Bogus self-employment: Bundestag adopts moratorium to temporarily prevent self-employed teachers from becoming dependent employees

Last Friday (31 January 2025), Germany’s lower house of parliament, the Bundestag, adopted two-year transitional provisions for self-employed teachers with the votes of the CDU/CSU, SPD and Greens. This means that teachers who do not work as dependent employees but as self-employed professionals can continue to do so for a further two years without having to worry that their work will be categorised as dependent employment.

I. Background

The statutory provisions have been introduced because of the issue of determining the social insurance status of an occupation, which is as difficult in practice as it is far-reaching in its consequences. In the modern world of work, there are many occupations that can be carried out both within a dependent employment relationship (e.g. as an employee) and as a self-employed professional. The correct status is decided on a case-by-case basis. The social insurance institutions, which are now scrutinising cases more closely, and the social courts make their decision after weighing up all the circumstances of each case.

This makes risk analysis and ensuring the legally compliant deployment of self-employed professionals extremely challenging for companies in practice. Legally compliant conduct is particularly important in this area, as mistakes can result not only in large back payment demands from social insurance institutions and tax offices, but also in personal criminal consequences for those responsible (see section 266a of the German Criminal Code (Strafgesetzbuch – StGB) and section 370 of the German Tax Code (Abgabenordnung – AO)).

The tendency of social insurance institutions to categorise the occupations they examine as dependent employment, which has been established in practice without any empirical basis, creates challenges in the compliance, purchasing and legal departments of companies. And this practice is also causing more problems in areas where society and legislators have a vital interest in the provision of services by various stakeholders.

The threat of people being classified as dependent employees combined with the associated compulsory social insurance contributions led, for example, to a fear that there would no longer be enough doctors available for medical emergencies and on-call services (see Federal Social Court (Bundessozialgericht – BSG) judgment of 24 October 2023, case B 12 R 9/21 R), that teaching services outside state schools could no longer be provided (see Federal Social Court judgment of 28 June 2022, case B 12 R 3/20 R, known as the Herrenberg decision) or that coaches could no longer be found for parasports or clubs and associations for popular sports.

In this context, a series of dialogues were initiated between the Federal Ministry of Labour and Social Affairs, professional associations, trade unions and the German Pension Insurance Association. In these dialogues, discussions were held for certain occupational groups regarding how self-employed professionals in these socially sensitive areas could be deployed in a legally compliant manner (we reported on the standalone solutions planned in this context in our live webinar on 30 October 2024).

As a result of these dialogues, a set of criteria was drawn up for doctors working in emergency/on-call services. If the criteria apply, the parties involved declare that they have accepted self-employment. The dialogue regarding working as a teacher is likely to be suspended, at least temporarily, due to the law now adopted. Unfortunately, there is currently no practically feasible solution for the many self-employed service providers in sport.

II. The provisions

The transitional provisions now adopted for teachers will be inserted into the new section 127 of Book IV of the German Social Code (Sozialgesetzbuch (SGB) IV n. F.). It will come into force the day after being promulgated in the Federal Law Gazette and reads as follows:

“Section 127: Transitional provisions for teaching staff

(1) If an insurance institution establishes in a procedure to determine employment status in accordance with section 7a or in the context of determining whether an obligation to pay insurance applies and the value of contributions in health, long-term care and pension insurance schemes and under employment promotion law in accordance with section 28h(2) or section 28p(1), fifth sentence that a teaching activity constitutes employment, an obligation to pay insurance on the basis of this employment will only arise from 1 January 2027 if

1. the contracting parties unanimously presumed that a self-employed activity existed when entering into the contract and

2. the person carrying out the teaching activity agrees.

If no such determination has been made and the contracting parties were in agreement on the presumption of self-employment when the contract was entered into and the person carrying out the teaching activity agrees with the other contracting party, there is no obligation to pay insurance and contributions on the basis of employment until 31 December 2026.

(2) If the requirements of subsection 1 are met, from [the day after promulgation] until 31 December 2026 the persons concerned will be deemed to be self-employed within the meaning of the provisions on the obligation to pay insurance and remit contributions for self-employed teachers in Book VI of the German Social Code. By way of derogation from the first sentence, for persons for whom the requirements of subsection 1 are met and who would fulfil the requirements of section 1 of the German Artists’ Social Insurance Act (Künstlersozialversicherungsgesetz) with the teaching activity in subsection 1 if it were carried out as a self-employed activity, the provisions on the obligation to pay insurance and remit contributions under the German Artists’ Social Insurance Act will apply accordingly until 31 December 2026.

(3) If the requirements of subsection (1) are met, compulsory contributions paid on the basis of teaching activities in accordance with the provisions for self-employed teachers in Book VI of the German Social Code prior to [the day after promulgation] will be deemed to have been correctly paid.

(4) If the requirements of subsection 1 are met, section 28a of Book III of the German Social Code will apply by analogy to the persons concerned who were insured under section 28a of Book III at the time of determination according to subsection 1, first sentence, or the time of approval according to subsection 1, second sentence, from the start of employment until 31 December 2026.”

This means that teaching staff who provide their services as self-employed professionals can continue to do so for a further two years. This is because for the next two years the parties to the contract will have to right to determine the social security status of the self-employed teacher.

The only prerequisite for application of the special provisions, which prevent the work from being categorised as dependent employment, is that (i) the parties presume that the work constitutes self-employment and (ii) the teacher agrees to this categorisation (see section 127(1) of Book IV of the German Social Code, as amended). According to the clear wording of subsection 1, the moratorium expressly applies to cases in which the social insurance institutions have already decided otherwise. It thus prevents these decisions from taking effect before the end of 31 December 2026. At the same time, the new provisions have a preventative effect in that they also prevent status determination decisions not yet issued from taking effect until the end of the aforementioned date.

III. Outlook

The new provisions should be helpful for individual self-employed teachers and educational institutions, provided they are upheld. They will be able to plan securely for the next two years and do not have to worry that their work will be categorised as dependent employment. For the time being, a teacher does not have to worry that the contractual relationship will be terminated because the institution is unable to finance the additional non-wage labour costs incurred. The provision is therefore a win for the education system in Germany, at least in the short term.

However, this special statutory provision also raises far-reaching concerns. It prevents even correct status categorisations of dependent employment from taking effect. This is only likely to have a minor direct impact on the social insurance institutions, which are already under pressure, as self-employed teachers are already subject to compulsory insurance (see for example section 2, sentence 1, number 1, of Book VI of the German Social Code). However, indirect effects on auditing practices at the expense of the insured community are likely to be unavoidable over the next two years. In addition, the scope of application of the provision is unclear. The question is when an activity counts as a teaching activity within the meaning of section 127 of Book IV of the German Social Code as amended. The wording of the law and the explanatory memorandum do not mention this at all.

Furthermore, this law does not provide any long-term or comprehensive solutions. It constitutes short-term special provisions for a specific occupational area and excludes other areas that are no less important to society. There is thus a fear that legislators will face less pressure to find an overall solution to the challenges in this area. In this context, individual industry associations are already warning that this can only be the first step.

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