Bogus self-employment

A pseudo self-employment is understood to mean the incorrect classification of a dependent employment relationship as self-employed. The term comes from social security law and can have serious tax or criminal consequences for both employers and employees.

Definition / explanation

A pseudo self-employment exists if someone, according to their own statements, provides an independent service or work performance for a third-party company, but is actually in a non-self-employed employment relationship.

The bogus self-employment must be considered in relation to the contractual structure of business relationships and the typical employment relationships of actually self-employed. An independent entrepreneur typically has several clients and is not bound by instructions beyond the client-contractor relationship. As a self-employed person, he bears the sole financial risk and can make decisions on his own.

In the case of bogus self-employment, one describes oneself as self-employed, but fulfills all the legal requirements that classify a person as an employee. This misjudgment can occur unknowingly or completely knowingly and has different backgrounds.

By hiring the self-employed, companies save a lot of social security contributions compared to hiring new employees. But even pseudo-self-employed are subject to social insurance and the wage tax must also be paid - retrospectively if necessary.

What are the characteristics of a bogus self-employment?

A pseudo self-employment is characterized by various criteria, which can be present in different degrees.
These characteristics are:

  • Sales are mainly generated by a client (at least 5/6)
  • Binding of instructions to a client with regard to working hours and the way work is carried out
  • no own business premises or no own letterhead
  • no employees of their own
  • Work performed is checked by the client
  • The activity is carried out in the premises provided by the client
  • Client employs employees who carry out the same activities as the self-employed

Tax implications

Not only in the context of social security, but also in terms of tax law, pseudo self-employment has consequences. From the time when the bogus self-employment is established, the bogus self-employed person must pay income tax and any sales tax shown must be paid back.

The client or employer also has to pay back payments, which can possibly be quite high. To protect against these financial consequences, a status check of self-employment can be requested.

Summary

  • People who act as self-employed to the outside world, but are actually employees
  • various criteria can indicate a bogus self-employment
  • In the case of bogus self-employment, it depends on the actual circumstances in everyday working life
  • In the case of bogus self-employment, both wage tax and social security contributions must be paid
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