Published 25. July 2017

False Self-Employment

False Self-Employment

False Self-Employment: What can you as a freelancer do?

The amendment to Section 611a (1) of the German Civil Code (BGB) created a legal definition of the term “employee” for the first time. But unfortunately, legislators have not provided a definition of self-employment. This makes differentiating between self-employed workers, self-employed workers who are obliged to pay pension insurance and false self-employed workers difficult. Many individual cases and contentious issues will have to be clarified by case law using the current criteria. The risks of False Self-Employment are also borne by freelancers themselves. This is why it is important that every freelancer minimises the risk they potentially face by creating an active entrepreneurial presence, working independently and taking on project assignments that are not bound by specific instructions.

Recommendations for freelancers to avoid False Self-Employment:

Ideally you are a legal entity (e.g. own limited liability company) with at least one employee obliged to pay insurance (not a family member or an employee in marginal employment).
Active presence as an entrepreneur, e.g. through:

  • Own website / own business cards / own stationery (with own logo)
  • Set up a profile in project exchanges or professional networks (offer/search) (e.g. on LinkedIn or Xing)
  • Nurture and document regular contact with intermediaries and potential clients
  • Offer your know-how and expertise, not your services as a worker
  • Renegotiate your fee for each contract, as not every contract is the same. This ensures that you define new parameters from contract to contract, rather than just delivering “assembly-line” work, which will make you appear more respectable
  • Regular continued training is recommended; you should finance this yourself
  • Entrepreneurial risk:
    • In terms of remedying defects and liability – if you make a mistake, you alone will be fully liable, but this is generally easier to overcome than a reputation as a false self-employed worker
    • Use working equipment that you have acquired yourself (laptop, office, etc.)
    • (Professional) liability insurance
    • Make voluntary payments into the social security fund – it’s up to you how much money you invest and whereWhat else is important to know?
    • The assessment of the status by case law depends on the overall situation in the case at hand. What is particularly important, besides the contractual arrangement between the freelancer and client, is how the contract is actually realised. If the latter shows that the work concerns a dependent activity, and therefore False Self-Employment, it will not matter what the role is called in the contract. For this reason, Westhouse has drafted its contract templates based on the law and will continuously update these appropriately. It is also important that Westhouse observes the rules for implementation and dedicates itself to an ongoing review of compliance with regard to self-employed workers, to ensure the best possible service for our customers.

Be careful when it comes to “long-term” contracts and working “predominately” for one client, as you can quickly go down the wrong path unintentionally.

What else is important to know?

The assessment of the status by case law depends on the overall situation in the case at hand. What is particularly important, besides the contractual arrangement between the freelancer and client, is how the contract is actually realised. If the latter shows that the work concerns a dependent activity, and therefore False Self-Employment, it will not matter what the role is called in the contract. For this reason, Westhouse has drafted its contract templates based on the law and will continuously update these appropriately. It is also important that Westhouse observes the rules for implementation and dedicates itself to an ongoing review of compliance with regard to self-employed workers, to ensure the best possible service for our customers.

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