Our traditional understanding of an employment relationship is still based on a 9-to-5-job and characterized by a strong personal dependence of the employees on their employer and by a fixed place of work in a typical office space.

However, this traditional understanding is nowadays being shattered by a more flexible approach.  This can be seen from an increasing number of freelancers, the common use of leased personnel in companies and the new phenomenon of crowdsourcing in our digitalized world.

Changes to the nature of employment relationships have not yet been fully reflected in the legislation.  German employment law is still strongly based on the traditional distinction between dependent employees and independently working service providers.  However, in the economic world this distinction is becoming more and more blurred as companies need more flexibility regarding over staffing than in the past.  Furthermore, digitalization offers new possibilities to companies. 

To achieve more flexibility, new models such as crowdsourcing are frequently used by companies.  Crowdsourcing allows companies to outsource specific projects to providers who offer their services on crowdsourcing platforms.  However, German labor law does not cater for these new models.  Therefore, the service providers on the platforms, who are usually registered as freelancers, could be qualified as employees of the company according to German law if they perform services for a company on a regular basis.  This qualification as employees is neither in the interests of the company nor in the interests of most service providers.  To avoid any undesired consequences for both parties, companies should implement a clear freelance relationship when using crowdsourcing platforms.

Apart from crowdsourcing, German companies frequently use leased personnel if they want to ensure a flexible provision of services which cannot be achieved by hiring employees.  However, the legislator has recently implemented an amendment to the German Personnel Leasing Act (Arbeitnehmerüberlassungsgesetz) that will become effective as of April 1, 2017. 

Under this amendment, the use of leased personnel will become more challenging for companies.  Starting from April 1, 2017, companies will have to differentiate between leased personnel on the one hand and freelancers as well as contractual service providers on the other.  Whereas under the current regulations companies have not faced any severe consequences if they did not properly differentiate between these categories, the new law provides that an employment relationship might be established with leased personnel at their discretion if they basically perform their services for the company under the same conditions as employees and in particular have to follow the instructions of the company the same way as employees do.  Furthermore, the amendment will bring companies a higher risk of being burdened with subsequent payments of social contributions and of income taxes.  Companies might even face penal consequences resulting in severe fines.