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Example case
Ricardo from Italy is a trained drywall worker. Despite his qualifications and many years of professional experience, it is difficult for him to find a permanent full-time position. Most recently, he had signed a trial contract with a construction company. After a month, his boss told him that in future he would only be able to employ him “with business”, i.e. as a self-employed person. That is why the boss has already registered a trade for Ricardo. Ricardo works as before from 07:00 to 16:00, gets 10€ per hour in cash and his boss tells him exactly what to do every day. He also checks that Ricardo is doing his job well. Ricardo caught the flu a few days ago. His boss told him on the phone that he would not pay him for the days not worked. What is even worse: During the visit to the doctor it turned out that Ricardo is no longer insured. Ricardo spoke to friends about his work situation. These have warned Ricardo that working as a business could cause problems during controls on the construction site. Ricardo thought that he was fully legally employed. He does not understand his situation and wants to clarify his rights.
With the business registration, Ricardo has become formally self-employed (and a trader). As a trader, he would have to apply for a tax number at the Tax Office and bill his boss for his work. He would also have had get his own health insurance. His boss has not paid health or pension insurance contributions for Ricardo. Traders are not entitled to this, nor to continued payment of wages in the event of illness, standard wages and holiday. In Ricardo’s case, however, there is some evidence that it is not a real independence but rather a so-called “Bogus-self employment”, so really he is still an employee in the construction company. Otherwise, as a self-employed person, he would have to be free to decide who he carries out assignments for. He should be able to determine for himself when to come to the construction site and when to leave it. His boss is not allowed to give him instructions on how to do his job. Normally Ricardo would also have to have his own tools to carry out the work. None of this is true in the case of Ricardo. In addition, you are not allowed to do the same work with the same employer first with an employment contract and then as a trader. It is therefore very likely that Ricardo was only supposed to be in a pretend business and that he is in fact an employee.
To make an initial assessment of his status, Ricardo can use one of the many checklists on the subject of bogus self-employment that can be found online:
https://www.handwerk-magazin.de/ scheinselbststaendigkeit/383/95/download
To get the basic information about his status, Ricardo can contact an employment law Advice centre:
Specific employment law Advice centres
https://www.arbeitundleben.de/arbeitsfelder/beratungsnetzwerk
https://www.faire-mobilitaet.de/en
Ricardo can find an overview of all Advice centres by subject focus as well as by language here:
https://www.eu-gleichbehandlungsstelle.de/eugs-en/eu-citizens/searching-for-an-advice-centre
There he also learns what rights he has as a bogus self-employed person. However, an Advice centre cannot make a binding determination of whether Ricardo is a bogus self-employed person - i.e. an employee according to objective criteria. Certain institutions are authorised to do this, such as the German pension insurance, tax offices and Labour courts.
Ricardo can have his status as an employee subject to social security contributions determined by the clearing location of the German Pension Insurance. It is the checking centre for questions relating to the social security status of people. To do this, Ricardo has to fill out a form that he can download from the German Pension Insurance website:n:
When completing the form, an Advice centre:
https://www.eu-gleichbehandlungsstelle.de/eugs-en/eu-citizens/searching-for-an-advice-centre
or a contact point of the German Pension Insurance can help. Then Ricardo must submit the application to the following address:
Deutsche Rentenversicherung
Bund Clearingstelle für sozialversicherungsrechtliche Statusfragen
10704 Berlin
The clearing location of the German Pension Insurance needs about four weeks to check the status. Ricardo then receives a written notification
If the clearing location confirms that Ricardo was actually employed as an employee and not as a self-employed person, his employer must pay all contributions (both the employer and the employee share) for all social insurance, i.e. for health, long-term care, unemployment and pension insurance This is important for Ricardo’s entitlement to old-age pension or unemployment benefit for example. The basis for calculating the contributions is the minimum construction wage.
If Ricardo remains employed by his employer, the employer may deduct part of the social security contributions from wages, but only for the three monthly wage payments after the pension insurance has determined his status as an employee. And the employer may only deduct social security contributions in the amount that exceeds the monthly seizure exemption limit (€ 1402.28 as at 2023). The seizure exemption limit is an amount which Ricardo may not be deducted from the wages, namely this sum is needed to secure his existence. For example, if Ricardo earns € 2000 net, € 1402.28 will remain protected. The employer may therefore withhold a maximum of € 597.72.
If Ricardo no longer works in the construction company, the employer cannot demand these contributions from him. In this case he has to pay the entire insurance contribution to the social security , i.e. both the employer’s and the employee’s share.
As an actual employee who only appears to be self-employed, Ricardo had all the rights of a “normal” employee from the start of the employment relationship, including the right to the prescribed minimum wage and the right to continued payment of wages in the event of illness.
His boss does not recognise the decision of the clearing location and the resulting rights and does not want to grant them to Ricardo as an independent trader. In order to obtain his rights, Ricardo can take legal action at the Labour court to determine the employment relationship. Only in this way can he enforce his rights Information on this procedure can be found in Chapter 2.
As a presumably bogus self-employed person, and therefore as an employee, Ricardo has the right to have health insurance through his employer. However, clarifying his status can take several weeks. Ricardo would not have health insurance during this time. The health insurance company can charge him contributions and high late payment surcharges for this period due to the unclear health insurance status. For this reason, it is recommended that Ricardo informs the health insurance company about the start of self-employment and joins the voluntary health insurance for the self-employed. The lowest health insurance contribution is currently around € 172.01 per month.
There are places throughout Germany that provide medical care to people without health insurance in acute cases. However, this care is limited to a minimum and is in no way preferable to registering with the health insurance company. Ricardo can get the exact information about such places from the social Advice centres:
https://www.eu-gleichbehandlungsstelle.de/eugs-en/eu-citizens/searching-for-an-advice-centre
If the clearing location determines that Ricardo was actually bogus self-employed, his employer has to pay the contributions to the health insurance. Ricardo would then be reimbursed for the contributions he has already paid.
In any case, Ricardo must report his income to the Tax Office. He should subsequently apply for a tax number and issue invoices to his employer for his work.
By registering a business, as a formally self-employed person, he is obliged to submit a tax return in the next year. If Ricardo does not do this (on time), he faces a penalty for being late or even a fine. For this, the tax that Ricardo has to pay would be estimated. That can be unfavourable for him.
If the Tax Office of Ricardo’s employer could prove that he consciously or recklessly did not pay the tax for his wages, the employer would have to pay the tax for Ricardo. For this, Ricardo should seek advice from a specialised office, a tax adviser or a lawyer specialising in tax law.
As soon as the clearing location has established that Ricardo was bogus self-employed, his commercial activity also ends. This means that Ricardo must then also deregister his business at the latest then. The best way to do this is using this form:
Bogus self-employment is a criminal offence. The boss of Ricardo could have committed a criminal offence because he did not pay any contributions to health, pension and social insurance. Ricardo can therefore report him to the office responsible for the Financial control of illegal employment for the headquarters of the construction company. The Financial control of illegal employment is an authority that controls employers and, among other things, checks whether they are correctly paying the social security contributions for the employees.
https://www.zoll.de/EN/Contact/Enquiries/General-enquiries/general-enquiries_node.html
The boss can be punished with a fine or even imprisonment.
Prior to this, Ricardo should seek advice from a lawyer because there is a risk that the Financial control of illegal employment could also review his actions and prosecute them.
Ricardo can report personally to the Financial control of illegal employment, file a complaint and make a statement. If that is not possible, he can also submit a message online:
https://www.zoll.de/EN/Contact/Enquiries/General-enquiries/general-enquiries_node.html
For efficient review and processing of the case, the FKS needs as much information as possible. Therefore, Ricardo should provide information about the length of the employment relationship, daily working hours, the amounts received, witnesses, etc.