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False self-employment: definition and criteria

False self-employment is an expensive compliance risk with an external workforce. This entry explains the criteria, the consequences and how to prevent it.

Key facts
  • Formally self-employed, in fact in dependent employment.
  • What counts is being bound by instructions and integrated into the operation.
  • Consequence: back payment of social security contributions, possibly criminal consequences.
  • Clarified through the status determination procedure (§ 7a SGB IV).

Definition and classification

False self-employment exists where a person formally appears as self-employed but is in fact integrated into an operation like a dependent employee and bound by its instructions. What counts is the actual picture of the work, not the label in the contract.

A practical example

A freelancer works fixed shifts in a team for months, uses the client's equipment and is bound by instructions. Despite a „freelancer contract" this is in fact dependent employment – with the risk of high back payments of contributions for the client.

How do you recognize false self-employment?

The indicators are the absence of entrepreneurial risk of one's own, being bound by instructions, being firmly embedded in processes and teams, and working for only one client. Where there is false self-employment, back payments of social security contributions follow and – where contributions were withheld deliberately – criminal consequences. Clarity comes from the status determination procedure under § 7a SGB IV. A related concept is concealed staff leasing.

How do you prevent it?

Preventing it means above all shaping how the work is actually carried out: self-employed people should use their own equipment, work free of instructions and for several clients and carry entrepreneurial risk – not be built into fixed shifts and teams. Where there is uncertainty, the status determination procedure provides legal certainty in advance.

Frequently asked questions

Who is liable for the contributions in a case of false self-employment?

As a rule the client as the de facto employer; they have to pay the social security contributions that were not paid – retroactively up to the limitation period.

Is a self-employment contract enough protection?

No. What counts is how the work is actually carried out, not what the contract is called. A „freelancer contract" gives no protection where the reality is dependent employment.

What is the difference from disguised staff leasing?

False self-employment concerns a single (solo) person; with disguised staff leasing, other people's staff are leased under the cover of a Werkvertrag.

Related terms

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