• Nursing care in crisis / High open items (OPOS) represent a heavy economic burden for providers
• How do I deal with overtime bonuses for part-time employees?
• VAT exemption in assisted living: Encouraging judgement by the Münster tax court for operators of assisted living facilities

Alarm level: dark red!

Nursing care in crisis – more than 1,200 care facilities insolvent or closed since the beginning of 2024 / High open items (OPOS) represent a heavy economic burden for providers

In this article, you will find out what the causes of the “death of care homes” are and how you can protect yourself against them.

No supply without reliability – alarming figures

Private care homes and services in particular are getting into financial difficulties due to the reluctance of social welfare offices and health insurance companies. The result: the facilities’ OPOS list is getting longer and longer, receivables are not being paid and threaten the liquidity of the operators. The lack of payment behaviour on the part of the health insurance funds and the lengthy process of recognising benefits for social welfare recipients in need of care pose major challenges for the care sector throughout Germany.

According to the Verband Deutscher Alten- und Behindertenhilfe e.V. (VDAB), more than 1,200 care facilities have already become insolvent or had to close since the beginning of 2024, including one of the industry giants, the Argentum Group, with 40 homes, around 3,100 people in need of care and 2,800 employees. In 2023, a total of over 800 facilities were affected nationwide.

Delayed payments and bureaucratic hurdles

A key problem is the lack of reliability in the payment of care assistance. A lack of digitalisation, lengthy application procedures, delays in processing applications due to staff shortages, incorrect invoices, billing disputes, budget limits and budget problems at local authority providers lead to serious payment delays.

Thomas Knieling, Federal Managing Director of the VDAB, warns: “If care assistance as a social benefit is not paid out for months – in some cases even years – this opens up huge financial holes for care providers that can no longer be plugged.”

This is because care facilities have to pre-finance their services without a clear perspective on refinancing.

“Home deaths continue!”

Association President Thomas Greiner already predicted at the beginning of 2024: “The death of care homes will continue, regardless of whether they are family-run care homes, church-run social centres or high-performance care companies.”

Security of care is indeed jeopardised at all levels. It is particularly worrying that despite the growing need for care, there are fewer and fewer places available.

Other causes and challenges

In addition to payment arrears, the lack of skilled labour, rising operating costs and insufficient political support are the main causes of the crisis. This leads to enormous outstanding debts in the companies, which can add up to six- to seven-figure sums.

How do I deal with overtime pay for part-time employees?

The Federal Labour Court (BAG) addressed this question in its decision of 05.12.2024 – 8 AZR 370/20.

What was it about?

The employee works part-time as a carer to the extent of 40% of a full-time employee. According to the applicable collective labour agreement, the regular weekly working time of a full-time employee is 38.5 hours on average, excluding breaks. Overtime is subject to an overtime premium of 30%, which is generally compensated in time off, but only to the extent that overtime is worked in excess of the monthly calendar working hours of a full-time employee.

Due to this clause, the employee received neither a bonus nor a time credit for the approximately 129 hours of overtime she had worked. She argued that this regulation put her at a disadvantage – both as a part-time employee and as a woman, as the majority of part-time employees in the company were female.

The BAG awarded the plaintiff a time credit in the amount of the overtime pay as well as compensation for indirect discrimination on the basis of gender. Before doing so, the BAG referred the question of whether the collective agreement provision violated EU law to the ECJ. The ECJ found that the collective agreement provision violated both the Directive on part-time work and the Equal Treatment Directive, as significantly more women than men are affected by the provision.

The fact that discrimination on the basis of part-time work (Section 4 (1) TzBfG) or gender (Sections 1, 7 AGG) is not permitted is not new. What is new, however, is when discrimination already exists: A blanket linking of overtime bonuses to full-time work is discriminatory, according to the BAG. In terms of payment per hour, full-time and part-time employees earn the same pay. However, part-time employees must – depending on their contractual working hours – work a greater number of overtime hours without bonuses, while full-time employees receive a bonus from the very first overtime hour. The relationship between performance and consideration is disturbed in the case of part-time employees.

The BAG did not see an objective reason for the unequal treatment. In particular, the BAG does not appear to follow the argument that a physical and/or mental strain justifying the overtime bonus can only be assumed from the moment the working hours applicable to full-time employees are exceeded.

What are the consequences of this BAG decision?

The fact that overtime bonuses are only paid for hours worked in excess of the regular working hours of full-time employees was not uncommon in the past, particularly in collective labour agreements.

From now on, the same standards must be applied when calculating overtime pay for part-time employees as for full-time employees. This means that if full-time employees are granted a supplement from the first hour of overtime, part-time employees must also be granted a supplement from the first hour of overtime in relation to their individual working hours.

The decision harbours risks: On the one hand, employees can exploit the TzBfG in order to “top up” their remuneration with overtime bonuses or to gain an advantage in terms of time off – which is not just a theoretical problem. Secondly, when looking at the total remuneration, there is basically a new unequal treatment of full-time employees. Full-time employees with a 38.5-hour week and an actual weekly working time of 42 hours would receive an overtime bonus for 3.5 hours. In comparison, part-time employees with a 20-hour week would receive an overtime bonus for 22 hours with an actual weekly working time of 42 hours. A further consequence could be the abandonment of overtime pay altogether.

The decision makes it clear that the requirements for a non-discriminatory remuneration structure are increasing and currently entail more uncertainty than legal certainty. Further “potential for dispute” cannot be ruled out.

An overview

The plaintiff senior citizens’ residence operates a nursing home and seven assisted living units in the same building. It provides short-term care and full inpatient care services for people in need of care in accordance with the German Social Code XI (SGB XI). Between 2009 and 2014, only a small proportion (no more than 10%) of the occupancy days were accounted for by residents of the nursing home and assisted living who only had a recognised care level.

VAT exemption subject to conditions

The tax office refused to recognise the tax exemption in the years in dispute and argued that the services in assisted living – with the exception of letting – were generally not tax-exempt. The Münster Tax Court disagreed with this view and found that the assisted living services in the case described are generally VAT-exempt, provided they fulfil certain conditions (Münster Tax Court, 15 K 3554/18 U).

Close links with social welfare

In principle, the services must be closely linked to social welfare and social security. However, according to the court, such services would generally be provided in an assisted living centre. However, several requirements must be met for tax exemption in accordance with Section 4 No. 16 UStG.

Which benefits are tax-free?

The services that are tax-free in accordance with Section 4 No. 16 UStG include in particular

• Outpatient care
• Domestic care (shopping, cooking, cleaning, washing)
• Provision of domestic help
• Care services
• Home emergency call services

The provision of a telephone connection is not included.

Persons in need of assistance

Furthermore, the services provided as part of assisted living must be aimed at people in need of assistance.

Persons in need of assistance are those who require support and care due to physical, mental or psychological limitations. This may be due to illness, a disability or a significant restriction in their ability to cope with everyday life.

In the specific case, the operator was able to demonstrate, for example, that a care level was known in some cases, that there were significant restrictions to the musculoskeletal system that required the use of a rollator or wheelchair or that there was a persistent alcohol dependency.

Qualified facility

The facility must also be considered a qualified facility within the meaning of the law. This means that in at least 25% of cases today, the care or nursing costs are reimbursed in full or for the most part by the statutory social insurance or social welfare organisations. For residents with a care degree, it is assumed that the costs are borne by the care insurance funds as the social insurance provider. Separate recognition of the qualification is not required.

Conclusion

The decision emphasises that assisted living services, which are closely linked to social welfare, can in principle be exempt from VAT. In practice, this means that corresponding services can be exempt from VAT in the invoice.

Our tip

We will be happy to provide you with further information or should you have any practical difficulties with your tax office regarding the recognition of tax exemption.