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Why Germany’s new regulation may be driving freelancers away

Following a new regulation, the number of freelancers may decline further in Germany. ‘The law encourages freelancers to work from beyond Germany’s borders’, said André Sola, Managing Director of APSCo Deutschland.

Jasper Spanjaart on April 25, 2022 Average reading time: 3 min
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Why Germany’s new regulation may be driving freelancers away

2022, by all means, looks destined to be the year of the freelancer. After all, 71% of human capital and C-Suite leaders plan to shift roles to contingent, project or contract. As freelancers slowly gain more of an important role in organisational context, that notion seems true for most European countries except for one: Germany. 

Germany is projected to have a continent-leading worker gap of 7 million by 2050.

To understand Germany’s labour market, look no further than its current statistics on ageing. Germany is projected to have a continent-leading worker gap of 7 million by 2050, according to CGDEV and United Nations studies. While labour shortages, or worker gaps, will be a common denominator in Europe’s labour markets, Germany’s version comes paired with another worrisome trend.

The number of freelancers in Germany is dropping rapidly

As its neighbouring countries look to make things easier for freelancers, Germany lags behind. In 2011, France introduced a new, simplified system with which freelancers were able to get a registration number in less than 48 hours. Germany, meanwhile, stuck to its own labour law called the Scheinselbstständigkeit. Which translates to false, or bogus self-employment.

The Scheinselbstständigkeit, often referred to as a ‘monster law’, aims to ensure no false self-employment occurs. German tax authorities take the law very seriously as a form of social security fraud — and the law has subsequently resulted in the total number of freelancers in Germany dropping rapidly. According to Eurostat, Germany’s total number of self-employed workers has decreased by 16.8% over the past 10 years. France, meanwhile, has seen a 16% increase.

‘The law encourages freelancers to work from beyond Germany’s borders’

Now Germany’s new government appears to have pivoted through the introduction of a new law. But on the outset, the new regulation on the inquiry proceeding of freelancers (Statusfestellungsverfahren) once more appears to be too complex, the German Association of Professional Staffing Companies (APSCo Deutschland) warns. “While the aim is to have a reliable status determination procedure that provides legal certainty for all parties involved in the contract, this is unlikely to be the case in many instances”, said André Sola, Managing Director of APSCo Deutschland.

“The law only applies to where the work is conducted, encouraging freelancers to work from beyond Germany’s borders.”

Sola sees several issues with the regulation, including the lack of viable digital processes which slows down any determination timeframe. But one of his key concerns is that the changes encourage freelancers to work from beyond German borders. “The law only applies to where the work is conducted, encouraging freelancers to work from beyond Germany’s borders. We are working with policy makers to ensure the regulation is amended further to ensure freelance compliance law is more straightforward. And supports the creation of a dynamic workforce.”

‘Independent freelancers should be defines as business-to-business’

Under current legislation, freelancers in Germany are viewed as dependent employees who provide personal service under direction and control. According to Tania Bowers, Global Public Policy Director at APSCo, that should be changed. “Independent freelancers should be defined as business to business, as opposed to dependent employees who provide personal service under direction and control”, she said.

“We believe that citizenship laws and skilled immigration legislation need to be modernised to support wider skills attraction.”

Finally, APSCo has called on policy makers to simplify the recognition process of foreign qualifications and professional registrations. “We believe that citizenship laws and skilled immigration legislation need to be modernised to support wider skills attraction. Where talent can’t be brought in to fill skills gaps, federal and state investment needs to be channelled to support educational, training and employer led programmes to build the technical skills needed to meet the challenges of the 4th industrial revolution.”

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Jasper Spanjaart

Jasper Spanjaart

Editor-in-Chief and Writer at ToTalent.eu
Editor-in-Chief and writer for European Total Talent Acquisition platform ToTalent.eu.
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