Bogus self-employment: A recurring "grey area"

Because the line between self-employment and dependent employment is often blurred in practice. And suddenly, during an audit – for example, by the German Pension Insurance – you could be classified as bogus self-employed!

For freelancers, collaborating with a company often seems straightforward: clear instructions, regular income, and minimal administrative effort. But this is precisely where the risk lies. If the actual nature of the work exhibits characteristics of dependent employment, it can be considered bogus self-employment – with significant legal and financial risks.
An often underestimated factor also comes into play: a lack of entrepreneurial freedom. If you effectively work like an employee, you bear the risks of self-employment but cannot reap its benefits.

What can happen if bogus self-employment is subsequently discovered?

Possible consequences for you include:

Your previous "fees" will be treated as wages.
If your work is subsequently classified as employment, the company will pay the social security contributions – in individual cases, it may therefore try to reclaim "overpaid" fees (because they are higher than a "normal" hourly wage).
If you are not exempt from VAT under the small business regulation and later lose your self-employed status:
If you have issued invoices with VAT, you may need to correct these invoices to reclaim any VAT already paid to the tax office.
Input tax deduction may be revoked, as you are no longer considered a business owner for tax purposes. You may also have to repay any input tax already refunded.
Uncertainty regarding your own financial security:
You have to renegotiate things that you previously covered yourself, such as private health insurance or retirement savings.

What criteria are used to determine whether someone is falsely classified as self-employed?

Typical signs include:

close adherence to instructions (e.g. fixed working hours, guidelines on working methods)
Integration into operational processes (e.g., use of internal systems, participation in team meetings)
Working predominantly or exclusively for one client

So what do you need to pay attention to – especially as a solo self-employed person?

1. Avoid rigid structures like an employee.
If you have fixed working hours, are regularly at the company, and have to attend internal meetings, you'll quickly seem like part of the company.
Better: Work in a results-oriented way, not bound by time constraints, and decide for yourself when and how you work.

2. Ensure genuine entrepreneurial freedom.
Ask yourself honestly: Am I still making my own decisions – or am I simply completing tasks?
Am I truly delivering a result and not just "work done according to specifications"?
It becomes dangerous when you are told exactly how to do something and you cannot choose your own methods.

3. Build up a portfolio of additional clients as quickly as possible
. This is one of the most important points. Working
with only one client is legally risky and financially dangerous!
Therefore, even if things are going well, (and demonstrably!) seek out small jobs in parallel and increase your visibility as a freelancer!

4. Use your own infrastructure.
You should always use your own "work equipment" and your own tools (such as your own email, your own processes).

5. Act like a company – not like an employee!
For example, never say: "I work for Company X," but always "Company X is my client"!
It may sound trivial, but it is often crucial for external perception and therefore also for status verification.

6. A contract is not enough.
A "freelancer contract" doesn't protect you if reality is different.
What matters is how you actually work, not what the contract says.

Checklist

There's no simple checklist that definitively distinguishes between self-employment and employment. Rather, it requires a comprehensive assessment of all circumstances.
However, if you can answer "yes" to all of the following statements, bogus self-employment is likely ruled out.

a) Working methods and structure

I determine my own working hours.
I do not work permanently on-site at the company.
I am not required to attend internal meetings.

b) Entrepreneurial freedom

I decide for myself how I perform.
I work in a results-oriented manner, not according to fixed specifications in detail.
I make my own business decisions.
I have the chance to win – but I also bear the risk of loss.

c) Client and market presence

I have (or am actively acquiring) other clients.
I present myself externally as an independent company.
I say: "The company is my customer" (not: "I work there").

d) Infrastructure

I use my own equipment (laptop, software, etc.).
I don't use a company email address as my primary email address.
Access to internal company systems is only granted when absolutely necessary.

e) Contract versus reality

My assignment is defined based on results.
My actual work corresponds to the agreed self-employed status.
I regularly check: Am I still truly working independently, or am I working on instructions?

Here you'll find a sample contract for freelance work. This provides initial guidance and can, of course, only contain general guidelines outlining what such a contract should typically include. Therefore, to ensure its legal validity, it must be adapted to the specific circumstances of each case.

Conclusion

The distinction between self-employment and employee status is not merely a formal matter, but rather a question of actual collaboration: For the self-employed, it's about entrepreneurial freedom and security. For companies, it involves a significant financial and legal risk.
For both sides, the clearer the roles, structures, and responsibilities are defined and practiced, the lower the risk of a later reassessment.
Those who proactively shape this early on avoid later – often very costly – consequences.

Tip: Status determination procedure

In practice, we recommend that you apply for a legally binding decision on the status of contractors through an enquiry procedure under Section 7a of the German Social Code, Book IV (SGB IV, to ensure legal certainty. The German Federal Pension Insurance Fund (Deutsche Rentenversicherung) is responsible for this. Conducting a status determination procedure provides clarity for both contracting parties.

In the status determination procedure , even in the case of a determination by the German Pension Insurance, the obligation to pay social security contributions only begins upon notification of the decision by the pension insurance institution, provided that an application is submitted in a timely manner within one month of commencing employment, the employee agrees, and the employee's protection against the financial risk of illness and for old age corresponds to the benefits of statutory health and pension insurance.
For status inquiries, you (or your company) should send your request in writing to:
Clearingstelle der Deutschen Rentenversicherung Bund,
Postfach
10704, Berlin.
You can download a current application form to check whether you are falsely self-employed at:
V0027 – Application for determination of social security status .