Independent Contractor Compliance – New Developments in Germany

By Christian Hübscher

An on-going hot topic when thinking about contingent workforce compliance is the delimitation of independent contractors and employees. It is a highly disputed question in a lot of countries. Due to the flexibilisation of employment relationships, which particularly increased during the pandemic, it is becoming more difficult to distinguish an independent contractor from an employee.

1.   How is the status checked?

In contrast to employees, independent contractors are not personally dependent in their work. In order to define the characteristics of the personal dependence, numerous individual criteria have to be taken into account, in particular the following:

  • Probably the most important criterion is the personal dependence on directives regarding place, time and specifics of the work performed
  • Integration into the operation of the client
  • Obligation to perform the work personally
  • Entrepreneurial behaviour and risk

2.   What are the consequences of misclassification?

If the contractual relationship is implemented wrongly, not as a true independent contractor relationship, but as an employment relationship, it is called pseudo-independence (Scheinselbstständigkeit). The legal consequences concern:

  • Employment law (full employee protection)
  • Social security law (Payment of full social insurance contributions retroactively for the current as well as for the last four years. In case intent is given, social insurance contributions have to be paid for the last 30 years)
  • Tax law (withholding taxes and wrongfully deducted VAT concerning the last four years)
  • Criminal law (imprisonment of up to five years or with pecuniary penalty as far as the employer withholds as an employer an employee's contribution to social security; tax fraud)

3.   New developments in Germany

In recent years, employee’s working conditions have become increasingly flexible, e.g. due to implementation of part-time work, mini jobs, fixed-term contracts, trust time work (Vertrauensarbeitszeit), etc.

It was an important criterion for an independent contractor status if the worker had several clients. However, courts argue that also employees can have several employers when working in several part-time jobs and that, therefore, having several clients should not be a valid criterion for an independent contractor status.

In the past employees regularly worked in the employer’s office. Working from home was an exception. When an independent contractor worked from home or remote, this was a good criterion for an independent contractor status since integration into the client’s operation was not given. During the pandemic, an increasing number of employees are working from home or remote. Therefore, German authorities now argue that employees also work from home and that independent contractors participate in meetings via internet.

There is a risk that increasing flexibility of working conditions and the resulting harmonisation of employment relationships and independent contractor relationships will lead authorities and courts to consider independent contractor relationships more and more as employment relationships.

Interested in more details? Please contact us.


Christian Hübscher


Phone:    +49 (0) 172 372 1943




Thomas Leister


Phone:    +49 89 5434 8060



External Workforce Assessment

By Christian Hübscher

How do you determine your next level of External Workforce Management solution?

Do you still face typical challenges, such as being compliant, minimise risk, managing cost, standardising processes and tracking performance?

PEER GROUP ALLIANCE has developed a External Workforce Assessment concept whereby we support you with mapping your current hiring principles and comparing these with your stakeholders expectations.

The result of the assessment will form the basis of a holistic External Workforce management solution preparing your company for the future and securing your competitive advantage.

External Workforce Analytics

By Christian Hübscher

We are delighted to announce that PEER GROUP ALLIANCE and myDIAGO entering into a Strategic Partnership. Both are joining forces as experts and innovators in holistic and tailored External Workforce solutions.

The focus is to provide an unique Dashboard Technology – myDIAGO. myDIAGO is a cloudbased, self-service dashboard that automatically consolidates all your external workforce and spend data into one system and that creates a clear dashboard overview according to your preferences and needs. No more manual consolidating of data from different systems. Done with vulnerable excel files.

Interested in learning more about “myDIAGO?


Supplier Collaboration

By Christian Hübscher

No matter how, but the Coronavirus changed your way of managing your client – supplier relationship and the way you serve each other. The traditional cooperation between a client and a supplier is no longer successful and ready for failure and disappointments.

But what has changed in the approach and the mindset? Electronic led relationship management, virtual sales and business development create a certain distance between the selling and buying party. Gaps in understanding both stories can lead to contract breach and loss of years of cooperation.

The only constant factor to implement is a solid but continuous evaluation of your supplier collaboration. How do you measure performance, how do you calculate added value from a supplier and how do you report this in a clear supplier collaboration scorecard?

PEER GROUP ALLIANCE launched the Supplier Collaboration Concept supporting companies in setting the stage for performance, evaluation and innovation through a strong supplier-client relationship program.

Interested in learning more about our “Supplier Collaboration” methodology?

Contract Auditing

By Christian Hübscher

If you go for dinner in a restaurant don´t you expect a good service for a reasonable price? Don´t you react when the service or the food doesn´t meet your expectations?

While looking on today’s business reality it’s more important now than ever, that your service provider is delivering the service you’ve always expected, at the levels that have been agreed to, at the rates that were negotiated.

PEER GROUP ALLIANCE, we are contract audit experts. Our proprietary “Health Check” methodolgy targets all aspects of the contract – commercial terms, service level agreements, key performance indicators, legal compliance and data privacy.

Let us dissect your HR Service agreements, identify areas of vulnerability, set supplier fees and margins benchmarks and – get immediate cash backs.