Contractors are paid better than fixed roles

Freelancer & Founder

In this article, the term freelancer is used synonymously with the self-employed. A distinction, as provided by tax law, is not necessary. Tax-approved freelancers are just as affected by the issue as the self-employed who pay contributions to the Chamber of Industry and Commerce and trade tax.

While the market for IT freelancers in Germany grew by almost twelve percent in 2018, it was only able to grow by 7.8 percent last year, according to a study by Lünendonk & Hossenfelder.
Many freelancers, just like their clients, do not know what the future will bring. It is not a phenomenon that appears out of nowhere. In fact, it is a complex problem of social security law, which is an essential pillar of our society and our changing world of work. The Deutsche Rentenversicherung (DRV) wants to be able to clearly identify the difference to permanent employees. And that is becoming more and more difficult for her. Because, especially with independent IT consultants, customers often want close and intensive cooperation.

Bogus self-employment is used when a contractual relationship between the client and the freelancer is implemented similarly to a dependent employment relationship. If the Deutsche Rentenversicherung determines or suspects this fact, the contract is retrospectively classified as subject to social insurance. Health, long-term care, unemployment and pension insurance must be paid retrospectively by the client.

  1. Popular jobs and IT projects for freelancers
    The shortage of skilled workers continues to play into the cards of freelance IT specialists. The freelancermap platform has evaluated over a million search queries and identified the most important jobs and IT trends for the self-employed for 2020.
  2. Skilled labor shortage
    According to Bitkom, a company needs an average of six months to fill a permanent position. Independent IT specialists can be recruited much faster - usually within a month.
  3. Artificial intelligence
    According to machine learning, the self-employed attribute great innovation potential to artificial intelligence (AI).
  4. Cloud services
    There is much greater demand for specialists in cloud services. Here, demand grew by 65 percent in 2019 compared to the previous year.
  5. security
    After the blockchain hype, the subject of IT security is now becoming the focus of the self-employed.
  6. python
    After the great Python boom in 2018, the programming language continues to gain in importance, even if the freelancermap search queries are down slightly with a growth of 70 percent compared to the previous year (119 percent).
  7. Javascript
    Javascript is currently considered a top skill among freelance IT specialists. The programming language enjoys great popularity and is searched for almost twice as often as in 2018. With an increase of 95 percent, the volume of inquiries almost doubled in 2019.
  8. Java
    Experts were critical of Oracle's new license model and release cycle in 2018, but knowledge of Java is still one of the most important skills for the self-employed. The programming language experienced a real boom this year. Demand grew by 115 percent - and the trend is rising.
  9. Agile project management
    Agile project management in the form of Scrum will dominate the tech industry in the coming year.
  10. Product owner
    Product owners claim first place among the top jobs. You are responsible for the creation and implementation of a product by development teams as well as for optimization and economic success.
  11. Scrum Master
    Scrum masters are also particularly popular. You are responsible for compliance with the Scrum rules and the optimization of agile project management in the company.
  12. Data scientist
    Data scientists are in great demand because they will have a significant impact on the business models of the future. They bring together the data sources available in a company and, based on them, design strategies and ideas for the future management of the company.

Until the end of 2002 there were fixed criteria according to which the German Pension Insurance had made decisions. In order to establish bogus self-employment, a two-page form was sent to the Deutsche Rentenversicherung. Based on criteria such as their own website, their own stationery and several clients, they checked whether they could confirm their independence. At the beginning of 2003 these clearly defined criteria no longer existed. It was not until 2008/2009 that the DRV also changed its decision-making practice. Since then, the number of voluntary status determination procedures that have been decided on bogus self-employed has risen to almost 50 percent.

The freelance study for download

The main difference in decision making is the DRV's perspective, which has changed. Whereas in the past the freelancer was considered in its entirety, today the individual contract relationship is considered. This means that a self-employed person who has several jobs can be bogus self-employed and self-employed at the same time.

Criteria for bogus self-employment

The DRV would like to be able to recognize serious differences to an employee who is bound by instructions. Indications for dependent employment, i.e. for bogus self-employment, are an activity according to instructions and an integration into the work organization of the instructor, defined in § 7 and 7a SGB V. Every detail that restricts the free decision and the work of the freelancer, she evaluates as an indication of Bogus self-employment. She wants to realize that she is a real self-employed person. Clients and the self-employed should be aware of this.

1. The customer determines the place of work

Often it is stated in the project tenders:

  • 100% on site,

  • no remote or

  • Remote only after consultation with the customer.

As a rule, the self-employed cannot then decide when and where to perform their work. This is justified by the fact that the job requires on-site work and must work with other colleagues to exchange information. Often it is even required that the self-employed record their absences in the calendar or other tools. The fact that the self-employed cannot freely decide where to provide the service is assessed by the DRV as an indication of bogus self-employment.

Reading tip: How freelancers cram COVID-19 order erasers

Some freelancers report that they are no longer allowed to be on site with the customer. Instead, they should work in an office near the customer, or at least be nearby, so that they can be on site quickly if necessary. But this is also a requirement that is to be assessed as an instruction. This means that such constructs are not a recommendable solution approach with which real independence is achieved, which is also recognized as such by the DRV.

2. Freelancers use the customer's infrastructure

Often the self-employed also receives a PC and a permanent workstation from his customer. He writes his e-mails from his customer's e-mail account on the company's own servers with the signature specifications. And receives his office supplies from the secretariat. Often the self-employed also get a permanent job or a telephone. The freelancer is thus equipped in exactly the same way as the permanent employees of the customer. The client wants to avoid security risks. For the DRV this is clear evidence of bogus self-employment.

3. Freelancer is involved in the customer's organization

The self-employed participates in the project meetings, jour fixes and other discussions - on site, online or by phone. It goes without saying that he is invited to birthday or Christmas parties. After all, he is part of the team for a more or less limited period of time. He and the permanent employee take their lunch break and enjoy the meal at the employee rate.

The freelancer appears in the organization chart of the organization or project as a project manager, sub-project manager or as an expert. If the freelancer coordinates his days off with his project colleagues or acts as a vacation replacement for the customer, he is definitely part of the customer organization. The use of the out-of-office assistant and the notification in the e-mail signature of when absences are planned is a further indication of the inactivity.

4. Contracts that regulate many details

The self-employed person creates work results on the basis of the customer's own templates. Complies with customer specifications and processes. Sometimes even negotiates with other suppliers or is a vacation replacement for an internal employee. For the submission of the time sheets, the self-employed person uses the templates that are given to him and adheres to the rules as to when and how the hours are documented. Or they can be recorded directly in the customer's own IT system, for example SAP. In addition, the freelancer is stipulated by when to submit the invoice.

In addition, there may be further specifications from the project customer, such as:

  • Submit daily or weekly as the last official act, put on drive XY.

  • Deduct the breaks with a flat rate of 1 hour per day.

  • No more than 10 hours of working time may be recorded per day.

  • Work on public holidays or on weekends requires the prior approval of the customer's contact person.

Contracts also like to regulate that the freelancer may only use assistants or third parties with the prior consent of the client.

With regard to the task and the work results of the freelancer, however, some clients are very imprecise. The contracts briefly specify the task or role the contractor will assume.
An example: I support my customers in the area of ​​change, communication and training in the role of Global Training Manager for a rollout of Office 365. For this I bought 60 percent by the end of the year. In the contract it states:

  • Global Training Manager Office 365 from July 1st, 2017 to December 31st, 2017

  • 75 person days (1 person day corresponds to 8 hours)

What exactly I do, that arises. The goals of the project are roughly clear, but not the content of my assignment. The tasks are distributed during the weekly jour fixes, depending on what arises and what is to be finished first.

  1. Roundtable on the topic of sourcing
    Rolf Kleinwächter (Capgemini), Marcel Buchner (Tech Mahindra), Jörg Hild (PwC), René Funke (Maturity), Christiane Pütter (IDG), Gerhard Haberstroh (DXC Technology), Hans Königes (IDG), Bernd Sauer discussed the topic of sourcing (Allgeier Experts) and Igor Radisic (Horváth & Partner).
  2. Marcel Buchner, Country Manager Enterprise Germany & Austria, Tech Mahindra:
    “Agility raises questions. How do you regulate the remuneration? There are no standards yet. In the end, the customer wants to work agilely, but shop conservatively - and see familiar roles and daily rates again. "
  3. René Funke, Head of Sales & Marketing, Maturity:
    “There are also hidden reasons for outsourcing. Many companies have missed the standardization of their services, systems and applications. They want to make up for that through cloud computing! "
  4. Gerhard Haberstroh, Adviser Relations, DXC Technology:
    “We have to form partnerships. This can also mean going into a project together with original competitors. Because sourcing is a resource issue! "
  5. Jörg Hild, Partner IT Sourcing Advisory, PwC:
    “Some companies set up their own delivery centers at offshore locations. Before recommending this to a customer, I would look twice. Because often the customer does not have the necessary market access to find staff. "
  6. Rolf Kleinwächter, Head of Cloud Practice DACH, Capgemini Outsourcing Services:
    “Almost three in ten study participants recognize the need to deliver IT-based innovations. There is an opportunity here for service providers. You can build a real bond with the customers! "
  7. Dr. Igor Radisic, Competence Center IT Management & Transformation, Horváth & Partners:
    “There is a high demand for automation through robotics, especially in the finance sector. In five years there will hardly be any need for clerks in accounting - in the same way, operational activities in controlling will be eliminated. "
  8. Bernd Sauer, board member of Goetzfried AG (an Allgeier Experts company):
    “German companies are not very open to offshore. It is not uncommon for tenders to say 'German language'. And that doesn't just apply to medium-sized companies. "