How do I determine the social status? And who pays the ensuing social contributions?

The social status only refers to the obligation to pay social contributions such as pension and health insurance. If you are obligated, you are treated like an employee, if not, as self-employed. The social status does not refer to the labour status, so whether you have labour rights such as statutory vacation. Therefore, as a managing director you can also be obligated to pay social contributions.

So how do you determine the social status as a shareholder working for the company? And what happens, if a different social status is determined than expected?

The only reliable way to determine the social status, whether obligated or not, is the status check by the German Pension Fund. The company is even obligated to conduct such a procedure for any shareholder serving as a managing director. It’s best to apply for the status check within one month after the beginning of the occupation since this will clarify things from the start and you avoid any penalties or retroactive payments.

Implicitly the social status may be determined in an administrative company audit. Since 2022 the administration conducting the audit is obligated to check the status of shareholders working for the company, be it as employees, freelancers or managing directors. What if the determined status turns out to be false? At least for the past you may object to this due to protection of legitimate expectation, but only if the company audit ended formally with an administrative act. Evidence for such an act is the instruction on right to appeal at the end of the letter.

However, the protection of confidence ends at the latest when significant circumstances change. If for instance a managing shareholder switches into the role of an employee or freelancer, he must initiate another status check.

If you do not agree with the determined status, you can appeal against it and - since the German Pension Fund also issues the ensuing ruling - file suit against the latter. These legal remedies do not have a suspensive effect though. Therefore you have to pay the social contributions at any rate until the final court ruling.

Who pays the social contributions? In general, the employer pays over income tax and social contributions of the employee for the employee. For income tax in the past the employee and the employer are joint debtors so the tax offices could charge either party. However, in most cases they will likely exercise their judgment by charging the employer.

The employer may only claim past social contributions from the employee in cases of either voluntary health insurance or for the past three months. Since the administration may in turn charge the current plus the previous three years retroactively, in consequence the employer risks to bear the brunt of up to 3.75 years of social contributions.

This shows how important determining the social status is from early on. Retroactively you cannot alter the status, but we can help you to change it going forward by drafting contracts and amendments to the articles of association or company bylaws.

Published on 24.08.2025