Fake Self-Employment
The flexibilization of the labor market offers numerous advantages for companies and freelancers alike, but it also brings significant legal challenges. One of the most pressing issues in Germany is the prevention of fake self-employment. In this blog post, we explore the current state of legislation, the associated problems, and how FRATCH in collaboration with PwC provides effective solutions.
The Current Legal Framework for Fake Self-Employment in Germany
The Law to Combat Fake Self-Employment has been creating uncertainty for freelancers and their clients for years. Fake self-employment occurs when an individual is formally classified as self-employed but is, in reality, integrated into the client’s organizational structure as an employee. The Social Code Book (SGB) outlines clear criteria to distinguish genuine self-employment from fake self-employment. Key indicators include:
- Defined Working Hours and Vacation Entitlement
- Integration into Fixed Business Processes and Reporting Obligations
- Work Performed Under the Client’s Instructions
- More Than 80% of Total Revenue Comes from a Single Client
- No Own Business Presence (e.g., Business Cards, Website)
- Participation in Client’s Training Programs
- Income Comparable to or Lower Than That of an Employee
- Exclusive Work for a Single Client
- Provision of Work Equipment by the Client
The more of these criteria that apply to a freelancer or self-employed professional, the more likely they are to be classified as fake self-employed. Therefore, it is essential to consider these aspects when drafting contracts and establishing working relationships to minimize legal risks.
Challenges for Companies and Freelancers
The increasing strictness of legal rulings poses significant challenges for companies. Lack of knowledge about legal requirements can lead to substantial financial penalties and reputational damage. For freelancers, fake self-employment often means the loss of social security benefits and legal claims, jeopardizing their professional security.
Companies must design clear and legally compliant contracts to mitigate risks. At the same time, they need to remain flexible to respond swiftly to market demands and efficiently deploy qualified professionals. Balancing flexibility with legal security is often difficult and requires comprehensive knowledge and effective tools.
FRATCH and PwC: A Comprehensive Solution
To address these challenges, FRATCH in collaboration with PwC Germany offers an innovative solution. PwC continuously monitors all labor and social law judgments related to fake self-employment and provides FRATCH with a comprehensive assessment tool. This tool enables companies to precisely evaluate their employment models and ensure compliance with legal requirements.
By integrating this assessment tool into the FRATCH platform, companies can quickly and efficiently verify whether their contractual conditions meet legal standards. FRATCH GPT, our AI copilot, assists in finding suitable freelancers and interim managers who are not only professionally qualified but also legally compliant.
Advantages of Collaborating with FRATCH and PwC
- Legal Security: Continuous monitoring of legal rulings by PwC ensures that companies stay up-to-date and can act proactively.
- Efficient Processes: FRATCH optimizes the sourcing process by providing matching candidates within seconds who meet legal requirements.
- Cost Efficiency: Partnering with FRATCH significantly reduces recruitment costs by avoiding unnecessary intermediary fees.
- Flexibility: Companies can swiftly respond to market changes and deploy qualified professionals without incurring legal risks.
Indicators of fake Self-Employment
Various indicators can suggest that an individual is fake self-employed. The following criteria are particularly relevant:
- Defined Working Hours and Vacation Entitlement
- Integration into Fixed Business Processes and Reporting Obligations
- Work Performed Under the Client’s Instructions
- More Than 80% of Total Revenue Comes from a Single Client
- No Own Business Presence (e.g., Business Cards, Website)
- Participation in Client’s Training Programs
- Income Comparable to or Lower Than That of an Employee
- Exclusive Work for a Single Client
- Provision of Work Equipment by the Client
The more of these criteria that apply to a freelancer or self-employed professional, the more likely they are to be classified as fake self-employed. Therefore, it is essential to consider these aspects when drafting contracts and establishing working relationships to minimize legal risks.
Conclusion
Preventing fake self-employment is crucial for legally secure employment relationships in Germany. With FRATCH and PwC by their side, companies can not only optimize their sourcing processes but also ensure compliance with legal requirements. This partnership offers an innovative and efficient solution to the challenges of the modern labor market.
Discover how FRATCH can help you minimize legal risks while remaining flexible and cost-efficient in finding qualified professionals. Visit FRATCH to learn more about our solutions.