‘New self-employment’ – an attempt at reform with significant side effects

The legal classification of freelance work has always been one of the greatest sources of uncertainty in German labour and social security law. Many companies and self-employed individuals do not know whether a working arrangement will subsequently be recognised as genuine self-employment/freelancing or classified as bogus self-employment. Social security audits are particularly problematic in this regard, as they often only provide clarity retrospectively, but frequently with significant financial consequences. This uncertainty leads to projects being abandoned, self-employed individuals no longer being commissioned, or activities being relocated abroad.

The so-called status determination procedure at the German Federal Pension Insurance Fund is intended to give individuals the opportunity to have their status determined before commencing work, to establish whether the activity constitutes self-employment or employment. It is designed to enable early clarification of social security status, but in practice it frequently fails to achieve this objective. Decisions are regularly made on the basis of abstract contractual arrangements and often show little consideration of individual circumstances.

Against this backdrop, the Federal Ministry of Labour and Social Affairs (BMAS) is pursuing the aim of creating greater legal certainty for self-employed work. According to reports that emerged after the end of March 2026 and an initial internal draft bill, the Ministry is working on a model for so-called ‘new self-employment’. This is intended to create an additional legal form of self-employment alongside the existing one. In the future, self-employed people will be able to choose whether to remain in the existing system or opt for this new form of self-employment. Those who opt for the ‘new self-employment’ will be required to become members of the statutory pension insurance scheme. In return, provided certain criteria are met, the work will be deemed self-employed, thereby eliminating the risks of subsequent status corrections (particularly as a result of social security audits).

The BMAS’s approach: security through compulsory insurance

The BMAS’s basic idea is understandable. Integration into the statutory pension insurance scheme is intended to clarify that this is an independent form of freelancing for the “new self-employed”. This would provide clients and the self-employed with greater security and predictability. At the same time, this framework could serve to provide broader protection for the retirement provision of the self-employed. In times of demographic change, this idea appears politically attractive.

The proposal therefore appears to be a pragmatic trade-off for those opting for ‘new self-employment’: compulsory statutory pension insurance in exchange for legal certainty.

The criticism: legal certainty must not be a luxury

However, the Association of Start-ups and the Self-Employed in Germany (VGSD) warns urgently of the consequences of this approach. The central point of criticism is that, in a constitutional state, legal certainty must not be a commodity that one has to buy. Inclusion in the statutory pension scheme entails a considerable financial burden, as the self-employed bear the full cost of contributions themselves. The monthly contributions can reach levels that are economically barely sustainable for many solo and micro-entrepreneurs.

This threatens to divide the self-employed into two groups: high earners who can afford the ‘new self-employment’ and can thus claim legal certainty, with their retirement provision benefiting from the statutory pension, and a large number of economically weaker self-employed people for whom the old legal uncertainty persists. Legal certainty would, in effect, amount to a privileged special status.

Voluntary participation only on paper

There is a further problem: even though the BMAS formally assumes a choice-based model, it is foreseeable that this freedom of choice will be significantly restricted in practice. To minimise liability, clients will prefer to work with those (‘new’) self-employed people who can be commissioned with legal certainty. Anyone who does not opt for the ‘new self-employment’ therefore risks losing contracts.

A voluntary scheme would thus quickly become a de facto compulsory one. Self-employed people would be forced to switch to the new system, regardless of whether their income situation or the development of their business allows for it. For start-ups in particular, as well as for those with fluctuating or project-based work, such a burden could threaten their livelihood.

New criteria, old uncertainty

Even if a self-employed person opts for ‘new self-employment’ and pays into the pension insurance scheme, the statutory requirements must still be met, which in turn raises further questions of interpretation. This ultimately fails to resolve the problem of legal uncertainty.

‘New self-employment’ within the meaning of the proposed new Section 7 (5) of the Fourth Social Code (SGB IV) exists, amongst other things, only if ‘entrepreneurial activity’ is present. A mandatory criterion is to be the possibility of appointing a representative. In addition, at least two of the following characteristics must be met for “entrepreneurial activity” to be deemed to exist: 

• Bearing the risk of loss and the prospect of profit (entrepreneurial risk);
• Marketing on the market;
• Bearing expenses typical of an entrepreneur;
• not working primarily for just one client.

What counts as “advertising” and what are “expenses typical of an entrepreneur”? At what point can it be assumed that work is carried out essentially for only one client, and must there be at least two clients at the same time? The examples already show that even within the new model, questions of interpretation and uncertainties arise once again. This means that the very problem that was actually supposed to be solved persists.

The mandatory representation criterion is also problematic. Those who engage highly specialised IT experts, interim managers or specialist consultants often want only their personal expertise, because the assignment depends on the individual’s experience and know-how. This highly personal expertise is the reason for the engagement, but – according to the draft – it stands in the way of “new self-employment”.

Conclusion

The BMAS’s desire for reform addresses a real problem. However, the solution currently under discussion raises questions and does not appear to resolve the fundamental issue of difficult questions of interpretation. A system that links legal certainty to a high level of financial capacity and effectively creates new constraints risks doing more harm than good. The VGSD therefore calls for a fundamental reform of the existing procedures rather than a new special status: clear, uniform and practical criteria that apply to all self-employed persons. Legal certainty must be a reliable component of the legal system, not a cost-bearing additional service, especially as the draft does not provide this legal certainty.