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I'd like to offer a german perspective on this. I've been a freelancer (webdev) for about 1.5 years now (about 3 years of experience) and this is how that calcu

I'd like to offer a german perspective on this. I've been a freelancer (webdev) for about 1.5 years now (about 3 years of experience) and this is how that calculation would look here: Employed at 100k Euro, no kids, not married: - 27.406 Euro income tax - 1.243 Euro solidarity tax - 7.923 Euro pension fund - 1.022 Euro unemployment insurance - 1.030 Euro statutory nursing care insurance - 4.440 Euro health insurance = 56.932 Euros left over. Health care can be made a bit cheaper with a private insurance company but this is the ballpark most people would be in. All the listed taxes and insurances are mandatory. Freelance with 100k Euro, no kids, not married: - 22.290 Euro income tax - 1.225 Euro solidarity tax - 10.594 Euro health insurance - 15.840 Euro pension fund = 51.310 Euro However: Paying into the pension fund is not mandatory as a freelancer and you can also choose how much to pay and health insurance can be made cheaper here as well. Health insurance and pension fund will be deducted from your taxable income. Also as others have mentioned you can suddenly deduct a lot of things (phone bills, parts of your electricity bill, buying a new laptop etc.). The main kicker here however is this: I work as a freelance webdev and so far I have managed to make about 80 Euros/hour which given my current workload will result in about 130k Euros of income this year. I have yet to get an offer from any company willing to pay more than 100k.

em-bee 5y ago
that means you have about 150 billable hours a month. you either have a few long term clients that just keep giving you work, or you are not counting your unpaid time spent searching for new clients. the average freelancer needs to budget about 50% unpaid time, spent on marketing themselves, searching for and negotiating with clients, so that at 80€/hour they can expect at most 70k€ per year if they want a workload that's comparable to a regular job. still 70k€ is a decent income in germany, so that works out.
- Escapado 5y ago
  Over the last 8 months I had 158 billable hours on average per month. I get about one to four calls per month offering projects (full time, 3-6+ months) in my city or fully remote at that rate without doing any active marketing. I just have a Xing profile and I am listed at a couple of job adviser agencies such as Gulp or Hays. Also I only do full time projects (for me they have been by far the majority anyway). So either it's webdev specific right now or I am just incredibly lucky but even as my current project is near its end I have about 3 options to chose from to continue elsewhere seamlessly after. Other freelancers I met in the field have reported similar situations but that's just anecdotal evidence. Would you have a reference of where that 50% unpaid time comes from?
  - zvr 5y ago
    Ah, so your freelancing is essentially working full time for a single customer for 3-6 months. As if you were changing (salaried) jobs this often. Thanks for the explanation. A question: doesn't the tax authority complain about the lack of multiple customers?
    - Escapado 5y ago
      Yep, that's correct. And no they don't most of the time. Investigations about this are rare apparently and also only working for one customer in that capacity at a time is not really an indication of pseudo self-employment or tax fraud. If the company dictates you your work hours and you suddenly appear in organisational diagrams as if you were employed and you were part of all company meetings and a couple of other things in the same vain then that would be indicative of pseudo self-employment. It's basically mostly about whether you are bound by instructions or not. This is however checked rarely (usually it would need to be initiated by one of the participating parties and we do not want that) and also hard to do rigorously. The laws around that are mainly to protect people from earning too little and being subject to paying all their social insurances/taxes by themselves and not getting any vacation days. For higher paying jobs this is not much of a threat since being paid higher than an average FTE would also count as indicative for being self-employed. Same goes with working from wherever I want (yay homeoffice). If pseudo-self employment were ascertained during an audit my customer would need to retroactively pay the social insurances for the months I worked for him and if he were to employ me further he could deduct that from my income of the following months but only for the last three or four months. I think there is a chance under very specific circumstances that the customer could try to demand that I would have to pay the difference between what a normal FTE would be paid compared to what I was paid but it's not yet clear whether that is actually lawful and I think it only applies if both parties were not entirely clear that the business relation ship is based on the premise of freelancing. All in all I am not very concerned that it will actually ever be a real problem. I have talked to at least two dozen freelancers doing what I do. Sometimes for over a decade and never once have they been questioned in their status in any way.
distances 5y ago
You should likely not pay to a pension fund as a freelancer in Germany. The payout is atrocious, you'll likely never even recoup the contribution let alone interest. Seems it's much better to just invest after taxes.

em-bee 5y ago

that means you have about 150 billable hours a month. you either have a few long term clients that just keep giving you work, or you are not counting your unpaid time spent searching for new clients. the average freelancer needs to budget about 50% unpaid time, spent on marketing themselves, searching for and negotiating with clients, so that at 80€/hour they can expect at most 70k€ per year if they want a workload that's comparable to a regular job. still 70k€ is a decent income in germany, so that works out.

Escapado 5y ago
Over the last 8 months I had 158 billable hours on average per month. I get about one to four calls per month offering projects (full time, 3-6+ months) in my city or fully remote at that rate without doing any active marketing. I just have a Xing profile and I am listed at a couple of job adviser agencies such as Gulp or Hays. Also I only do full time projects (for me they have been by far the majority anyway). So either it's webdev specific right now or I am just incredibly lucky but even as my current project is near its end I have about 3 options to chose from to continue elsewhere seamlessly after. Other freelancers I met in the field have reported similar situations but that's just anecdotal evidence. Would you have a reference of where that 50% unpaid time comes from?
- zvr 5y ago
  Ah, so your freelancing is essentially working full time for a single customer for 3-6 months. As if you were changing (salaried) jobs this often. Thanks for the explanation. A question: doesn't the tax authority complain about the lack of multiple customers?
  - Escapado 5y ago
    Yep, that's correct. And no they don't most of the time. Investigations about this are rare apparently and also only working for one customer in that capacity at a time is not really an indication of pseudo self-employment or tax fraud. If the company dictates you your work hours and you suddenly appear in organisational diagrams as if you were employed and you were part of all company meetings and a couple of other things in the same vain then that would be indicative of pseudo self-employment. It's basically mostly about whether you are bound by instructions or not. This is however checked rarely (usually it would need to be initiated by one of the participating parties and we do not want that) and also hard to do rigorously. The laws around that are mainly to protect people from earning too little and being subject to paying all their social insurances/taxes by themselves and not getting any vacation days. For higher paying jobs this is not much of a threat since being paid higher than an average FTE would also count as indicative for being self-employed. Same goes with working from wherever I want (yay homeoffice). If pseudo-self employment were ascertained during an audit my customer would need to retroactively pay the social insurances for the months I worked for him and if he were to employ me further he could deduct that from my income of the following months but only for the last three or four months. I think there is a chance under very specific circumstances that the customer could try to demand that I would have to pay the difference between what a normal FTE would be paid compared to what I was paid but it's not yet clear whether that is actually lawful and I think it only applies if both parties were not entirely clear that the business relation ship is based on the premise of freelancing. All in all I am not very concerned that it will actually ever be a real problem. I have talked to at least two dozen freelancers doing what I do. Sometimes for over a decade and never once have they been questioned in their status in any way.

distances 5y ago

You should likely not pay to a pension fund as a freelancer in Germany. The payout is atrocious, you'll likely never even recoup the contribution let alone interest. Seems it's much better to just invest after taxes.