Chapter 4 Employee or Freelance Worker

Abstract

Under German law the distinction between employees and freelance workers is of particular importance in determining the applicability of employment and labour laws, as well as the payment of social security contributions and the obligation upon the employer to deduct income tax. In practice, the courts have interpreted the meaning of “employee” widely, often finding that relationships which were intended to be construed as freelance were in fact relationships of employer and employee. Consequently, such relationships fall within the scope of German employment law. Employment law offers greater protection to an individual who is an employee in comparison with a freelance worker. As an illustration, the termination of an employment relationship must be in compliance with restrictive employment law provisions which would not apply to a freelance relationship. Furthermore, employers are responsible for the payment of social security contributions and the deduction of income tax from an employee’s salary. In order to avoid any doubt as to the status of a relationship, all parties are well advised to carefully analyse whether their relationship truly qualifies as freelance.