Working as a freelancer in Germany
What is different about insurance and life in general when working as a freelancer in Germany
Introduction
Seriously consider if freelance work in Germany is the right thing for you. It comes with a number of draw backs.
Please also read this article; it addresses primarily “remote” freelancers, but nonetheless contains important information. Particularly, “freelancing” constructions that are accepted in other countries may be illegal in Germany and expose both your employer and yourself to prosecution and fines - see the section on Scheinselbständigkeit.
Matters of insurance
One being that you’ll be solely responsible for paying your own insurance, meaning you have to pay both the usual half of an employee and the half that an employer usually pays. The insurance model almost all freelancers are under is called “Freiwillig versichert” (voluntarily insured), which is a misnomer, as it is still mandatory to have health insurance. You don’t have to switch insurance and are as eligible for public insurance as before, but it will cost twice as much.
You also can’t use a freiwillige Versicherung to include family members in the insurance, so if you want or have children insurance will either become more expensive again, or your partner needs to be in a situation where they have Pflichtversicherung and can put your children on that with them. [citation needed]
(Much) more info: an introduction to German health insurance
What if I don’t have enough clients and have to stop freelancing, can I get unemployment benefits / ALG I when I have been freelancer long enough? Will I receive “Rente” when I’m old?
Unlike with work as an employee, there is also no automatic amount paid into unemployment insurance. It becomes an elective insurance, and you have to actively take care of it yourself. If you at some point need it, the rules for how long you can receive it are also somewhat different from how it works for previously employed people.
You have to completely finance your reserves for old age yourself, nothing is paid into the Rentenkasse anymore (unless you choose to). You have no access to Riester (which isn’t worth much anyway, but still, fyi). Riester is only open to people with mandatory insurance (Pflichtversichert).
Is freelance work seen the same way as work as an employee?
Freelance work in Germany is often looked at with a side-eye, likely because traditionally people were either employees, or had their own company in an official form like GmbH, that usually also leads to becoming an employer yourself, even if it’s on a small scale. The concept of freelance work doesn’t quite fit in there, and often people working as freelancers are seen as just a half-step away from being unemployed, and as lazy and unable or -willing to get “real” world. Even if that image is far from the reality of how freelancers actually work.
Consequently, as a freelancer, you often have a hard time finding housing (for many landlords, including the big companies, it’s an automatic rejection), you have an extremely hard time financing anything, unless you prove you have the collateral to insure any loan. EU rules mean that even if you have your private and company account at different banks, the one with your private account is still mandated to treat you as a business client, and the small cheap “fun” credits people can get for smaller things, or vacations or cars are whatever, are not accessible for you. So you have to apply for business loans, but then might have problems because there is no business reason to get them.
What does all that mean for me, and how do I know how much money to take for my work?
Before accepting any freelance work, do all the numbers and make sure that, in your hourly wage, you also make space for sick days, holiday time, time out of work, and any surplus costs that you have that usually an employer takes care of (work space, computer, furniture, whatnot). That may easily mean three to four times as much per hour than you earned before is necessary just to keep your current standard of living and security in both present and future (old age).
Do not give in to the temptation to leave all those normal cost of business out of your calculation and sell your work for a lower price. You are taking money away from yourself that you need to live, period. There is no luxury included in that. And an established lower price you made to get clients with will also be a big problem, as those clients will not take happily to any attempts on your side to raise your prices considerably. So any client you get and would like to hold on to also chains you to an income that is not sustainable long-term.
Also, taxes, and dealing with them – as a freelancer your tax dealings will be complicated enough that you will need a Steuerberater, and will have tax-prepayments, and other things that will take money out of your pocket. As with insurance, your income needs to cover the part that for an employee gets deducted before they even see it (the “netto” left over from the “brutto”). So the money coming in looks more than there will be once the part meant for taxes is taken off. This income tax calculator gives you an idea of how much money you keep every month.
It is of course still very possible to freelance successfully, but, in Germany especially, takes a very secure and well-paid income/client base.
Business registration
You must register your business with the Finanzamt by filling the Fragebogen zur steurlichen Erfassung. A tax advisor can do this for you. It’s easier that way.
Depending on your type of business, you might also need to get a trade licence, and get an entry in the business registry. This can also be done by a tax advisor, or by websites like firma.de
Taxes and cost of living
As explained above, your costs as a freelancer are very different. You pay more for your health insurance, and you must build your own safety net. To figure out how much to charge, you must understand how much you will pay for taxes, insurance and other expenses.
Visas
If you are a non-EU/EEA citizen, you need a visa to be self-employed in Germany. This is usually the German freelance visa. The Blue Card and the Work Visa sometimes let you be self-employed, but only as long as you keep your main job.
If you have a permanent residency, you do not need a visa to freelance in Germany.