Bureaucracy is the source of high costs at family businesses

Regulatory burden can be reduced:
Example of A1 certificate

German family companies groan under the burden of an EU bureaucracy characterised by inefficiency – owing both to European Union requirements themselves as well as their impractical handling and implementation in Germany.

One example of this is the A1 certificate. Employers must apply for this certificate when they deploy an employee temporarily in another EU country, even for just a short business journey. The aim is to document that employees are covered by the social security systems in their homelands.

This procedure considerably strains the resources of family companies, and yet it could be made much more efficient with a few simple measures. This is the conclusion of a comparative study undertaken on behalf of the Foundation for Family Businesses by the Centres for European Policy Network and Prognos AG in cooperation with the Regulatory Control Council of the state of Baden-Württemberg.

The study examined the information required when applying for such a certificate in four member countries of the EU – Germany, France, Italy and Austria – along with the economic costs to companies that result in practice. The entire research project extends to four volumes on four different regulations. Part one is dedicated to the A1 certificate.

Each country requests different information

The EU allows a certain latitude – which member states use with greater or lesser efficiency. The EU does not specify the concrete information to be provided, not even for a certificate in accordance with Article 16 of the corresponding EU regulation, which regulates exceptions, such as for longer periods of deployment. Thus, each state requires different information and – in the next step of the process – reveals a different degree of digitalisation in its application procedure. In Germany, for instance, the data that is entered cannot be stored.

Researchers carried out a practical test in 82 interviews with companies in these four countries. In Germany, the application procedure took 26 minutes for each individual application, was especially expensive (more than 10 euros), and entailed long waiting times until the certificate was issued. In addition, those responsible for personnel spend an especially long time dealing with requirements in order to be able to submit the application correctly.

Researchers recommend a uniform EU portal

The study’s authors recommend driving forward the pilot project started by the EU in 2021 to develop a digital European social security ID that would permit holders to prove their membership in the systems of their homelands. That would render the A1 certificate obsolete. In the short term, the application process should be streamlined and a EU portal for the submission of applications should be created. Until this happens, Germany should make its portal more user-friendly and ensure that information in the form for the same company and the same person need be entered once only.

Quote from Rainer Kirchdörfer, member of the Executive Board of the Foundation for Family Businesses: “The foundation is presenting a series – heretofore unknown in this form – that addresses the costs of bureaucracy. We will use concrete examples to illustrate its everyday burden on work, which consumes immense amounts of energy and resources in our family companies.”

Quote from Gisela Meister-Scheufelen, former Chair of the Regulatory Control Council of Baden-Württemberg: “I’m convinced that Germany can change this. Substantive relief for family businesses is achievable; data protection and federalism are not obstacles to this aim. We need modern processes at long last, and other countries offer examples.”

The non-profit Foundation for Family Businesses is the most important promoter of academic research regarding family businesses. It is the contact partner for politicians and the media in matters related to economic policy, legislation and taxation. Founded in 2002, the foundation is now supported by more than 500 companies that rank among the largest family businesses in Germany.