New Self-Employment Status: Germany Wants Classification to Become Predictable
- Jul 29
- 3 min read
If you engage freelancers, you are carrying a risk that only shows up years later. Where an auditor later reclassifies the engagement as dependent employment, the back payments of social security contributions hit the client above all. Germany's Federal Ministry of Labour and Social Affairs wants to dissolve that uncertainty with a third category in social security law.
1. The Starting Point: A Balancing Exercise Without Solid Ground
So far, German social security law knows only two states. Either there is dependent employment (abhängige Beschäftigung) with full liability for contributions, or genuine self-employment, in which the client owes no contributions at all. Which of the two applies follows from an overall assessment of all the circumstances. And the outcome of that assessment is hard to predict at the moment the contract is signed.
The Herrenberg ruling of the Federal Social Court (Bundessozialgericht) showed how harsh this can turn out (judgment of 28 June 2022, case no. B 12 R 3/20 R). Music teachers engaged on a fee basis by a municipal music school were held to be in dependent employment. For the education providers concerned, that meant back payments on a scale that threatened their existence. The legislator responded with Section 127 SGB IV, a transitional provision for teaching staff whose term has since been extended to 31 December 2027.
2. Four Requirements That Must All Be Met
The ministerial draft bill (Referentenentwurf) pushes a third category between the two familiar ones. Anyone who meets it counts as self-employed for social security purposes, without the overall assessment mattering any more. Four points have to be met, and all of them together.
First, the intention to work on a self-employed basis must be shared by both sides and agreed expressly. A contract in text form that speaks of freelance work or of a fee agreement (Honorarvertrag) is meant to be enough as an indication.
Second, the contractor must act entrepreneurially. He must not be personally obliged to perform, but must be free to send a substitute. On top of that, at least two of four further features are required: opportunities for profit and risks of loss, a portfolio of engagements that does not in practice consist of a single client, own business expenses, and appearing on the market in an advertising capacity. Both must be written into the contract and actually handled that way day to day.
Third, there must have been no employment relationship between the parties in the six months before the engagement started.
Fourth, the client must report the start of the activity to the pension insurance institution (Rentenversicherungsträger) within six weeks. The deadline is designed as a cut-off period. Once it expires, the new self-employment status is ruled out and classification falls back on the previous standards. For certain sectors, such as construction and building cleaning, the model is not meant to be open at all.
3. The Price: Contributions on Turnover Instead of Profit
Planning certainty does not come free. Anyone falling under the new category is subject to statutory pension insurance by operation of law, regardless of how much work is involved. The thresholds for minor employment (Geringfügigkeitsgrenzen) do not matter.
The decisive point is the assessment basis. Unlike the self-employed who are already subject to insurance, the contribution is measured not against profit but against the remuneration, that is, against turnover. Flat-rate deductions for business expenses are provided for, but they are unlikely to make up the difference. The contribution burden sits with the contractor and will regularly be higher than before.
Added to that are duties that otherwise fall on employers. The client reports when the engagement starts and when it ends, files an annual remuneration report, calculates the contribution, pays it over, and is drawn into the audits of the German Pension Insurance (Deutsche Rentenversicherung) to that extent. Whether the model is taken up in practice may turn on exactly these points: meant as a voluntary option, it could become a de facto condition if clients only conclude contracts on that basis. How things develop is open. So far the bill exists as a ministerial draft.
Not Sure Which Status You Are Working Under?
Whether an engagement counts as self-employed or as dependent employment is not decided by the heading of the contract, but by how the cooperation is actually lived out.
If you engage freelancers as a client, or if you want to know as a contractor how your own status is to be classified, I offer you a short, free initial assessment. In that conversation we clarify where your contract stands and which next steps make sense.
