There are two legal ways to work with a nanny in Germany: on a freelance basis or employment contract. Lighthouse Nanny offers opportunities to work with both, but which method should you choose? Let’s get into some details that highlight the differences between the two options.
What is the difference between a freelancer and an employed nanny?
Freelancers are self-employed. This gives them the freedom to work on a flexible basis, and set their own hours. They are able to take on short-term assignments with ease, like travel nannying, temp nannying, and nannying for events. Infant care specialists are often also self-employed, they only spend a short time with familyies while babies are young.
As self-employed individuals in Germany, freelance nannies are responsible for paying 100% of their tax and social contributions themselves. These costs are high—health insurance usually runs between €400 and €600 per month, and taxes can be 20% to 42% of the nanny’s yearly income. Freelance nannies are also not entitled to paid sick leave, holiday, or unemployment benefits. For this reason, freelance rates are higher than employment rates, because nannies must cover all of these costs themselves.
Employed nannies, on the other hand, are the legal employees of the family they work for. This means the families must register with the Finanzamt, acquire all the necessary insurance, match the nanny’s social contributions, and provide at least the legal minimum of benefits (paid sick leave and 20 holiday days per year).
Because families need to pay social contributions in addition to their nanny’s salary, employed nannies usually have a marginally lower hourly rate than a freelancer. However, the price differential at the end of the day tends to be similar. Although freelancers don’t have additional charges for social contributions, they should be factoring these costs into their rate already.
What are the pros and cons to hiring a freelancer vs. an employed nanny?
Hiring a freelancer is much simpler in terms of paperwork. As you won’t be a legal employer, then there’s no need to register with the proper authorities, or handle things like health insurance or unemployment contributions. The freelancer is already registered with all the right authorities, and will handle all of these things on their own.
Freelancers are also able to work on a much more flexible basis. So for instance, if a family is visiting Berlin for 3 weeks and needs to hire a nanny for 8 hours per day for those weeks, a freelancer can easily take this assignment. It wouldn’t be possible for this family to become a legal German employer during this short period of time, so a freelancer is the best choice here
If your family doesn’t need regular support, but instead just needs irregular help—say, the occasional date night, or for a few extra days when Kita is closed from time to time—then a freelancer would also be the right choice.
In general, if you are looking for a regular commitment from your nanny—that is, someone to come at the same fixed dates and times per week, then you would almost always need to hire an employee. This requires registering with the proper authorities a legal employer, and matching your nanny’s social contribution, in addition to paying her wages each month. It is a more complex process, but it is the only way to avoid the risk of false self employment, or Scheinselbständigkeit.
What is false self-employment or Scheinselbständigkeit?
If you want to hire a freelancer to avoid paying holidays, sick leave, and social contributions, then you run the risk of committing a crime known as “False Self Employment” or “Scheinselbständigkeit.” False self employment occurs when a freelancer is fully integrated into an organization, or in this case family, and is expected to complete the tasks of an employee without receiving any of the benefits to which employees are entitled.
If your nanny spends more than 80% of her time working for your family, or earns more than 5/6th of her income from your family, then you are likely guilty of false self employment. Other indications could be if your nanny is unable to dictate her time of work, the scope of her responsibilities, her wage, and even the place of work.
If you are audited by the authorities and found to be guilty of this crime, you can be forced to back pay social payments, hefty fines, and more. Freelancers are also liable as they can also face fees, the revocation of their freelance status, and back payments.
N.B. Hiring a freelancer is not a loophole for avoiding German employment law. Nannies make a commitment to the families they work for, and they deserve a commitment in return. Many families wish to work with freelancers long term to avoid paying benefits like holidays or sick leave. But remember—expecting an individual to perform the tasks of an employee for an extended period of time without providing sick leave or holiday is false self-employment and it is illegal.
The only time a freelance nanny might be the right fit for a recurring role is when it is in the nanny’s best interest. For instance, if the nanny wishes to work two days per week for one family, and 2 days per week for another, and spend one day per week teaching music classes for children. This would fit the criteria of being a legal and legitimate freelancer, and would be permissible.
When is it okay to pay my nanny cash?
Never. Undeclared cash work is always 100% illegal in Germany for both parties. However, cash tips or Trinkgeld are permissible, as long as they are not a substitute for declared legal wages.
Can I hire a freelance nanny or an employed nanny with Lighthouse Nanny?
Lighthouse Nanny works with both freelancers and employed nannies, although which one we recommend for the role will depend on the nanny herself. We work hard to protect our nannies from false self-employed status, and must make sure that any freelance roles she takes on legal and ethical in design.
If you want to learn more about hiring a nanny with Lighthouse Nanny, fill out a family application here.
