False self-employment (Scheinselbstständigkeit)
False self-employment exists where someone is engaged as a contractor on paper but in practice works like an employee: subject to instructions and integrated into the client's organisation. The consequence is back payment of social security contributions, borne mainly by the client.
How it is assessed
The test sits in section 7(1) of the German Social Code IV: employment is non-self-employed work, indicated in particular by working under instructions and integration into the work organisation of the party giving them. The decision is made on the overall picture of the actual circumstances, not on the heading of the contract.
Indicators against self-employment: fixed working hours and attendance obligations, day-to-day subordination to instructions, a place in the org chart and in internal processes, use only of the client's equipment, no own market presence, a single client over a long period, and taking on a line function rather than a defined project.
Indicators for self-employment: several clients, genuine entrepreneurial risk, freedom over time and place, own equipment and staff, payment for results rather than attendance, and an independent market presence.
What happens on assessment
If the German pension insurance finds dependent employment during an audit, the full social security contributions fall due retrospectively. Under section 28e SGB IV the client owes them — both the employer's and the employee's share.
Recourse against the individual is narrow: under section 28g SGB IV the employee's share may generally be recovered by payroll deduction only for the last three months. The economic burden therefore stays with the company.
Limitation follows section 25 SGB IV: contribution claims expire four years after the end of the calendar year in which they fell due; where contributions were withheld intentionally the period extends to thirty years. Late-payment surcharges are added, and intentional cases can constitute a criminal offence under section 266a of the German Criminal Code.
Status determination
Where doubts exist, a status determination procedure under section 7a SGB IV can be started with the German pension insurance. It creates legal certainty for the specific arrangement and can be requested by either side — sensibly early, not after the first audit.
Relevance for interim mandates
Interim managers carry elevated risk because the role by definition requires closeness to the organisation. An interim CFO running a finance department sits in leadership meetings and takes decisions, which from the outside looks like integration.
What helps in practice: a service contract with a defined assignment and objective rather than a job description, payment for delivery rather than attendance, freedom over time and place, several parallel clients, and no inclusion in the org chart, internal mailing lists or employee formats. Where the role meets none of those conditions, temporary agency work through a licensed provider is the more honest route.
This is general information, not legal advice.