Translator in Germany with one main client: social security issues?
Thread poster: mleach

mleach  Identity Verified
Germany
Local time: 14:21
French to English
Nov 17, 2013

Hi,

I've been working in Germany as a translator since Jan 2013 and in that time have worked for two clients. One of these is based in the USA and accounts for about 95% of my work.

My question is: does this mean I am liable to pay social security because the government will class me as working for one main client? I currently only pay income tax and also have a private health insurance.

If anyone has any experience of this and can help answer my query I would be most grateful! I've seen conflicting advice online about this topic and have considered paying a tax advisor to give me some advice but thought I would try here first.

Thanks in advance,

Mark


 

Jenn Mercer  Identity Verified
United States
Local time: 08:21
Member (2009)
French to English
U.S. Citizen? Nov 17, 2013

If you are a U.S. citizen, you will need to at least file taxes, but most likely will not need to pay - or not need to pay much, if you are paying taxes in Germany.

 

mleach  Identity Verified
Germany
Local time: 14:21
French to English
TOPIC STARTER
UK citizen Nov 17, 2013

Thanks Jenn for your speedy reply! I'm actually a UK citizen and am only required to pay taxes here in Germany (thank goodness). Just not sure about the social security/one main client issue.

 

Sheila Wilson  Identity Verified
Spain
Local time: 13:21
Member (2007)
English
+ ...
A freelancer with one client is hardly free Nov 17, 2013

It seems that freelancers in Germany don't have to pay S.S. if they don't want to. But it is compulsory for them to have health insurance. I imagine nobody would want to live in a country without one or the other, anyway - the personal liability of falling ill with cancer or diabetes (for example), or an accident that left you disabled, would be terrible.

But are you actually fulfilling the requirements to be classed as a freelancer at all? I don't know what the position is in Germany but I do know about France, which I only left last year. There, a client who gives a freelancer so much work that that freelancer is largely dependent on that client would be breaking the law. The biggest fault would be his, for failing to declare (and pay for) an employee. But the freelancer would also be taken to court to pay the S.S. contributions due as an employee. Of course, that would probably only apply in France to a French client/employer, not a foreign one.

However, regardless of the legal situation, have you thought about how exposed you are? It's an incredibly precarious way to work. What if that client goes bankrupt? You'll no doubt lose a lot in outstanding invoices (I'm guessing he doesn't pay up-front). You'll also have zero income for some considerable time while you desperately seek other sources of income. Actually, that could well happen at any moment. Although bankruptcy might be fairly uncommon, translation clients are notoriously fickle creatures. Agency clients are continually looking for cheaper translators, and although your PM might be quite loyal to you, a replacement wouldn't. A direct client could decide tomorrow to pull out of that foreign-language market, or he could sign up with an agency for all his translations, or find a cheaper provider, or employ someone capable of doing the work, or...

A freelancer should be invoicing several clients per month, with at least 3-4 major clients and a whole load of clients who send work on a less regular basis. Putting all your eggs in one basket is an incredibly unhealthy scenario.


 

Daina Jauntirans  Identity Verified
Local time: 07:21
German to English
+ ...
Scheinselbstständigkeit Nov 17, 2013

Check out this link. It might help:

http://www.frankfurt-main.ihk.de/recht/themen/arbeitsrecht/scheinselbstaendigkeit/

Scroll down to "Anhaltspunkte für eine Scheinselbstständigkeit":
"Tätigkeit auf Dauer und im Wesentlichen nur für einen Auftraggeber
Bei der Auslegung des Begriffs „im Wesentlichen“ gehen die Sozialversicherungsträger von einem Anteil von fünf Sechsteln des Umsatzes mit einem Auftraggeber aus. Es genügt nicht, vertraglich die Zulässigkeit weiterer Auftragsverhältnisse festzustellen, sondern die Auftraggeber müssen tatsächlich nachgewiesen werden."

You are doing more than 5/6 of your work for one employer, so although you should get professional advice on this, it does seem that you could be considered scheinselbstständig.

Also, Section 5. on that page: "Grundsätzlich tritt bei Feststellung der Scheinselbstständigkeit die Sozialversicherungspflicht mit Aufnahme der Tätigkeit ein. Der Auftraggeber ist verpflichtet, die ausstehenden Arbeitgeber- und Arbeitnehmerbeiträge zur Sozialversicherung rückwirkend bis zu vier Jahre nachzuzahlen." (not sure how that would work since your client/employer is non-EU)

I'd say it would be a good idea to get a few more clients, but again, professional advice is in order.


 

Cilian O'Tuama  Identity Verified
Local time: 14:21
German to English
+ ...
Steuerberater Nov 18, 2013

I'd advise you to contact other British translators in Berlin. If you don't already know any, they're searchable in the directory. German-English (probably your best bet), located in Berlin.

You could ask them for their advice, or if they could recommend a local tax advisor.

I know a handful of people who, years later, have been hit by uncomfortably high tax demands as a result of their innocent ignorance/unawareness of the situation.

As Daina says, get professional advice!


 

Steven Segaert
Estonia
Local time: 15:21
Member (2012)
English to Dutch
+ ...
Ask a professional Nov 18, 2013

The first question is whether or not you can be considered to be an employee - something which you want to avoid. I don't think that the mere fact that one client provides 95% of your work in your first year can be the only factor. Is the percentage the same when you look at income? Can you show that you actively market yourself as a freelancer? Do you have other activities next to translating? What did you do before, and was that same company also part of your professional life?

In the end, the determination of being self-employed or not is based on facts and observations. At first, you are what you say you are, and it is up to the authorities to contest that if they wish. They will do that if they think that you (or your "employer") are cheating the system, or to protect you if they see you as the weaker party being taken advantage of. But they need arguments to do so - it is not a mathematical question.

Next to the question whether there are enough arguments to say you are actually an employee (which you can assess a bit for yourself, and work towards adding counter-arguments if you feel at risk), the question is if the authorities would have an interest to go after it. Let's say that they would determine that you are employed by the American company. If that company does not have a legal presence in the EU and would stop being your client if pushed into the role of employer, would it make sense for them to push the point? I doubt it. Of course, if that company has a legal office in Germany, then it is a different story entirely.

If you are not in this situation "by design", I wouldn't worry too much. Develop your freelance portfolio and work towards building a wider client base - and document that effort (registration with translation agencies, perhaps even investments such as Proz.com membership which you wouldn't need if you would focus only on your existing client, ...). Be prepared to argue that you are self-employed if some calculation would trigger an initiative from the part of the social security authorities. If you are really developing yourself as a freelancer, that argument should be easy. Even if things have turned out differently in your first year.

Or re-think what you are doing. There are other ways to go about. You could for example start a company and employ yourself, which also helps towards getting you pension rights and other social protection.

And indeed, do ask professional advice. If you formulate your question carefully, that doesn't have to cost heaps. Before paying for a tax advisor, perhaps you may even be able to get free yet professional advice from a professional organisation for self-employed, or a chamber of commerce. Or from the authorities themselves.


 

Steven Segaert
Estonia
Local time: 15:21
Member (2012)
English to Dutch
+ ...
Interesting link Nov 18, 2013

(I'm offering it as a separate post rather than an edit, in case you miss it otherwise)

http://www.working-in-germany.com/false-self-employment-0054.html

" Overlooked by this regulation are new companies in their first 3 years "

Of course, to be confirmed by searching out the actual legal text...


 

mleach  Identity Verified
Germany
Local time: 14:21
French to English
TOPIC STARTER
Thanks for the link - will seek professional advice Nov 18, 2013

Thanks Steven for the helpful advice and the useful link.

I certainly wouldn't personally classify myself as 'employed' and indeed meet five of the six criteria the German authorities have set to be classified as 'self-employed'. The only condition I perhaps don't meet is the 'working long-term and substantially' for one client.

I will definitely be marketing myself more vigorously in the next financial year as relying on one client is an unhealthy position for any business. And I'll be seeking professional advice on this social security issue. Money well spent I think!


 

mleach  Identity Verified
Germany
Local time: 14:21
French to English
TOPIC STARTER
Godo idea to contact other British translators in Berlin Nov 18, 2013

Thanks Cilian for the suggestion to contact other British translators here in Berlin. I'll do that. I certainly want to be transparent with the tax authorities and avoid any nasty surprises in the years to come!

 

mleach  Identity Verified
Germany
Local time: 14:21
French to English
TOPIC STARTER
Thanks for the links to legal texts - professional advice important Nov 18, 2013

Thanks Daina for the links - it's useful to see the actual legal position. Based on the 5/6 earnings rule I could be 'falsely self-employed'. The Deutsche Rentenversicherung website does say that cases are individually assessed so perhaps my own situation and the fact that I meet all the other conditions to be classified as self-employed would count in my favour. I definitely need the advice of a Steuerberater on this particular point.

 

Christine Andersen  Identity Verified
Denmark
Local time: 14:21
Member (2003)
Danish to English
+ ...
Find some more clients... Nov 18, 2013

Whatever you do, aim to find more clients and spread your risk if you possibly can.

I had a main client like that to begin with. Luckily I soon found a second major client and several others.

Just as we were looking forward to celebrating the 30th anniversary of the biggest of them - and for 25 years at least it had been a large and successful translation agency - it went bankrupt.

Again, I was lucky, and did not lose a lot, and the employees were covered by their trade union initially, then a national wage guarantee scheme. But freelancers do not have safety nets like that, and you need to protect yourself in other ways.

Best of luck!


 


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