How are freelancers paid for Upwork

Become a freelancer: registration, advantages and tips

What is a freelancer? definition

Freelancer - in German freelancers - are self-employed people who work on behalf of another company and are usually characterized by a high level of qualification or specialization. That is why they are in great demand as external specialists. Freelancers do not employ employees, they work alone. Freelance work is subject to a temporary service or work contract; Payment is made either according to an hourly rate, as a fee, lump sum or, in the case of artists, as a fee. The only thing that is not permitted is a regular, fixed income - in this case you are most likely bogus self-employment (more on this below). Freelancers are not subject to social insurance and have to take care of their own insurance cover.

Freelancers are not integrated into the company commissioning the contract and are also not bound by instructions; you can determine your working hours and your place of work yourself. Freelancers also generally have several clients who they acquire independently.

Other terms for freelancers are e-lancers, multiple employees, freelance workers or, on a small scale, micropreneurs. Freelancers who work completely independent of location and also like to work abroad - i.e. multi-local - are now also referred to as digital nomads.

Difference Between Freelancers and Freelancers

The two terms freelancer and freelancer are often used synonymously - but there is a difference.

  • Freelancer refers to the employment relationship
  • Freelance refers to the activity

So a freelancer is usually also a freelancer - but conversely, not every freelancer is a freelancer. In fact, a lot of freelancers are active in the creative or media industry and consequently also freelancers, but freelancers can also carry out commercial activities:

  • A freelance copywriter who works independently is always a freelancer.
  • A freelance lawyer can, however, also be an entrepreneur if, for example, he and his fellow lawyers found a PartG.
  • And a marketer who has a commercial activity and is employed as a freelancer is not a freelancer.

In general, it can be stated that all commercial freelancers are not freelancers.

For which professions does it make sense to work as a freelancer?

In principle, every freelance activity is also suitable for a freelance job. In addition, there are some commercial activities that are well suited to being carried out without permanent employment. For example, the following activities are suitable for freelance jobs:

  • Engineer, architect
  • Alternative practitioner, physiotherapist
  • Tax advisor, lawyer
  • Journalist, interpreter, translator
  • Editor, editor, social media manager, marketer
  • Designer, web designer, programmer, graphic artist, photographer
  • Coach, consultant, lecturer, teacher, consultant
  • Educators, supervisors, trainers, trainers
  • Musicians, artists, actors
  • Event technician

Advantages and disadvantages of freelance work

For freelancers
advantagesdisadvantage
Free choice of orderCustomer acquisition and order procurement must be done by hand
Flexibility (regardless of location, working hours can be divided up freely)No steady, regular income
Varied tasksNo continued payment of wages, no paid vacation
Influencing paymentNeither notice period nor protection against dismissal
Work-life balance, a good work-life balance possibleRisk of bogus self-employment
 Insurance cover not given
For clients
advantagesdisadvantage
Good for staff shortagesUncertain availability
Can be used flexiblyMust be trained
Lower costs, as there is no social security obligationNo team spirit or loyalty
No notice period 
There is no high organizational effort when recruiting new employees 

Freelancer and bogus self-employment

Freelancers have to make sure that their work does not slip into bogus self-employment. This can happen if several of the following statements apply to freelance work:

  • More than 5/6 of the income is generated by a client
  • There is no obligation to follow instructions or self-determination of the place and time of work
  • Permanent activity for only one client
  • No employees subject to social insurance are employed

A pseudo self-employment - as soon as it is discovered - has serious effects on both the freelancer and the client. For example, the client is threatened with additional payments for social security contributions, but the alleged freelancer benefits from this finding. In this way, he subsequently receives all the rights of an employee, e.g. protection against dismissal, vacation entitlement or continued payment of wages. You can read in our guide what you can expect in detail and how you can avoid bogus self-employment from the outset.

"Fixed free" and pseudo self-employment

In the media and music industries, many freelancers work for one and the same company over a longer period of time, which is why these employees are also referred to as “permanent freelancers”. For employers, a permanent customer is always more comfortable than a permanent employee, but it should be borne in mind that the permanent customer works like a permanent employee through this type of employment, but in return cannot enjoy any of the advantages of permanent employment (e.g. protection against dismissal , Continued payment) and there is a risk of bogus self-employment.

Generalists

Flat rate lists are another class of freelancers who often work in the media sector and, for example, continuously deliver articles to an editorial office for a monthly flat rate. If flat-rate operators carry out other jobs for other companies, flat-rate work can form a mainstay of their income and is then not to be classified as bogus self-employment.

Become a freelancer: this is how it works

Register as a freelancer

Depending on whether you are to be classified as a freelancer or a trader (depending on the work you do), different registration steps are necessary in order to start as a freelancer:

  • Freelancer: Registration with the tax office is sufficient; You will then receive a questionnaire on tax registration.
  • Business: You also register with the tax office, but then also with the trade office. After these formalities have been completed, you will receive your tax number. Now you have to register with the IHK or HWK. After this has been done, you are now officially a trader and can get started as a freelancer.

Freelancers start alone, i.e. always as a sole proprietorship - regardless of whether they are freelancers or not. A legal form such as GmbH or UG is not required to work as a freelancer, which is why, for example, registration in the commercial register is not necessary.

You can find help, filling out aids and tips on the individual registration steps in our start-up cockpit.

To the start-up cockpit

Further registrations

Depending on the industry, however, you will now have to deal with further insurance registrations.

  • For artists and publicists (including, for example, web designers), registration with the Artists' Social Fund (KSK) is mandatory. The KSK is the health insurance company for freelancers and makes it possible for artists and publicists to receive benefits from pension, health and long-term care insurance.
  • Membership in the responsible professional association (BG) can also be compulsory for freelancers - inquire about this at the DGUV.

Insurance for freelancers

In contrast to permanent employees, freelancers are not subject to social security contributions and therefore have to take care of their own insurance cover. Insurance for freelancers should cover personal and professional risks - the following insurances make sense for every self-employed person:

Lowering taxes: essential for freelancers

Freelancers are also obliged to make advance tax payments, but the final amount of the amounts due is only given with a time lag. That is why it is extremely important for freelancers to build up tax reserves in good time and regularly in order to be able to cushion the inevitable back tax payments. But what taxes are there for freelancers? Below is an overview:

Tax typeWhat and how muchAllowances, exemption limits, etc.
value added taxSales tax or value added tax applies to all independently rendered services; 19% or 7%With the small business regulation, freelancers up to a certain amount of sales can do without showing sales tax
Income taxLike employees, freelancers also have to pay taxes on their income; between 14 and 42%The basic tax allowance of 9,744 (2021) applies. If the income is higher, everything must be taxed.
Business taxThe trade tax is levied by the municipalities and does not affect freelancers in the liberal professions; the trade tax rate varies depending on the municipalityIncome of up to 24,500 euros per year is exempt from trade tax, everything that goes beyond that is taxed.

Accounting for freelancers

Freelancers are generally not required to keep accounts and are therefore sometimes different from commercial freelancers: they are obliged to keep double bookkeeping from a turnover of more than 500,000 euros or a profit of more than 50,000 euros. The bookkeeping for freelancers in the start-up phase may, however, be created by means of an income-surplus-account (EÜR), in which at the end of the year the profits are simply compared with the losses. We have summarized how this works and what has to be considered in a comprehensive guide.

How do freelancers get jobs?

Freelancers have to take care of new orders, customers and partners independently and take care of acquisition and sales themselves. But where do the orders actually come from?

  1. Networking events
    Here it is important to get out of yourself, make initial contacts and pursue acquisitions as passively as possible. Anyone who leaves a good impression will be contacted later.
  2. Direct acquisition
    Direct acquisition can also be worthwhile for freelancers, but a little more time should be invested in the preparation so that you leave a competent impression.
  3. Recommendations / word of mouth
    A freelancer who does a good job and was able to convince the client is gladly recommended. The more enthusiastic customers make recommendations, the more potential customers you can attract.
  4. Own website
    This point is mandatory for all freelancers. The services are presented and explained on the company's own website, reviews and testimonials are displayed and, if necessary, work samples are displayed. Potential customers can contact the freelancer directly and easily or even book the services offered online.
  5. Freelancer portals
    In recent years, numerous platforms have sprung up offering countless jobs for freelancers. Often these are creative activities such as design work, copywriting or website programming. However, the competitive pressure on these portals is very strong; as a result, there is also a greater risk that you will sell yourself below value and be subject to price dumping. Freelancer platforms should therefore always be treated with caution.
  6. Social media
    Especially at the beginning of the job, when nobody knows you and your own skills, promotion and customer acquisition via social media marketing on channels such as LinkedIn, Xing, Facebook or Instagram is priceless. On the one hand, many people can be reached with a small budget, and on the other, satisfied customers can share their experiences directly on their channels.

How much do freelancers earn?

Compared to employees, freelancers can charge a much higher hourly rate, depending on the industry and work experience, but they also have to cover significantly higher expenses. But how much expenditure does a freelancer have and how big is the difference to an employee? In many places one reads that a freelancer should earn 1.5 times the gross salary of an employee, but this amount is hardly enough to cover all costs and to build up reserves for times of low activity. We did the math once:

Employed web designerFreelance web designer
Gross salary € 3,0007.830 €
Working hours per month 168108
Hourly wage € 17.86Hourly rate € 72.50
Occupancy 100%Occupancy 60%
Costs
  • Social insurance (partly taken over by the employer)
  • Supplementary insurance
  • income tax
  • Cost of living
  • social insurance
  • Sick days and vacation days
  • Insurance
  • accounting
  • Acquisition and sales
  • marketing
  • Business equipment
  • Income tax
  • VAT, if applicable
  • If applicable, trade tax
  • Cost of living

As the example calculation shows, a freelancer has to cover a few cost points more with his income than an employee - therefore the hourly rate should always be calculated realistically and not be based on flat rates. A freelancer also has ongoing "unproductive" times in which he does not earn anything. During these times, he has to take care of customer acquisition, marketing, bookkeeping and the organization of his work, or he has to receive further training. However, so that these times do not mean total failure, these "unproductive hours" are factored into the freelancer's hourly rate. In the end, the average hourly rate for freelancers is 60 to 100 euros.

Before you estimate a certain hourly wage, however, research in detail how much your colleagues earn and measure yourself based on industry and work experience. Always keep your higher fixed costs in the back of your mind and factor in back tax payments and other unforeseen events.

Conclusion: freelancer tips

Earning money as a freelancer is not always easy. So that you can start armed from the start, we have prepared a few tips:

  • Build up reserves: Back taxes in particular can cause liquidity bottlenecks. Freelancers should therefore always include a buffer and put part of the profit in reserves.
  • Mix order forms: Long-term jobs are perfect for covering costs, short-term jobs are ideal for increasing your income a little.
  • Avoid stressful customers: Customers who cause more work than they bring in should be avoided in the first place - or at least in the future.
  • Don't sell below value: Companies use freelancers because they are specialists and experts. Get your specialized work paid accordingly and don't be afraid to charge hourly rates from 60 euros upwards. Conversely, avoid any price dumping where you earn less than a permanent employee in your industry and with your professional experience.
  • Use smart tools: Time recording tools are ideal for correctly accounting for the time you have worked on the project. With some you can also create invoices directly from the time recording. Bookkeeping can also be simplified with clever tools. An all-round solution that combines both time recording, invoicing and accounting is best suited. This saves you juggling with different software and data sets.

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Author: Für-Gründer.de editors

As editor-in-chief, René Klein has been responsible for the content of the portal and all publications by Für-Gründer.de for over 10 years. He is a regular interlocutor in other media and writes numerous external specialist articles on start-up topics. Before his time as editor-in-chief and co-founder of Für-Gründer.de, he advised listed companies in the field of financial market communication.