“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. firstname.lastname@example.org
- 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 27.8% 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.