More and more companies are relying on freelance staff – be it for short-term projects, to bridge bottlenecks or to bring special expertise into the company. At first glance, this sounds attractive: flexibility, lower running costs and no commitment to long-term employment relationships. But be careful: anyone who employs freelance staff quickly moves into a legal risk area – especially in labor and social security law.

Sham Self-Employment – the Greatest Danger

The buzzword is “sham self-employment”. This refers to someone who is officially working as a freelancer, but in reality works like an employee. This can be the case, for example, if the person adheres to fixed working hours, receives instructions or is integrated into the work organization. The consequence: authorities or courts can determine that in truth an employment relationship or dependent employment exists.

Expensive Consequences for Companies

This can be expensive for the client. If the German Federal Pension Insurance or a court determines that there is sham self-employment, social security contributions must be paid retroactively – up to four years retroactively, in some cases even longer. In addition, there are late payment surcharges and possibly criminal proceedings for withholding social security contributions. There are also risks under labor law: an allegedly “freelance employee” can suddenly assert claims to vacation, continued payment of wages in the event of illness or protection against dismissal.

Uncertainty among Contractors

Sham self-employment is also problematic for the freelance staff themselves. Anyone who is officially self-employed must generally take care of their own health, pension and unemployment insurance. However, if it is later determined that an employment relationship actually exists, there may be subsequent payments and demands for repayment. In addition, those affected often lose confidence in their clients.

What Companies should Pay Attention To

In order to prevent freelance work from backfiring, careful structuring of the collaboration is required. Typical criteria that speak in favor of genuine self-employment are:

• free time management
• use of own work equipment
• multiple clients
• no integration into the client’s organization

A written contract is important, but the actual implementation in everyday life is decisive.

Conclusion

Freelance staff can be a valuable addition – but only if the legal framework is observed. Anyone who acts rashly here risks high additional payments, legal disputes and perhaps even damage to their image.

Companies should therefore seek advice at an early stage before using freelance staff. This minimizes risks and creates clear structures that give both sides security. Please do not hesitate to contact me about this.