Farewell to pseudo self-employment? Legislator creates transitional regulation on social security obligations in the education sector

The distinction between self-employment and dependent employment as well as the risks associated with possible pseudo self-employment have always caused difficulties for those involved.

Now, as a result of the so-called ‘Herrenberg decision’ of the Federal Social Court (BSG), the legislator has felt compelled to include a new transitional regulation in the Social Security Code (SGB) IV with effect from 1 March 2025 so that educational institutions can employ teachers as freelancers with legal certainty until the end of 2026.

Background

In the ‘Herrenberg decision’ (BSG, judgement of 28 June 2022 - B 12 R 3/20 R), the BSG applied the already known criteria for distinguishing self-employment from dependent employment, which had been developed by case law, much more strictly than before. In doing so, the BSG assumed that dependent employment already exists if, among other things, work equipment and premises are provided by the client. This should also apply if there is a high degree of freedom of instruction between the parties to the contractual relationship. As a result, the umbrella organisations of the social insurance system and the courts of lower instances adapted their standards for assessing status to the stricter requirements of the BSG.

Following the BSG's decision, educational institutions that had based their teaching activities on the standards developed over the last few years were suddenly confronted with additional claims for social security contributions that jeopardised their existence.

The transitional provision of Section 127 SGB IV (new version)

The transitional regulation of Section 127 SGB IV (new version), which applies from 1 March 2025 to 31 December 2026, now enables educational institutions to employ teachers on a fee basis under certain circumstances with legal certainty, even if the activity would actually be considered dependent employment and would therefore be subject to social security contributions.

The legislator's decision to introduce this transitional regulation is based on the outstanding importance of the education system for society as a whole (BT-Drs. 20/14744, p. 28 f.).

In order for the use of freelancers in the education sector to be legally secure, pursuant to Section 127 (1) SGB IV (new version)

• the contracting parties must have unanimously assumed a self-employed activity when concluding the contract and
• the person carrying out the teaching activity must give their consent.

If these conditions are met, the obligation to pay social security contributions will cease to apply by the end of 2026.

If the teacher does not give the required consent, the obligation to pay social security contributions is, as before, dependent on the status assessment - applying the now stricter standard of review.

Conclusion

It is true that the transitional regulation relieves the education sector financially to a large extent and enables educational institutions and teachers to adapt the structure of their activity and business models during the transitional period to the stricter requirements of the BSG, the courts of appeal and the umbrella organisations of the social insurance system regarding the existence of self-employment.

However, the legislator fails to recognise that it is not only the education sector that is affected by the impact of the ‘Herrenberg decision’. The judgement is already having an impact on other areas of activity and is also creating a high degree of legal uncertainty and financial burdens in these areas due to high additional claims for social security contributions.

Against this background, the question inevitably arises as to whether the legislator is violating the constitutional principle of equal treatment under Article 3 (1) of the German Basic Law by defining the scope of application so narrowly.

The general reference to the outstanding importance of the education sector for society as a whole (BT-Drs. 20/14744, loc. cit.) is probably not sufficient to justify unequal treatment. After all, the outstanding importance of the education sector for society as a whole is not a unique selling point of the education sector. Other sectors - such as care, construction and transport and logistics - are also of such importance. In times of demographic change, housing shortages and ever-increasing globalisation, it would be foolish to deny that these sectors are of comparable importance to the education sector in society as a whole.

Finally, it is questionable whether a transitional regulation such as Section 127 SGB IV (new version) - whether limited to the education sector or not - is at all the right answer to the question of how to deal with the risks of pseudo self-employment or whether the legislator should not instead come up with a permanent solution for distinguishing self-employment from dependent employment.

Until the legislator addresses the core problem of pseudo self-employment, those affected who are not educational institutions still have no choice but to adapt the design of their activity or business models as quickly as possible to the current, stricter standards of the BSG, the courts of lower instances and the umbrella organisations of social insurance when determining status.