bogus self-employment
noun · Scheinselbständigkeit
Whether someone is employed for social security purposes does not depend on what the contract calls the relationship: § 7 Abs. 1 SGB IV defines Beschäftigung as work that is not self-employed, with instructions and integration into the organisation as the indicators. Where a supposed contractor turns out to be employed, contributions are reassessed retrospectively and the employer carries them.
Which translation, when
Why
Bogus self-employment is the Scheinselbständigkeit, and the concept exists because German social security law asks a different question from contract law. Section 7 Abs. 1 SGB IV defines Beschäftigung, employment in the social security sense, as non-self-employed work, in particular within an employment relationship, and gives two indicators: working according to instructions and integration into the work organisation of the person giving them. Those indicators are weighed in an overall appraisal of how the engagement was actually carried out, and the description the parties gave it counts only where the lived reality is genuinely open. A consultant who works fixed hours at the client’s desk, with the client’s equipment, in the client’s reporting lines and with no own market presence will be found to be employed however the contract is headed. The consequences run backwards. Contributions are reassessed for the past, the employer owes the combined contribution as the contributions entry explains, the employee’s share can no longer be recovered beyond the last few payroll runs, and the arrears carry interest; in serious cases withholding contributions is a criminal offence. Certainty can be sought in advance. On application the German Pension Insurance Federation determines whether an engagement is employment or self-employment, a procedure now headed Feststellung des Erwerbsstatus in § 7a SGB IV, and where employment is found the contribution falls due only when the finding is unappealable, though that deferral applies only where the conditions the provision attaches to it are satisfied; objection and action against the decision have suspensive effect in any event. One caution belongs in any current translation: several newer elements of the procedure are expressly time-limited and expire at the end of June 2027 unless the legislature extends them.
Typical mistakes
- The status follows the lived reality and not the contract label, so a document calling someone a freelancer does not settle the question.
- Contributions are reassessed for the past and the employee’s share can no longer be recovered beyond a few payroll runs, so the exposure sits with the client.
- Parts of the status determination procedure are time-limited to the end of June 2027, so advice on it needs a date.
What matters
Reviewing a German freelance arrangement for a foreign client: the analysis should test instructions and integration against § 7 Abs. 1 SGB IV rather than the contract heading, and consider applying for a status determination before the engagement starts.
What the machine misses
A machine version of bogus self-employment produces falsche Selbständigkeit or Pseudoselbständigkeit, neither of which German practice uses, and the term is Scheinselbständigkeit, decided by the indicators of § 7 Abs. 1 SGB IV rather than by the contract label; the invented wording also hides that the finding reaches backwards and that the client carries the arrears.
Examples
| bogus self-employment | die Scheinselbständigkeit |
| employment in the social security sense | Beschäftigung im sozialversicherungsrechtlichen Sinn |
| integration into the work organisation | Eingliederung in die Arbeitsorganisation |
| determination of employment status | die Feststellung des Erwerbsstatus |
More notes on these sections
employee Arbeitnehmer