Employee-like Self-Employed Person - Working-in-Germany
 
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Employee-like Self-Employed Person


Definition, Explanation

To distinguish whether somebody is an employee or self-employed is not always easy. Besides false self-employed an employee-like self-employment also exists. The distinction between both is important in order to decide if statutory social insurance contributions must be paid or not. To determine the status and whether social insurance contributions are compulsorily the statutory health insurances funds (gesetzlichen Krankenkassen) or the Federal Insurance Institution for Employees (BfA - Bundesversicherungsanstalt für Angestellte) are required to examine the facts and circumstances ex officio.

If the following criterion is met in all points, then it is regarded as an employee-like self-employment:

  • Working in a doubtlessly self-employed occupation, for example as a self-employed sales agent
  • Working permanently and predominantly for one client. On the basis of a service contract or work contract
    Note: You should not have been working as an employee for that employer in the past. Otherwise you could be suspected of working in false self-employment
  • No employing of employees with social insurance obligation, i.e. persons earning above 400 Euros (Minijob) per month. Family members may be employed

According to the above criterion the law regards the following occupations as an employee-like self-employment:

  • Teachers in commercial further education institutions and in adult education
  • Nursing staff in healthcare, baby care and childcare
  • Teachers and educators, also driving instructors and sports teachers
  • Home Worker
  • Sales agents, insurance agents and building and loan agents
  • TV journalists
  • Franchise partners
  • Shareholder of a limited liability company Unternehmergesellschaft (Mini-GmbH) or a regular GmbH
  • Managing directors of a company health insurance fund
  • Artists and writers
  • Lawyers
  • Newspaper deliverers
  • Freelancers

Persons who are already members of the German Artists' Social Security Fund (Künstlersozialkasse – KSK) do not need an additional pension insurance. The German Artists' Social Security Fund (KSK) will arrange for payment of the overall contributions to the statutory pension insurance (Deutsche Rentenversicherung) and other insurances.

Since January 01 1999 a person in an employee-like self-employment must pay pension insurance contributions, according to § 2 Nr. 9 Sozialgesetzbuch (SGB VI - Social Code Book). In some cases, contributions have to be paid in retroactively for the last 5 years, this means to 5 x19.9 % of the respective average annual income. The employee-like self-employed person is responsible for paying contributions. Employers do not pay a share of the contributions as for employees.

Comparison of false self-employment and employee-like self-employed:

  • False self-employed persons are subject to social insurance contributions, that is health-, nursing- care-, and pension insurance. Employee-like self-employed persons only pay pension insurance contributions
  • False self-employed persons only do tasks that are do not show any typical features of business activities, which means they are subject to employers’ directives concerning working hours, working place, or do not takeover business activities such as marketing, acquisition, investment of own capital or material

Exemption from pension insurance obligation is possible for:

  • Business starters
    • Within the first 3 years after starting the business
    • When the 2nd business is started, as long as it is not merely a re-naming of the 1st business
  • Persons who are older than 58 years and have already worked self-employed
  • Persons who are receiving a start-up grant (Gründungszuschuss) according to § 421 I SGB III
  • Persons who were born before Jan 02 1949 and have been in an old-age provision before Dec 10 1998 that is equivalent to a life insurance
  • Members of an occupational pension fund , such as doctors, lawyers, architects

Employee-like self-employed persons have similar rights and obligations to those ones of permanent employees, e.g. entitlement to paid annual holiday or notice of dismissal.

Tips, Checklist

  • Have your status of being an employee-like self-employed person and not being in a false self-employment sorted out by the so-called Anfrageverfahren (request procedure) at the Deutsche Rentenversicherung (Bfa - German statutory pension insurance scheme)
  • As an employee-like self-employed person, you have to report to your pension providers at once and pay your contributions. Otherwise they will claim you for the contributions of the annual year and the past four years
  • As a business starter you can apply for exemption from pension insurance contributions
  • To do so, file your application for exemption from pension insurance contributions as an employee-like self-employed person within 3 months after you have started your business. Then, your exemption will be valid from the moment all prerequisites have been fulfilled. The exemption will only come into force when the application has been received. Therefore, file the application as early as possible
  • Make sure that you can certify tasks you perform in your job that characterize you as a self-employed person. Such activities include marketing tasks and client acquisition and things like your own office, letterhead, webpage and investments with your own capital and own working devices etc.
  • The Deutsche Rentenversicherung (statutory pension insurance) examines businesses every 4 years determines if someone is an employee-like self-employed person and checks their membership in pension insurance
  • In unresolved cases, get the support of a solicitor



Last update: 01/26/2012
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