Bogus self-employment can become a major problem, especially for freelancers in a company. And always when, due to the objective contractual criteria (service or work contract) on which the order is based, an employee relationship must actually be assumed. Then it can be expensive for those affected! How can you recognize pseudo self-employment, who is affected and how can you circumvent the problem? We explain that here.
What is bogus self-employment?
It is not always easy for laypeople to recognize whether they are bogus self-employment or not. In simple terms, there is obviously bogus self-employment when an employee is or becomes self-employed. In this case, costs and formalities as well as other regulations that affect both tax law and social security law are circumvented, and labor law issues are circumvented in the case of bogus self-employment.
The legal regulations do not define pseudo self-employment. However, these are people who, like employees, are dependent on the employer and are bound by instructions.
The definition of the employee, in turn, is precisely defined in the Social Security Code:
Employment is salaried work, especially in an employment relationship. Clues for employment are an activity according to instructions and an integration into the work organization of the instructor. (§ 7 (1) SGB IV )
Importance of bogus self-employment
Anyone who only seems to work independently, but is factually bound by instructions and properly integrated into the client’s company, should actually be employed there. Since the contractor and client avoid the employment relationship, they save the corresponding insurance requirements (social security obligation).
In addition to the social security obligation, tax liability is also affected. And that is the wage tax, sales tax and trade tax . Anyone who wants to rid themselves of the suspicion of bogus self-employment should make sure from the outset that their company is designed in such a way that self-employment is clearly proven.
Bogus self-employment with …
The bogus self-employment can be assumed for both self-employed / freelancers and employees. Let’s take a closer look at the two groups of people.
In Germany, this aspect has been regulated by law since 1999 in Section 7, Paragraph 1, Clause 2 of the fourth book of the Social Code . For example, there is bogus self-employment if activities are carried out directly according to the instructions of the client. This also includes things like the organization of working hours and the possibility of having the service provided by third parties, for example a subcontractor.
Those who are self-employed are obliged to pay contributions to pension insurance, health insurance, unemployment insurance and long-term care insurance; in the case of a regular employment relationship, these payments are the responsibility of the entrepreneur.
Bogus self-employment among the self-employed
Business start-ups in particular often get into difficulties here because they have to struggle to get orders. If you then have at least one satisfied client who keeps coming back with a project, that’s good for your business. But it seems like a pseudo self-employment, because there is only this one client.
Usually, the bogus self-employment of freelancers (or bogus self-employment of small business owners ) is assessed in such a way that project-related activities that are limited to one thing from the start and do not last longer than a year do not count as permanent activity for just one client. This is the case, for example, with engineers or architects. In that case, there would be no bogus self-employment.
The following other professions could also give the appearance of bogus self-employment:
- Consultant in various industries
- Graphic designers, copywriters, illustrators
- Employee in film and television
- Real estate agent
- Employees in the freight forwarding or courier business
- Teachers, trainers, coaches
- Cleaning staff
- Health care professional
Bogus self-employment among employees
This variant also occurs when an employee becomes self-employed in the previous area of activity and then continues to work for the current employer. Because everything stays the same, the two criteria of being bound by instructions and being integrated into the organization of the company are met.
After that, however, there is an employment relationship and not self-employment! A graphic designer who has worked for a newspaper, becomes self-employed and then continues his work for the newspaper (only on account) would be an example of such a type of bogus self-employment.
When is bogus self-employment?
In the case of bogus self-employment, the allegedly self-employed act like an employee. This essentially means that he is not allowed to make independent decisions, but is bound by instructions to both the client and an employer.
Bogus self-employment criteria
- The client is integrated into the work organization
- There is a personal dependency on the client
- There is an economic dependency on the client
- There is no entrepreneurial risk
- There is no entrepreneurial leeway