Quick Hits
- The German government plans to introduce an additional category of self-employment under social security law.
- To qualify for New Self-Employment status, at least two of four legally defined criteria would have to be met, while the right to issue instructions and integration into the client’s operations would no longer be considered and an overall assessment would no longer apply.
- New Self-Employed individuals would be subject to mandatory pension insurance, with the client responsible for registration and contribution payments.
Background: Status Determination
Under current German social security case law, the classification of a working relationship as dependent employment or self-employment is based on an overall assessment of all circumstances of the individual case. Various criteria are considered, including the compensation model, the extent to which the individual uses his or her own infrastructure, liability arrangements, the right to issue instructions (Weisungsgebundenheit), and integration into the client’s work organization. In practice, the latter two criteria are typically decisive.
The determining factor is not the contractual arrangement but rather the actual performance of the working relationship. This frequently creates uncertainty in practice, particularly in long-term engagements. If dependent employment is determined retroactively, the client may face significant back payments of social security contributions and late payment surcharges.
Content of the Draft Bill
The German government intends to create greater legal certainty for all parties involved. The ministerial draft (Referentenentwurf) (as of March 26, 2026) proposes an additional form of self-employment (“New Self-Employment”) in Section 7 (5) of Book Four of the German Social Code (Sozialgesetzbuch Viertes Buch (SGB IV)). This new category would not replace the existing criteria for classification but would exist alongside them as a new form of self-employment.
To establish New Self-Employment status, at least two of the following four criteria (which would be codified by statute) would have to be met. The contractor would:
- bear the risk of loss and have the opportunity for profit,
- not work predominantly for only one client,
- incur expenses typical of an entrepreneur, and
- actively market his or her own services.
In addition, the parties would be required to submit a joint declaration, observe a six-month waiting period (in cases of prior employment with the client), and register the engagement after work begins. In exchange for this classification, New Self-Employed individuals would be required to make statutory pension insurance contributions.
The existing law on status classification would remain in effect alongside the new provisions. The draft bill also provides that employment law status determinations would not be affected by the reform.
Takeaways
The proposed New Self-Employment category is intended to provide legal certainty. Whether it will achieve this goal remains to be seen. While the error-prone overall assessment would no longer apply, legal uncertainty may persist because the new statutory classification criteria would also require interpretation.
As a result, companies engaging independent contractors may want to continue analyzing their contractual arrangements early and take appropriate measures to avoid potential employment law and social security law disputes.
Ogletree Deakins’ Berlin and Munich offices will continue to monitor developments regarding (Pseudo-)Self-Employment among freelancers and status determination and will post updates on the Cross-Border and Germany blogs as additional information becomes available.
Karl Melzer is an associate in Ogletree Deakins’ Berlin office and advises companies on status determination matters, with a particular focus on freelancers and new work.
Lela Salman, a law clerk in Ogletree Deakins’ Berlin office, contributed to this article.
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