Engel & Völkers, a prominent German real estate agency, is facing investigation for potential sham self-employment practices among its freelance agents, which could classify them as dependent employees. Authorities are examining compliance with social security regulations, leading to searches at 18 locations. The company asserts that its practices have previously been deemed lawful. While the investigations proceed, Engel & Völkers continues to thrive in a competitive market, reporting significant sales commissions and a robust international presence.
Investigation into Engel & Völkers: Allegations of Sham Self-Employment
Engel & Völkers, Germany’s leading real estate agency, finds itself under scrutiny by social security and law enforcement agencies due to allegations of sham self-employment among its freelance agents. Authorities suspect that individuals categorized as freelancers may actually be dependent employees. This discrepancy raises concerns since employees are required to have contributions paid toward unemployment, pension, health, and long-term care insurance, which freelancers do not need to bear.
Recently, a significant investigation unfolded as 300 agents conducted searches across 18 Engel & Völkers locations nationwide, supervised by the Bielefeld public prosecutor’s office. Customs officials, who focus on fraud and embezzlement related to social security, are leading the charge, highlighting the seriousness of these allegations. Additionally, tax investigation teams are involved, indicating potential issues with unpaid wage tax, which is applicable to employees but not freelancers. Unfortunately, detailed information remains scarce, as both customs and the public prosecutor’s office have opted to provide limited updates, contrary to their usual practices of informing the public.
Commission Structure and Company Response
Engel & Völkers representatives, including spokesperson Kirsten Best-Werbunat, maintain that the legality of their independent agents has been scrutinized in the past without any significant concerns raised. In the real estate sector, where personal relationships and trust are paramount, it is common for freelancers to handle transactions, particularly when their work is difficult to monitor due to its individualized nature. These freelancers typically receive a substantial portion of the sales commission upon successful transactions.
Amidst these investigations, Best-Werbunat reassures stakeholders that they are assessing the situation with external legal counsel to determine if any organizational changes are warranted. Meanwhile, the Bielefeld office, which employs seven staff members, is at the center of the investigation, with claims that the alleged sham self-employment instances are minimal and have occurred over a brief period. However, the Hamburg headquarters appears to downplay the seriousness of the situation, stating that the investigations are not uncommon for such allegations.
Despite the ongoing inquiry, the commercial impact on Engel & Völkers seems limited, particularly since the agency operates in a highly competitive market where trust is vital. The latest financial disclosure from 2021 reported sales commissions totaling €1.3 billion, with over 12,000 agents earning an average commission of approximately €100,000 each.
Operating on a franchise model, Engel & Völkers maintains a presence in several international markets, with a stronghold in German-speaking countries, and is expanding into regions like Greece. Founded in 1977 by Dirk Engel and later joined by Christian Völkers, the brand gained prominence in luxury real estate. Völkers sold a majority stake to the British private equity firm Permira in 2021, securing substantial dividends and financial backing for further growth.