Contracts to produce a work and freelance contracts (Werk- und Honorarverträge)

If the contractor is a company (firm) active on the free market (good indicators include name, legal status, presentation, etc.), the Beschaffung (Procurement) unit in the Division of Finance and Controlling is solely responsible for concluding a contract to produce a work or freelance contract. Please send your request including all required information to Beschaffung (Procurement), Division of Finance and Controlling. Note: In this case, the following explanations are irrelevant to you.

It is important to distinguish between contracts to produce a work and employment contracts, because while the former only comes with tax obligations, an employment contract also comes with social security obligations. With an employment contract, the contract goal is not yet clear or foreseeable at the time the contract is concluded. The employee has been contracted to perform certain tasks, irrespective of the result. Contractors are treated differently. They are paid only if the concrete objective, i.e. a particular result, has been delivered as stipulated in the contract to produce a work - irrespective of the actual amount of work required to achieve this objective. What counts is not the effort made, but the result. Another important difference is related to tax legislation. A regular employment contract (as a sub-type of the service contract (Dienstvertrag)) should be preferred over a contract to produce a work if the contracted party is under the supervision or authority of the employer and/or is part of the employer’s organisation.

If an employment contract for an independent service is to be concluded and a concrete result cannot be defined in the contract, you must request a contract for services (typically this will be a freelance contract). However, this is only possible if, due to the nature of the service to be performed, engaging a contract lecturer is not an option. Freelance contracts should not be offered in place of a teaching assignment. Exceptions are possible if the contract is financed with private external funds.

In contrast to an employee, a contractor has no right to social benefits such as holidays, sick pay or subsidies and must produce the agreed work or service on his/her own premises and with his/her own tools. The fee generated from contracts to produce a work or freelance contracts is not subject to wage tax or social security obligations. It is, however, subject to income tax and, if applicable, value added tax. Therefore, the university must be able at all times to provide evidence that it does not violate tax or social security legislation with its contracts to produce a work or freelance contracts (Scheinselbstständigkeit (pseudo-self-employment)).

Pseudo-self-employment occurs if the university is liable to pay social security contributions for an individual employed in line with § 7 para. 1 SGB VI (German social code), but tries to avoid this by awarding a contract to produce a work or a freelance contract in place of a regular employment contract.

§ 7 SGB IV defines five indicators of pseudo-self-employment. Any individual in gainful employment who does not meet his/her obligation to cooperate in line with § 206 SGB V or § 196 para. 1 SGB VI is suspected to be in a regular employment relationship and excluded from concluding a contract to produce a work if at least three of the five following criteria apply:

1. The “self-employed” individual does not usually employ others who are subject to compulsory insurance and whose salary regularly exceeds € 400 per month.
2. The “self-employed” individual mainly works for a single employer over extended periods of time.
3. The employer usually tasks regular employees with the duties allocated to the “self-employed” individual.
4. The activities of the “self-employed” individual are not characteristically entrepreneurial (e.g. business hazard, maintaining business relations, discretionary working hours and content, upkeep of business premises, no participation in the employer's organisation).
5. The “self-employed” individual’s activities appear to be equivalent to the duties he/she performed while in a previous employment relationship with the employer.

To prove that there is no employment relationship as defined in § 7 para. 1 SGB VI, you must submit an appropriate declaration as part of the request form. If you have questions, please contact Enrico Tille (Enrico.Tille@uni-konstanz.de) from the Division of Human Resources and Legal Affairs.

Contracts to produce a work and freelance contracts with University of Konstanz employees are excluded as per § 57 LHO. In special circumstances, provided that a proper explanation is provided and on request (together with the secondary employment request), the Division of Human Resources and Legal Affairs can make an exception. Even so, the gross fee paid on such a contract should not exceed € 1,000. Also, the contractual service must be clearly distinguishable from the employee’s official duties. Outside the regular working hours, services that are part of the employee’s main contractual responsibilities can only be performed as extra and/or overtime hours.

Contracts to produce a work or freelance contracts with university employees can be concluded once the Division of Human Resources and Legal Affairs has established that the work or service to be performed can be considered a valid secondary employment. University employees include undergraduate student assistants as well as teaching and research staff as well as employees working on externally-funded projects.

Other state employees need to obtain the approval of their employing agency prior to accepting a contract to produce a work or a freelance contract. If you have questions, please contact Manfred Witznick from the Division of Human Resources and Legal Affairs.

As per § 7 LHO, the university is obliged to conform to the principles of economy and thrift in all of its activities. Therefore, you need to prove that the item or service to be delivered is appropriate and necessary. This also applies to externally-funded projects. Especially public funding institutions pay particular attention to this during audits.

Specifically, you will have to ask yourself and explain why a contract to produce a work or a freelance contract should be concluded if, in principle, the service in question can also be delivered by a university employee (either by your own subordinates or by a dedicated service area such as a workshop, graphics workshop etc.).

Besides justifying the appropriateness and necessity of the service, you will also need to include a declaration from the relevant university service area (email) declaring that they cannot deliver the service or item in question in sufficient quantity, quality or time.

For the production of a “Werk” (work), you must always agree on an overall remuneration. Partial remuneration is however possible if the service owed is to be performed in several stages. However, it is not permitted to negotiate a flat-rate fee to be paid out on a monthly or other basis (which is characteristic of a service contract).

On accepting the work / partial service, the project leader needs to provide a “sachlich richtig” (factually correct) confirmation before paying out the agreed fee.

In financial law, fees for freelance contracts or contracts to produce a work are not considered staff expenses. A contract to produce a work or a freelance contract can only be concluded if suitable material resources are available. Please include the precise cost centre on your request form.

If the contract is to be funded with external funds, you need to establish whether the funding institution allows the financing of contracts to produce a work or freelance contracts. To find out more about this or about whether staff resources can or need to be re-dedicated for spending on material resources, please talk to the member of the Project Administration team responsible for managing your funds.

Generally, services should be contracted out on a competitive basis. This is not only a legal requirement that the university has to fulfil as a public institution, but it is also of central concern to funding institutions auditing externally-funded projects. Contracts to produce a work and freelance contracts are no exception.

The contract fee should be calculated in a transparent manner and be based on the local market value. For contracts worth € 1,000 (including VAT) or more, you need to obtain one additional offer for comparison; for contracts worth € 1,500 or more, you need to obtain two. From € 5,000 upwards, you need to provide a short explanation.

Exceptions can only be made if you can provide a conclusive and verifiable explanation as to why the required service can only be performed by your chosen contractor.

The contractor is responsible for paying tax and making social security payments as required by the law. Typically, the contracting party will always have to pay income tax. The University of Konstanz is obliged to forward any information about contract fees paid out to contractors to the tax office.

In principle, as per § 1 (1) no. 1 Umsatzsteuergesetz UStG (value added tax act), the contractor is also liable to pay value added tax (VAT). Therefore, he/she must bill the university within six months of providing the agreed service. Please note that the invoice must comply with the requirements set out in § 14 (4) UStG. The contractor is obliged to include his/her tax ID, which he/she must request from the relevant tax office, if applicable. VAT exemptions are possible if the contracting party has successfully requested the “Kleinunternehmerregelung” (regulations for small entrepreneurs) as per § 19 UStG. In this case VAT must not be added on the invoice! Otherwise tax will have to be paid.

VAT is generally payable on contracts with foreign contractors. The “Kleinunternehmerregelung” (regulations for small entrepreneurs) does not apply! (§ 13b para. 5 UStG). This means that the University of Konstanz must pay VAT. An exemption is only possible if the contractor can produce confirmation from his/her local tax office (in Germany) that he/she is not an entrepreneur resident in another country. To avoid paying VAT twice, the foreign entrepreneur should make sure to submit a net invoice only (i.e. an invoice that does not specify the amount of tax owed).

As per § 4 no. 21 b UStG, teaching services provided by independent lecturers for educational and training purposes are not subject to VAT. This also means that guest lectures are generally exempt from tax. If you are uncertain as to whether this rule applies to you, please contact Ms Sabina Josic from the Division of Finance and Controlling.

In order for the Division of Finance and Controlling to be able to draw up and conclude the requested contract in time, you should submit your request at least 14 days ahead of the planned start date of the contractual service. Please make sure to include all required documentation. If the contractual services commence before the contract is approved and drawn up, the person responsible may be liable for damages if the requested contract cannot be concluded in time.

Please note that only the Division of Finance and Controlling can draw up and sign contracts to produce a work and freelance contracts. However, please feel free to include a draft based on our sample contract with your request and make sure to also email both to the responsible staff person. A sample contract for contracts to produce a work or freelance contracts is available for download from the pages of the Division of Finance and Controlling.

If you have questions about externally-funded contracts, please contact the staff member responsible for your case in the division’s research unit. If you have questions about budget-funded contracts, please contact Christina Leib-Keßler.

For general questions around the topic of contracts to produce a work or freelance contracts, please contact either Dominik Huppert, Manfred Witznick or Christina Leib-Keßler.