For your self-employment, it is important that you do not come under suspicion of being a “bogus self-employed” worker. Bogus self-employment is prohibited because it is a way to circumvent social security obligations.
Don’t accept any tempting offers—such as one from your current employer—unless you truly and seriously want to become self-employed.
If you have even the slightest doubt, be sure to seek expert advice! Otherwise, the consequences could be costly for you—and especially for your customers.
Therefore, please check before you become self-employed to see if any of the criteria in the following list apply to you.
The following working conditions, among others, may serve as evidence of bogus self-employment:
- They work primarily for one client
- They work under supervision
- They do not operate in a business-like manner
- Other employees at the client company work as salaried employees
- You do not have any employees of your own who are subject to social security contributions
No single criterion is decisive on its own, but you should examine the matter very carefully and ask questions. “Doing nothing and waiting to see what happens” is not an option here—liability applies retroactively for a long period, at least for your client.
There are exceptions to every rule, or reasons why a situation might not constitute bogus self-employment: for example, many freelancers have no employees and work for individual clients. If they do this only temporarily and on specific projects, and are actively seeking other clients, everything is fine.
Please be especially careful when performing work for a client for whom you were previously employed. In such cases, there is a strong suspicion of bogus self-employment.
Of course, that’s not always the case. Perhaps you simply realized that a specific aspect of your work was in high demand among many potential clients, so you started your own business, and your former employer is now just one of several clients.
But if your former employer is now your only client, and you are also doing essentially the same work as before at the same location—under their direction and without the freedom to manage your own time—you are guilty of sham self-employment and, consequently, of working off the books. Not only you, but above all your client is liable for the unpaid social security contributions.
So check carefully and provide evidence that you do not fall under the category of “sham self-employment.” Seek advice from the tax office, the Employment Agency, and the German Pension Insurance Fund. Ask them to provide their assessment in writing. By clarifying your account status, you can be sure that you are not subject to pension insurance contributions.
Also: Relying on a single customer is always a bad idea. In your own best interest, make sure you don’t become dependent on a single customer by working to build a base of several good customers.
