False self-employment in Germany: criteria and consequences
In short
False self-employment (Scheinselbständigkeit) exists when someone appears self-employed but actually works like an employee: bound by instructions and integrated into the client’s organisation. What counts is actual practice, not the contract. The status determination procedure of the German pension insurance brings clarity.
A registered trade alone does not make anyone self-employed. False self-employment (Scheinselbständigkeit) means someone formally acts as a contractor but is in fact employed. The test is § 7(1) SGB IV: signs of employment are working under instructions and being integrated into the client’s organisation.
Criteria: self-employed or employed?
The pension insurance and the courts look at the overall picture of the actual work. Signs of genuine self-employment:
- several clients rather than just one,
- free choice of working hours, place and methods,
- your own prices, invoices and business risk,
- your own equipment and market presence (advertising, website),
- the right to turn down jobs or use helpers.
Fixed rosters, control by the client, hourly pay without negotiation and the same tasks as permanent staff point to employment. Practice matters more than the contract.
Consequences of false self-employment
- For clients: back payment of social security contributions (employer and employee share), usually for up to four years, up to 30 years if intentional, plus late-payment surcharges, wage-tax liability and possible criminal proceedings.
- For the contractor: retroactive status as an employee; invoices with VAT may need correcting.
Status determination procedure
If in doubt, the clearing office of the Deutsche Rentenversicherung Bund can make a binding decision under § 7a SGB IV. Contractor and client can apply jointly or separately. If the application is made within one month of starting the work, compulsory insurance may, under certain conditions, only start when the decision is announced.
Special case: employee-like self-employed
Even genuinely self-employed people can be subject to pension insurance: anyone who permanently works essentially for one client and has no employees subject to insurance is covered under § 2 sentence 1 no. 9 SGB VI.
Carers: look closely
In home care the line is particularly fine because carers often live in the household and follow fixed routines. Aim for several clients, your own prices and freedom in how you work. A properly registered business, your own liability insurance and correct invoices help – but do not replace an individual assessment.
Frequently asked questions
What is false self-employment?
When someone appears self-employed but actually works like an employee, bound by instructions and integrated into the client’s business.
Who bears the consequences?
Mainly the client, who usually has to pay social security contributions for up to four years retroactively.
How do I get clarity?
Through the status determination procedure under § 7a SGB IV at the Deutsche Rentenversicherung Bund.
Sources
- § 7 SGB IV – Beschäftigung (gesetze-im-internet.de)
- § 7a SGB IV – Statusfeststellungsverfahren (gesetze-im-internet.de)
- Statusfeststellung – Deutsche Rentenversicherung
This article is for general information only and does not replace tax or legal advice.
Starting a business in Germany?
We register your business and take care of address, mail and invoices.
Apply for your business now Send a message
