Check the false self-employment risk in 5 minutes

Right of direction — time, place, content

§ 7 SGB IV names work under instructions as the first indicator of dependent employment. How freely does the contractor decide when, where and how the work is done?

• The client bindingly determines when the work is performed (fixed working or attendance hours).
• The client prescribes the place of work beyond what the task objectively requires.
• The client issues detailed instructions on how tasks are carried out — not only which result is owed.
• Vacation and absences must be requested or approved, as they are for employees.
• The contractor must submit regular activity reports or detailed time tracking like internal staff.

Integration into the work organisation

Since the Herrenberg ruling of the Federal Social Court, integration into the client's organisation alone can tip the overall picture. How deeply is the contractor embedded?

• The contractor is a fixed part of internal team routines (daily stand-ups, jour fixe, duty or shift rosters).
• The contractor uses a company email address and internal accounts and appears like an employee.
• The work is performed mainly with the client's hardware and software, provided free of charge.
• Tasks are assigned ad hoc from day-to-day operations — like for employees — rather than following the agreed scope.
• The contractor must perform personally and may not use own staff or substitutes.

Entrepreneurial risk & opportunity

Genuine self-employment shows in real profit opportunities and loss risks. The following statements describe entrepreneurial behaviour — answer how strongly they apply.

• The contractor sets prices independently and negotiates rates per engagement.
• The contractor bears typical business expenses (equipment, licences, insurance, training, marketing).
• The contractor carries a real risk of loss (fixed-price elements, rework at own cost, unpaid idle time).
• The contractor can decline orders or individual tasks without consequences.

Market presence & contract setup

Formal indicators carry less weight than practice — but courts do look at market presence, client structure and the history between the parties.

• The contractor actively markets their services (own website, platform profiles, ongoing acquisition).
• The contractor works for several clients per year, in parallel or consecutively.
• The contractor performs essentially the same work for the same company as previously under an employment contract.
• More than 5/6 of the contractor's revenue comes from this one client long-term, and the contractor employs no own staff.

For companies

• Back payment of both halves of all social contributions for up to 4 years — 30 years in case of intent (§ 25 SGB IV)
• Late-payment surcharges of 1% per month (§ 24 SGB IV)
• Recourse against the worker only via the next three salary payments (§ 28g SGB IV) — the client effectively pays almost everything
• Criminal liability for withholding contributions (§ 266a StGB), payroll tax liability and VAT unwinding
• In agency triangles additionally: unlicensed labour leasing with a deemed employment relationship (§§ 9, 10 AÜG)

For freelancers

• Retroactive employee status: vacation, continued pay and dismissal protection — but the end of the self-employed setup for this engagement
• Possible VAT corrections on issued invoices and fee clawback discussions
• Own employee share of contributions going forward
• Collapsed client relationships and lost follow-up engagements after audits