“I’ve got this great full-time job offer in Germany, but they want to hire me as a freelancer.”
This isn’t always ill-intentioned, but when your company offers to hire you in Germany as a full-timer but wants you to write them invoices as a freelancer instead of employing you, they might not have your best interests at heart. Or they might just have no clue about how employment law in Germany works. In any case, it might cause some serious problems for them and for you later down the track.
What is Scheinselbstständigkeit?
Scheinselbstständigkeit (pseudo-self-employment) or arbeitnehmerähnliche Selbstständigkeit (employee-like self-employment) refers to a working relationship between two parties – namely, the working relationship between you, a “freelancer”, and your client, in which you are officially freelance but you work more like an employee would. The relationship might be considered “Scheinselbstständigkeit” or “arbeitnehmerähnlich” if you fulfil the first two, plus possibly some of the other conditions listed below.
Signs you might be “Scheinselbstständig”
- You are a sole-trading self-employed person (either you’re a freelancer or you have a “Gewerbe”) AND
- you only have one client over a long period of time, e.g. longer than a year or
- you are dependent on one client for more than 83.3% of your income.
Other signs (these can be taken into consideration when looking at the bigger picture):
- you are working primarily in the offices of one client
- you are not paying any statutory social contributions, e.g. you are privately health-insured
- your client determines your working hours
- you wear a uniform
- you have business cards with your name and your client’s logo on them
- you have an email address within your client’s company e.g. kathleen@myclient.com
- you attend staff meetings
- your client employs people to perform similar tasks to you
- you have access to administrative documents or inner workings that a company normally wouldn’t give a freelancer
What could happen?
It could be that nothing ever happens. Or, if you are considered “scheinselbstständig” or “arbeitnehmerähnlich” by definition of the law, the statutory pension scheme in Germany (Deutsche Rentenversicherung, DRV for short) can demand that you pay your pension contributions and/or your social contributions retroactively for however long you were in the working relationship in question (up to 5 years retroactively). This would be 18.9% of your income, or you’d pay half and your employer would pay half. Ouch. Additionally, they could chase your employer up to backpay your social contributions too. They might make your employer employ you. Not only is a lot of money at stake here, you can probably also say goodbye to your nice working relationship with your client, upon which you have been more than 83% dependent.
But my client is overseas.
It’s true that the DRV can’t/won’t chase up an overseas client for social contributions but they could still classify you as an “arbeitnehmerähnliche Selbstständiger” and demand that you pay the German pension contributions. They do however look at other factors before giving you this label, for example, do you need a degree to perform the type of work you’re doing for the client? Determining that you are arbeitnehmerähnlich selbstständig is more likely if you do work that requires a qualification.
Keep calm and carry on.
Keep in mind that it’s unlikely you’ll ever get contacted by the DRV and labelled as “scheinselbstständig” or “arbeitnehmerähnlich selbstständig” in the first place unless you make a point of contacting the DRV yourself (e.g. for some other reason), or if someone decides to rat on you or your employer.
How to do things by the book
Here are some ways you can make sure you and your employer are in the clear.
- Find another client and earn at least 17.8% of your income from them.
- Make sure the contract you sign with your employer looks like a freelance contract, e.g.
- the client doesn’t determine your working hours
- you can accept or turn down work as you please
- the client doesn’t have to consent to you working for other clients etc.
- Hire an employee. The Scheinselbstständigkeit classification only applies to sole trader freelancers, so having an employee will fix this.
- Apply for an exemption from paying into the DRV for the first 3 years within 3 months of starting your work activity. Keep in mind though that since you have to make contact with the DRV to do this, you will have to pay into the pension if you continue to find yourself in this employee-like freelance relationship with your client three years later.
- Negotiate with your employer to employ you instead of hiring you as a freelancer.
Also keep in mind that this working relationship might also affect the type of work permit you need and whether or not it’s granted. To find out more about that, book a Skype coaching with me.
Hey! You have a calculation error here: “Find another client and earn at least 27.8% of your income from them” — if the threshold for the “true” freelancing is 82% from one client, the other client(s) should supply 18%, not 28.
Indeed! Thanks Daria, I’ve fixed it.
This is extremly helpful Daria. Thankyou.
Where are you based? Europe or the states?
Thanks in advance.
Laura
“Keep in mind that it’s unlikely you’ll ever get contacted by the DRV and labelled as “scheinselbstständig” or “arbeitnehmerähnlich selbstständig” in the first place unless you make a point of contacting the DRV yourself (e.g. for some other reason), or if someone decides to rat on you or your employer.”
How would you define contacting them? Like filling out forms or having an appointment with them, or do you think just scheduling an appointment would be enough?
I think filling out forms and having an appointment with them is a definite contact. Re: scheduling an appointment with them, well, I’m not sure. Were you asked to give them your Versicherungsnr. when you booked the appointment? I really can’t say whether this would trigger any sort of audit process. I doubt it. –Kathleen
What would happen if organization is opted for kurzerbeit and can’t offer full time employment but hire you as a freelancer. Will that work or it is considered illegal?
It would be OK in the short-term (e.g. for up to a year), but might be problematic beyond that.
Thanks for great info. What if I register my freelancer company in Estonia as e-residents program. I know I still need to pay tax in Germany as I will be resident here. But then would this solve the “Scheinselbständigkeit”?
What about if you do freelancer job next to your full employment job? Do I still need to have 2 clients as freelancer?
Hi Ale – I’m not sure about your first question, to be honest. I looked into e-residency a while back for my own interest, but determined that if I was resident in Germany and running the business exclusively in Germany, there was no benefit to having an E-residence in Estonia because it would be hard to convince the German tax authorities that the business was not simply a German one and shouldn’t have a German legal form. The Scheinselbstständigkeit problem is all about your social contributions. So some solutions: pay voluntarily into the statutory pension. Get a part-time or full-time employment contract and make sure that the job brings in more than 50% of your income (to answer your second question: if your freelance work is not your main occupation and you’re paying into the pension due to employment, then no, it won’t be necessary to have 2 clients as a freelancer). Hire a part-timer and pay THEIR contributions.
Great info! The only things I am not sure is this applied to non-residents also? Say, I am a resident in another EU country and living there, am I/company reliable for false self-employment? Thanks!
If you are a resident of another country for tax purposes and therefore don’t have to pay social contributions in Germany, then this is a non-issue for you as a self-employed person.
Hi Kathleen,
This was so helpful. My biggest concern is whether I must contribute to the state pension in the first place? I am a freelancer who has had one key client for more than a year, making up almost all of my income, but I am part-time and actively looking for other clients, just with little luck. I just spiral with so much information and other blogs that I just don’t know what the correct answer is. Do I need to contribute to the state pension and should I be concerned about this pseudo-self-employment; knowing that I tick many of the above but that is not the intention behind it?
Technically yes, if you work for one client “regularly” (and if it’s been more than a year, it does look that way), you must pay 18% (roughly) of your profit into the pension. Having said that, the pension fund (DRV) is not going to actively chase you about this – if you have never made any contact with them, they have no idea what you’re doing and may never find out, so I wouldn’t lose sleep over it unless you think someone is holding a weird bureaucratic grudge against you and might dob you in. But in the meantime, do try to find another client or get a part-time employment contract that pays enough to cover your public health insurance and pension, and pays more than your freelance earnings. Or hire someone? (Long shot!) OR…. if your key client is in Germany, ask them to employ you. If they won’t, you could always dob THEM in. It’s usually more strife for the company than it is for the freelancer.
oh dear that shows a lack of understanding how german authorities have to operate. When you get self employed and still want to contribute to the public pension system you are being asked in the formular who is your contractor and if you have more than one. Then the “Finanzamt” will have a look when you declare the income for the preceding year. Most important however if the authorities are defining. you Freelancer position as an employment they will not come to you for the social security contribution but. the “Auftraggeber”. He is then obliged to pay the full 40% social security contributions and there is no duty for the Freelance to even pay him the employee contributions. In addition the employee!! (because this is what the freelance is and always has been) is entitled to paid holiday, 6 weeks sick pay and and. So stay away from the idea of a bogus self employment as it is not only anti social behaviour but also illegal and will be exposed sooner or later.
Hi,
First of all, thanks a lot for the valuable information.
I started working as a freelancer about a year ago as a make-up artist/hair stylist, but the income I earned so far is not so high (less than 1900 Euro for this year (1.1.2022-11.9.2022)). The possible issue here is that I have so far worked with one client only. Would it be still possible for my case to be considered as “Scheinselbstständigkeit”?
My client is a bit worried in this sense, and she would like me to provide a confirmation from the “Steuerberater” so that my case should be legally clean. What would you recommend me to do?
Thanks a lot in advance for your reply.
I doubt Scheinselbstständigkeit is going to be an issue for you or your client, because a) if you are obligated, you are only obligated to contribute to the pension once your profit exceeds a certain amount per calendar year, and I’m fairly sure it’s around 4,000 EUR a year, b) working for one client for under 1 year is not yet working “regularly” for one client just yet and c) the pension system is not going to harrass an employer over an amount of 1900 EUR profit per year – that’s not enough to justify any sort of employment contract. But do talk to a tax advisor to be sure.