Under German law, the entrepreneur is generally free to decide whether certain tasks within its business operation shall be fulfilled by its own (employees) or an external workforce (independent contractors). From a purely legal perspective, this decision should mainly be influenced by the nature of the work or project in question, as the main criteria when determining the legal status of the engaged worker refer to the place, time and exact manner of the work to be performed as well as a necessary integration into the principal’s business organization. However, a feasible solution in practice has to factor in more than just legal aspects. When making this decision, the entrepreneur should in any case be very much aware of the risk of a disguised employment, i.e. the possible consequences of a situation where a supposed independent contractor will be qualified as an employee. In many cases such risk can be significantly mitigated if the relationship with the independent contractor is prudently structured and managed.
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