enables:
- a holistic assessment of risks
- consistent processes and evaluation standards
- reduced internal coordination efforts
- increased legal certainty for companies and corporate bodies
Your benefits at a glance
- Transparency regarding key liability and audit risks
- Reduction of personal liability risks
- Early identification of discrepancies between tax law and social security law
- Better preparation for digitalized DRV audits
- A solid foundation for sustainable compliance structures
Outlook on upcoming Health Checks
With Part 4, we conclude the first Health Check series, which examines key tax, customs, employment and social security law risk areas. The series highlights the added value of an interdisciplinary approach with closely coordinated, cross-functional expert teams.
Due to the strong response, the series will be continued, including topics such as:
- Contract management & legal compliance management
- Data protection
- Transfer pricing
- International tax law
- Insurance tax
- Health Checks in the public sector
- Digitalization
Read also
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Katharina Lehner Katharina Lehner works as a lawyer and tax adviser on VAT at our Munich office. She has more than 15 years of experience in advising clients of all sizes on national and international VAT issues.View Profile -
Dr Laura Krings Laura is Partner and head of the labour and social security law department in the Legal service line.View Profile