Definition
Someone is bogusly self-employed if they formally present themselves as self-employed but actually work like a dependent employee. The benchmark is section 7 of Book IV of the Social Code (SGB IV): employment is non-self-employed work, in particular within an employment relationship, characterised by being bound by instructions and being integrated into the work organisation of the party issuing those instructions.
Indicators at a glance
| Points towards employment | Points towards self-employment |
|---|---|
| Fixed working hours and obligation to be present | Free choice of time and place |
| Instructions on content and execution | Performance of services on one's own responsibility |
| Work equipment provided by the principal | Own operating resources and own capital |
| Integration into teams, rotas, internal processes | Own market presence, website, advertising |
| Only one principal | Several principals |
| Fixed monthly pay | Project- or success-based pay, entrepreneurial risk |
| No employees of their own | Employs staff subject to social insurance |
None of these features is decisive on its own. The German Pension Insurance (Deutsche Rentenversicherung) carries out an overall assessment — focusing on how the arrangement is actually lived out in practice.
The status determination procedure
Both the principal and the contractor can apply to the clearing office of the German Federal Pension Insurance (Deutsche Rentenversicherung Bund) for a ruling on employment status (section 7a SGB IV). Since 2022, the employment status itself is determined, rather than liability to insurance in individual branches; it is also possible to obtain a forecast ruling before work begins, and a group determination for similar assignments.
What is at stake if bogus self-employment is established
- Back payment of total social security contributions, generally for four years, and up to 30 years in cases of intent.
- The employer also owes the employee's share; recourse against the employee is limited to the last three pay periods.
- Late-payment surcharges of one per cent per month.
- The principal's liability for wage tax.
- Reversal of VAT treatment: tax incorrectly shown becomes payable, and the right to deduct input tax is lost.
- Criminal and administrative-offence consequences under section 266a of the Criminal Code (StGB) for withholding contributions.
Special case: employee-like self-employed persons
Even genuine self-employed people can be subject to compulsory pension insurance if, on a lasting basis, they work essentially for only one principal and do not employ any staff subject to compulsory insurance (section 2 sentence 1 no. 9 of Book VI of the Social Code, SGB VI). This is not bogus self-employment, but it does trigger contributions.
Prevention
- A contract for work or services with a clearly defined scope of deliverables, rather than a job description.
- No integration: no company email address with employee status, no rotas, no obligatory attendance at internal staff meetings.
- Success-based pay, own work equipment, own liability.
- Keep evidence in the file of the contractor's other principals.
- When in doubt, apply for a status determination before work begins.
Correspondence with the pension insurance authority
Hearings and notices arrive by post, and the deadline for objection is one month from notification. Reply in writing and within the deadline — proof of receipt can later determine the amount of contributions owed.