Can a federal employee own a business

Bogus self-employment: definition, criteria, consequences and protection

Bogus self-employment: what is it and who is going to judge it?

Bogus self-employment is the term for an employment relationship in which a contractor who is contractually referred to as self-employed is an employee according to objective criteria and would have to be registered as such and subject to compulsory insurance. Both the client and the contractor can lose their livelihood if one of the relevant bodies discovers the bogus self-employment.

An examination of the bogus self-employment can be carried out by the German Federal Pension Insurance, a labor court, the tax office or social insurance. A contractor or a client can also request an examination of bogus self-employment, for example if a contractor sues for protection against dismissal or a client wants to terminate a contractual relationship. In many cases, however, both parties are not involved in initiating a test for bogus self-employment and a third instance, e.g. the health insurance company, requests a test of bogus self-employment because it would like to request additional contributions.

Bogus self-employment: who can it affect?

All self-employed who do contract work can be affected by bogus self-employment. Freelancers and freelancers are particularly affected. In contrast to freelancers, freelancers can also have a contractual relationship with the client, but this does not constitute an employment relationship. You have also usually registered a business, whereas freelancers do not have to register a business and do not have to pay trade tax.

Examples of affected professions and industries in which bogus self-employment can occur are:

  • Consultant
  • Employees in the film and television industry
  • Graphic designer, copywriter
  • Craftsman, construction industry
  • Honorary doctors, nurses / nursing staff, health professionals
  • Real estate agent
  • Courier driver
  • Teachers (lecturers, coaches)
  • programmer
  • Cleaning staff
  • Forwarding business (drivers, logistics)

Sothe test of bogus self-employment works

When examining bogus self-employment, both the contracts concluded and the actual circumstances and conditions in everyday working life are checked. The examiners must find evidence of bogus self-employment and provide evidence of this. The following criteria make up the bogus self-employment:

  • Basically, there is bogus self-employment if a self-employed person does not regularly employ an employee who is subject to insurance
  • works permanently for a single client as well
  • whose orders deliver him 5/6 of his turnover.

This employment would then influence his entrepreneurial risk. In addition, the authority to issue instructions is a criterion for bogus self-employment. This can be the case if the self-employed person works in a work environment in which the client has control and control options that restrict the self-employed person's freedom of decision-making.

Test: false self-employment, yes or no?

So if you want to check whether you or one of your contractors falls into the zone of bogus self-employment, you should ask yourself the following questions:

  • Is the contractor free from instructions from the client?
  • Can the contractor determine his own working hours?
  • Are the tasks of the contractor different from those of the permanent employees?
  • Is the contractor free from regular reports on performance?
  • Is the job for the contractor (mostly) freely selectable?
  • Is the contractor free of hardware and software that would allow the client to check it?
  • Does the contractor act as a self-employed person in the outside world?
  • Does the contractor use their own stationery, business cards with the name of their own company, etc.?
  • Is the contractor active in customer acquisition and promotion for his own company?

If you have these questions predominantly Yes answer, you are unlikely to fall into the field of bogus self-employment.

Consequences of bogus self-employment for the client

If a bogus self-employment exists and can be proven, both the client and the contractor must expect legal and financial consequences.

In the case of the client, all liability and payment obligations apply retrospectively to bogus self-employment as for normal employees. This means that the client has to pay the social security contributions retrospectively for up to four years. This also includes late payment surcharges if an application for status determination by one of the two parties does not produce a positive result within one month of the start of work. Otherwise, the social security obligation does not apply until an incontestable decision has been made.

In the case of bogus self-employment, the tax office can also request retroactive wage tax payments. Here, too, the regulation applies retrospectively for up to four years. If intentional bogus self-employment is proven, fines, prison sentences and repayment claims for up to 30 years are possible.

The statement of the sales tax on the bills of the bogus self-employed becomes ineffective, i.e. that the input tax deduction is considered inadmissible and the deducted input tax amounts have to be corrected and repaid. As soon as the bogus self-employment is established, all rights that the company's employees have apply to the previous contractor.

Consequences of bogus self-employment for the contractor

The contractor also has to reckon with the consequences of bogus self-employment. In the first step, his independence is ended and he subsequently receives the status of employee at the beginning of the employment relationship. This gives him numerous rights, for example protection against dismissal, vacation entitlement or the obligation to continue to pay wages in the event of illness. In addition, in the case of bogus self-employment, he receives net salary payments in the amount of the previous fee. At the same time, however, this means that in the case of a freelance worker, the trade must be deregistered at the trade office and membership in the Chamber of Commerce and Industry ends at this point in time.

Both the client and the contractor are legally regarded as joint and several debtors in the case of bogus self-employment. The client to date can therefore deduct the employee's share of the back payments of the social security contributions for the past three months from his future salary. The amount of the contribution depends on the fee or the net salary.

Previously issued invoices must be corrected by the contractor if a pseudo self-employment is established. The sales tax shown must be declared invalid. The input tax deduction must not have been carried out or the input tax must be paid back to the tax office.

How to avoid bogus self-employment: 5 tips

To protect yourself from the consequences of bogus self-employment, we give you the following five tips:

1. Ignorance does not protect against punishment

If you are on this page, you have already taken the first step: Find out more about bogus self-employment! Because even with bogus self-employment, ignorance does not protect in criminal cases. As a self-employed person, you have the duty to acquire the necessary knowledge. If you are not sure, you will find a lawyer or consultant in our service provider and consultant exchange who will help you with your specific questions.

2. Carefully review the service contract

You should compare the above criteria with your day-to-day work and your service contract. In particular, you should check whether you still bear your entrepreneurial freedom of choice and your entrepreneurial risk when you sign the contract. The contract should contain a note that there is no obligation for the freelancer to issue instructions. It can also be stated there that the contractor regularly provides evidence of further orders and independent insurance. You can protect the following aspects of your employment contract from bogus self-employment:

  • The contractor is responsible for paying statutory fees (taxes, social security).
  • The exact fee for specific activities.
  • The contractor may reject orders and accept those of other customers.
  • The contractor may use auxiliary staff (own employees).
  • The contractor does not provide more than half of his work capacity.
  • Specify the amount of the usage fee for equipment

3. Separate hardware and software or rooms

The so-called freedom of choice is also increased by the fact that different software programs are used for the placing of orders, time and effort recording or invoicing. Even if you have an (additional) workplace of your own, this can underline the entrepreneurial freedom and protect against bogus self-employment .

4. Registration with the German Federal Pension Insurance

It is advisable to apply to the German Federal Pension Insurance Association for exemption from compulsory pension insurance for the first 3 years of self-employment within the first three months of starting an activity. In the event of a dispute, both sides can request clarification of the status query there.

5. Clear communication between client and contractor

In order to avoid misunderstandings or problems in borderline cases, you can inform your client or contractor about the subject of bogus self-employment in case of doubt. Both sides are equally responsible in the event of bogus self-employment. As a contractor, you protect yourself with clear statements regarding vacation planning and orders. You can also clearly distinguish yourself through the corporate design and, for example, your own work clothes.

Author: Für-Gründer.de editors

As editor-in-chief, René Klein has been responsible for the content of the portal and all publications by Für-Gründer.de for over 10 years. He is a regular interlocutor in other media and writes numerous external specialist articles on start-up topics. Before his time as editor-in-chief and co-founder of Für-Gründer.de, he advised listed companies in the field of financial market communication.