The labor market in Germany has been changing in recent times. More and more workers are moving away from the typical 9-5 job and into freelance work, which allows them more self-determination in their daily work life and, above all, is flexible. However, in order to enter the freelance market, it is good to know what the differences are between the different types of freelancers and what types of contracts you can enter into with business partners.
Two different types of self-employed workers in Germany: Selbstständiger and Freiberufler.
In Germany, it is necessary to distinguish the terms “self-employed worker” (Selbstständiger) and “freelance worker” (Freiberufler); at the legal level belong to two distinct subgroups of the macro area “non-employee workers,” following different rules and applications. Therefore, it is important to stick into those specific requirements, which allow us to clearly identify and categorize the fiscal and legal nature of the two categories of “non-employee work” mentioned above.
The work of the freelancer (Freiberufler) is characterized by the fact that there is no exchange of goods, therefore, the freelancer does not sell a product, but a service. Professions of this type can therefore be that of a teacher, tax consultant, journalist, lawyer, accountant, translator, etc. As a freelancer you have the advantage of not having to register a trade and thus not having to pay trade tax. The tax office that determines if you are freelancing, because it is not always entirely clear whether a profession can fall into that category or not.
Instead, the self-employed person (Selbstständiger) carries out a business activity and consequently must register with the trade office and pay trade tax to the tax office. The legal basis is the Trade Regulation Act (Gewerbeordnung – GewO). In addition, the self-employed person cannot get more than 83% of his or her income from one company or one client, so as not to be suspected of fictitious self-employment.
Different types of contracts: Werkvertrag and Dienstvertrag.
Those who make the decision to become self-employed or freelancers are faced with many contractual obligations that they had been spared until then because the company took care of them. The risk of running into legal risks is present, so it is necessary to be clear in one’s mind what types of contracts one can enter into with business partners. Among these, it is important to distinguish between service contracts and employment contracts. To assess whether a contract is legally a service contract or an employment contract, one must always examine the content of the contract, because the mere wording on a freelence contract has no legal effect.
Service contract: Dienstvertrag.
The German Civil Code (Bürgerliches Gesetzbuch – BGB) in Article 611 and following deals with the service contract, the Dienstvertrag. If a freelancer enters into this type of contract, he or she undertakes to provide a specific service. Consequently, it is only the service that is paid for, independent of the success or result achieved. Therefore, the freelancer is entitled to compensation as early as the moment he determines to provide his service. Service contracts can cover different types of trades, such as that of a lawyer, teacher, doctor, etc. To give an example that clarifies the concept, in the service contract for treatment by a doctor, it is not the patient’s recovery that determines payment, but the mere fact that the doctor has provided his service.
Employment contract: Werkvertrag.
In contrast, the contract of employment, the Werkvertrag, is dealt with in Articles 631 et seq. of the German Civil Code. Unlike the service contract, in this case the freelancer takes responsibility for producing specific work and is remunerated precisely according to what he has produced. Thus it is not the action itself, but the work accomplished that determines the remuneration. The freelancer can act independently and determine for himself in how many hours and with how many employees the work is done. It is possible to enter into this particular type of contract for specific work, such as some repairs, the creation of software, the transportation of passengers and goods, or the production of intangible work results such as expert reports or construction. Obviously, the freelancer in question carries out his activity on his own responsibility and using his own tools. He or she takes the risk for the success or failure of his or her work, and payment is made after the work is produced or at specified periods agreed between the two parties to the contract.
In order to save on office expenses, freelancers often work in their own private apartment. To be able to do this safely from a legal point of view, it is important to ask permission from one’s landlord. For the Federal Supreme Court (Bundesgerichtshof – BGH), a self-employed person can only carry out his or her professional activity in a home office if there is no external effect, such as noise or emissions.