Bogus self-employment in Germany: criteria, status determination and how to avoid it

What is bogus self-employment?

Bogus self-employment (Scheinselbstständigkeit) is not a status of its own but a misjudgement: a working relationship is treated as self-employment although legally it is dependent employment. Social security law does not look at the heading of the contract but at how the work is actually carried out. Under § 7 Abs. 1 SGB IV the main indications of employment are working according to instructions and integration into the work organisation of the person giving the instructions.

Sectors in which freelancers work for the same client for a long time are particularly affected: IT projects, consulting, media, care, education, logistics and construction. The risk lies primarily with the client, who is treated as an employer. For you as a freelancer it is about your status, your insurance cover and VAT that you may have charged wrongly.

Do not confuse: the tax office (Finanzamt) independently assesses whether you are an employee (wage tax). In practice both checks usually lead to the same result, but they are legally separate.

Criteria: how do you recognise bogus self-employment?

The German Pension Insurance (DRV) and the social courts weigh all features against each other. No single criterion is decisive; the list below shows which indications point in which direction. According to case law, a high fee tends to indicate self-employment, but it is only one indication among many.

The status determination procedure at the DRV clearing office

Whether an activity is employment or self-employment is decided on application by the clearing office (Clearingstelle) of the Deutsche Rentenversicherung Bund (§ 7a SGB IV). Both client and contractor can apply, in writing or online. The procedure is mandatory if a spouse, civil partner or descendant of the employer or a managing shareholder of a GmbH is registered; the health insurance fund then initiates it. Since April 2022 the DRV decides on employment status itself, no longer on compulsory insurance in each individual branch.

• Forecast decision (Prognoseentscheidung): the status can be determined even before the job starts, based on the contract and the planned performance. If actual practice differs, this must be reported within one month of starting.
• Group determination (Gruppenfeststellung): clients with many similar contracts can obtain an opinion for all cases of the same kind.
• Later start of compulsory insurance: if the application is made within one month of starting the activity and the DRV determines employment, compulsory insurance only starts when the decision is announced – provided you agree and were covered for illness and old age yourself until then (§ 7a Abs. 5 SGB IV).
• Objection and legal action have suspensive effect; contributions only fall due once the decision is final.
• Forecast decision, group determination and oral hearing are currently limited until 30 June 2027.

Consequences of bogus self-employment – with a worked example

If the DRV determines employment – in the status procedure or during an audit – the client is retroactively an employer. They owe the entire social security contribution (employer and employee share), but can only withhold the employee share from the next three salary payments (§ 28g SGB IV), so in practice they bear it alone for the past. Contributions become time-barred after four years, if intentional only after 30 years; on top come late payment surcharges of 1 % per month or part of a month. In cases of intent there may be criminal consequences for withholding contributions (§ 266a StGB).

For you as the contractor: you retroactively have employee rights (holiday, continued pay during illness, protection against dismissal). If you showed VAT on your invoices although you were not a business, you still owe it to the tax office (§ 14c UStG), and the client loses the input VAT deduction – invoices then have to be corrected.

Example (simplified with 2026 values, fee treated as gross pay): an IT freelancer works for two years for €7,000 a month exclusively in one of the client’s teams, with a duty roster and company laptop.

Self-employed with only one client: compulsory pension insurance under § 2 Nr. 9 SGB VI

Even those who are genuinely self-employed can be compulsorily insured. Employee-like self-employed people (arbeitnehmerähnliche Selbstständige) are subject to compulsory statutory pension insurance if, in connection with their activity, they do not regularly employ an employee subject to insurance and work permanently and essentially for only one client (§ 2 Satz 1 Nr. 9 SGB VI). In DRV practice, “essentially” means: at least five sixths of income comes from one client. If your earned income does not exceed €603 a month (marginal employment threshold 2026), there is no obligation.

You must register with the pension insurance yourself within three months of starting. The standard contribution in 2026 is €735.63 a month (18.6 % of the reference value of €3,955); on application you pay an income-based 18.6 % of your profit, at least €112.16. Founders pay half the standard contribution (€367.82) on application in the first three calendar years. You can also be exempted for the first three years after starting self-employment (§ 6 Abs. 1a SGB VI) – you must apply for this.

In addition, certain occupational groups are subject to compulsory pension insurance regardless of the number of clients if they do not employ an employee subject to insurance. Artists and writers are insured via the artists’ social insurance fund (Künstlersozialkasse). How to provide for retirement outside the compulsory scheme is explained in the guide retirement provision for the self-employed.

Herrenberg ruling: what applies to teachers and lecturers?

With the so-called Herrenberg ruling (Federal Social Court, 28 June 2022, B 12 R 3/20 R) the BSG classified a music school teacher as dependently employed: she was integrated into the music school’s teaching operations and bore no significant entrepreneurial risk. The DRV then adjusted its assessment practice, which affected many freelance teachers at music schools and adult education centres (Volkshochschulen), language and integration course providers.

As a transitional rule, § 127 SGB IV provides: if the contracting parties assumed self-employment when concluding the contract and the teacher agrees, compulsory insurance on the basis of employment does not arise before 1 January 2028. The rule initially applied until the end of 2026 and was extended in March 2026 until 31 December 2027. It does not apply if a final status decision has already been made. Important: self-employed teachers without employees are subject to compulsory pension insurance anyway under § 2 Satz 1 Nr. 1 SGB VI – even without bogus self-employment.

How to avoid bogus self-employment: checklist

The best protection is to genuinely act as a business – and to document it. These points help you and your clients:

• Win several clients and document your income; in the long term no more than five sixths from one client.
• Contracts for work or projects with a clearly described result, acceptance and fixed price instead of pure hour quotas, where possible.
• Your own work equipment, your own website and your own quote to every client; no company email and no place in the internal organisation chart.
• Decide working time and place yourself; appointments only where the project requires them.
• Proper invoices with all mandatory details and a calculated hourly rate that covers entrepreneurial risk, holidays and provision for the future.
• If in doubt, apply for the status determination procedure within one month of starting – this secures the later start of compulsory insurance.
• A legal form such as a GmbH does not protect you automatically: here too the DRV checks who actually works how (see choosing a legal form).

Bogus self-employment and Kontelio

Kontelio does not decide on your status, but it makes your self-employment easy to prove: you write invoices with sequential numbers to different clients, filter the invoice list by client and period (helpful for the five-sixths question) and archive receipts in line with the GoBD. More about how Kontelio supports freelancers in their day-to-day work.

Frequently asked questions