The German government has proposed a new category of self-employment under social security law—referred to as “New Self-Employment” (Neue Selbständigkeit)—that aims to provide greater legal certainty for companies engaging freelancers, fee-based workers, and other external contractors.

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...

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