Working Life > Self-Employment > Freelancing > Freelancing Forms

The Forms of Self-Employment or Freelancing

Definition, Explanation

Besides the classification of occupations in "catalogue professions", catalogue-similar professions and trading professions, various names that are often colloquially and imprecisely pooled as "free-lance activities" can be found. However, the fields of occupation have differing fundamentals when it comes to fiscal, labour and commercial law.

• Freelancers according to the German Income Tax Act
  Freelancing is a fiscal and labour law-related term that is defined in the German income tax Act (EstG) § 18 and in the Partner Company Act (PartGG) § 1. These two laws and jurisdiction describe in a list of so-called catalogue professions and catalogue-similar professions above all qualified service providers like doctors, jurists, natural scientists, freelance engineers etc. as "real freelancers". Freelancers have to register with the tax office and pay income tax.
  Also, "freelancer" is a social contributions-related term. From a fiscal perspective, freelancers can be both freelancers and tradespersons.
  Freelancers fulfil tasks for a company independently without them being integrated in the company. They are paid a fee and work using their own time allotment and where they want. They have to pay for all of their own costs and services, like national insurance, additional expenses, wage continuation, holiday leave themselves.
  There are currently about 1 million freelancers in Germany, 900,000 of those being self-employed. Freelancers like a doctor, for example, can however also have employees (e.g. a work doctor), a civil servant (e.g. a public health officer) a freelancer (e.g. a stand-in at a doctor's surgery) or a shareholder in a business partnership or corporation (a doctor in a private clinic).
• Tradespersons
  This is also a fiscal term. Those who are self-employed, who do not belong to the list of freelancers (catalogue professions, catalogue-similar professions, see above), but underlie with their activities the Industrial Code, count among these . They must register with the public order office (§ 14 German Industrial Code). Their activities are often very similar to those of freelancers in such a way that that the classification of individual occupations is often legally disputable. In general, the following applies: In contrast to the qualified intellectual, creative or scientific services of freelancers, simpler services like trading, producing goods and trade are what count here. Master craftsmen require master craftsman certificate from the Chamber of Crafts (HWK) or the Chamber of Commerce as well as a business registration in order to become self-employed.
• Subcontractor
  This term is often only another name for "freelancer" and can include both traders and freelancers. Its aim is that the company or contractor is the "main contractor". The subcontractor then fulfils the tasks himself for the company. The term "subcontractor" is often used in the building industry and logistics.
• Service contract employees
  This form of job is derived from the kind of contract of employment that underlies the employment contract: the service contract §§ 611 – 630 German Civil Code. It can be both on a freelance or dependent basis. The employee is obliged to render a service, not for the production of something like in a works employment contract. Payment is made in form of a fee; that is why one often speaks of honorary co-workers in this context. An example of this is the job of a museum educator, who provides contentual and didactical tours through exhibitions and the like.
• Works contract employee
  Even in the case of this form of job, the underlying type of contract, the works contract according to §§ 631 – 650 German Civil Code is eponymous. It can be both on a freelance or trading basis. Subject of the contract is that the co-worker creates a concrete, representational achievement, like e.g. an assessment or a building plan in return for a fee.
• Part-time self-employment.
  By this, tasks done under self-employment amounting to less than a third of normal working hours (40 hours a week or 8 hours a day) is meant. At the same time, one must differentiate between self-employment on its own or secondary employment. On its own is when there is no further income. For example, a woman who takes care of family and household and at the same time pursues part-time self-employment. Secondary employment is when another source of income, the so-called main income, exists. This is the case when someone works in a company during he day and pursues self-employment activities in his free time.

Tips, Checklist

• To classify one's job, competent legal advice is helpful. Participation in entrepreneur startup seminars and making use of online guides can also provide important information
• It is often difficult to determine the border between "freelance" and "trading". Even in the present jurisdiction, there are varying opinions. A programmer is classified as both a freelancer and a tradesman, depending on the focus
• Another example is being a self-employed pharmacist. One would assume that this job would be self-employment due to the scientific background and that it is a freelance job according to the Income Tax Act. Nut that is not the case: In the case of the job of a pharmacist, the selling and trading of goods is to the fore. That is why he must be classified as a tradesperson. It would be different if he were a freelancer in pharmaceutical research. In that case, scientific and mental processes of development would dominate; he would be a freelancer
• If a freelancer only works for one contractor then the presumption arises that we are talking about disguised employment. Disguised employment means that they are superficially self-employed freelancers, service providers or works contract employees who, from social insurance carrier's point of view, have to be classified like employees due to the type and implementation of their tasks. This results in the obligation to pay national insurance and other tax and labour-related consequences

Last update: 01/30/2012