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Business case:

A company works with a freelancer for cost beneficial reasons and to take advantage of greater flexibility in regard to the German labour law.

The company is the freelancer's only client and contractual conditionshow that the freelancer is subject to hourly pay. The contract also required the freelancer to deliver the service personally. While working for the company the freelancer also uses the equipment & materials of the employing company.

Business challenge:

Looking at the given situation the German authorities considered the freelancer as a regular employee of the company.

For this reason the employing company requested a change to the status of the freelancer, from freelance to regular employee. Changing from freelance to employment status involves several risks for the employing company in respect to the German labour law:

Questions to be considered:

• Liability for the employer's and the  employee's parts of the social security contributions,
• First-line liability for the employee's income tax,
• Reversal of VAT payment and pre-tax deductions
• Criminal Law: e. g. Tax fraud,
• Possible unintentional consequences with regard to labour law.

How we helped:

We provided advice and support throughout the full process of changing the contractual status from freelance to employment.

Our law professionals negotiated with the German tax authorities and the social security administration in behalf of the employing company in order to prevent further negative impact for the ongoing business operation in Germany.

When managing an employment relationship in Germany it is most important to consider local compliances, as well as meeting German governance standards. Our professional advisory services can help you to minimize the risks involved when employing and managing human resources in Germany.