The German Federal Social Court (BSG) has further clarified its case law on the distinction between dependent employment and self-employment. The ruling is highly relevant for all organizations that work with freelancers, for example in the areas of education, administration, projects, IT, or consulting.
Distinction between self-employment and dependent employment in Germany
The BSG once again dealt with a case in which the central point of contention was whether a permanently recurring activity agreed as “freelance work” was in fact self-employment or employment subject to social security contributions in Germany. In addition to the usual criteria for distinguishing between self-employment and dependent employment, the parties’ intentions were ultimately decisive in this case. After a comprehensive overall assessment, the BSG concluded that the activity was self-employment and not employment.
German Criteria for assessing self-employment or employment
Whether someone is self-employed or employed is determined by an overall assessment of all circumstances, not by a rigid scheme. The decisive factor is not only integration into processes or the use of infrastructure, but whether genuine entrepreneurial freedom and risk remain, such as
- free allocation of location/time,
- selection and reduction of orders,
- independent organization of work, and
- remuneration with entrepreneurial risk while having several clients and your own market presence.
BSG: Mutual agreement between the parties can be decisive
On the one hand, the BSG points out that mandatory social security regulations cannot be “waived” by agreement between the parties. However, it also makes it clear that the contract designation and thus the mutual agreement between the parties can be used as a decisive factor if the objective circumstances do not indicate a clear preference for one side. If, therefore, all objective evidence in the overall assessment points equally strongly towards employment and self-employment, the common intention of the parties (“self-employed” or “freelancer”) may, in exceptional cases, tip the scales.
The ruling is in line with the previous interpretation of Section 7 of the German Social Code (SGB IV), but sharpens the focus: employment remains characterized by personal dependence, integration, and the right to issue instructions, while self-employment is characterized by entrepreneurial risk, extensive freedom of organization, and an independent business structure. Industry-specific requirements and standard processes may explain a certain degree of integration, but do not automatically lead to employment in themselves.
At the same time, the BSG places greater emphasis on actual entrepreneurial freedom of disposition, i.e. the ability to select, reduce, or reallocate orders in favor of other clients and thus manage one’s own economic risk. Against this background, it remains the case that the contract designation is only a weak indication, but one that takes on particular weight when the objective circumstances do not reveal a clear preference for one side.
Significance for nonprofit organizations and companies in Germany
The ruling is relevant in practice for associations, foundations, nonprofit limited liability companies, and companies in several respects. The BSG emphasizes once again that freelance work remains possible but requires that actual entrepreneurial freedom exists and that freelancers demonstrably have their own scope for decision-making in terms of location, time, order structure, and working methods. Contracts that are effectively lived as an employment relationship, for example with fixed working hours, comprehensive instructions, and full integration into the team, continue to carry a high risk of false self-employment. Working exclusively for only one organization tends to indicate employment, while multiple clients, a separate market presence, and independent entrepreneurial activities support classification as self-employed.
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The use of the organization’s premises, IT, and processes is permitted, but should be structured in a way that is consistent with self-employment, i.e. optional, transparent, and, if necessary, subject to a usage fee. Remuneration models with genuine entrepreneurial risk, such as flat-rate or sales-based models, without overtime pay and with the possibility of reductions in the event of poor performance, are more conducive to self-employment than pure hourly wage models. Ultimately, what matters is how the collaboration is actually carried out, not what is written in the contract. If the practice shifts toward employee-like structures, even an originally viable freelance model can be overturned under social security law.
Legally compliant drafting of fee agreements for NPOs and companies
The ruling clearly states that simply being labeled as “self-employed” is not sufficient to avoid social security obligations, but can be decisive if the other indications neither support nor contradict dependent employment or self-employment. Although this is a positive signal from the BSG in the direction of private autonomy, one cannot and should not rely on this alone.
In order to minimize risks such as additional contribution claims, interest, and liability consequences, WINHELLER’s specialized attorneys provide support in the following areas:
- Reviewing your fee contracts for the use of freelancers in accordance with the current BSG line and identifying risk constellations
- Revising fee contracts, service descriptions, and remuneration models in light of the BSG criteria
- Comparing contracts and actual practice; developing concrete proposals for adjustments (e.g. regarding reporting structures, use of infrastructure, contract design)
- Development of legally compliant models for freelance work in nonprofit organizations and companies, tailored to your specific areas (e.g. education, administration, IT, consulting, project work)
Feel free to contact us!
BSG, judgment of July 22, 2025, B 12 BA 7/23 R
