Taxes & business banking for the self-employed


Part-Time Self-Employment - Is It Time to Be Your Own Boss?

Last updated on Feb 21, 2020

Mar 25, 2019

Have you ever found yourself wondering what it would be like to quit your 9-5 and embark on the journey of self-employment? You’re in good company. Many of us will, at some point, find ourselves mulling over the idea of ditching that regular pay cheque. Oh, the liberation of making your own rules! Getting up when you want to, wearing sweatpants to the “office” (your sofa) and finally spending more time with your children/significant other/pet certainly has its appeal. The temptation to throw caution to the wind and just “give it a go” is huge. But, of course, being your own boss isn’t always as dreamy as it sounds: often clients determine work hours and spontaneous projects may crop up right when you’d planned that two-week holiday. But the biggest concern of all is financial security: if you can’t get clients, you don’t get paid. That in itself is enough for many people to relegate their self-employment dreams to the bottom of their “to-do” list.

Financial Fears Are Real but There’s a Solution

Money – or lack of it – can be the cause of many frown lines and sleepless nights. The fear of not knowing whether you can afford the lifestyle you’re living on a regular pay cheque can quickly put a stop to all solopreneurial dreams. If you’re thinking about becoming self-employed, and you’re past the euphoria-fuelled stage where you can only see how amazing your life could be, you might start worrying about the “what ifs” – what if I fail and have to go back to a full-time job? Won’t that look bad on my CV? Will I get enough clients?

But alongside all the worries, there are many reasons why it’s worth considering self-employment. If you’re toying with the idea of being your own boss, but potential financial risks are putting you off, maybe you should consider part-time self-employment. This is a great way to test the waters and build your business without the angst that accompanies full-time self-employment.

Why Should I Be Part-Time Self-Employed, Rather Than Full-Time?

First things first: full-time self-employment is always worth considering – even if you know that the first months can be really tough and the risk factor feels enormous. It’s brave and it can be immensely rewarding – if you put in the work, are self-motivated, disciplined and diligent, you can really build that life and career path that you’ve always dreamed of.

However, if you are the type of person that prefers keeping the risk minimal, then part-time self-employment might be a better option. It’s a bit of a compromise: on one hand, you’ll still have your regular job to attend to (whether that’s part or full-time). That will take up significant time but it also pays your bills. On the other hand, you’ll be free to try out self-employment life and also earn extra cash this way. If you have few clients to begin with, it won’t hit you as hard because you’ll still have your regular gig covering your bases.

Part-Time Self-Employment as a Transition Phase

Being your own part-time boss can enable you to make a gentle transition to full-time self-employment. Consider it as a test phase in which you can figure out whether your business idea is sound or needs tweaking. It also enables you to slowly build a client base and evaluate whether or not you’d be able to do this full-time.

The figures from the German KfW Gründungsmonitor ( Source: ) highlight that around 50% of all people who end up founding a business in Germany will first try out their idea and choose part-time self-employment.

How Will Part-Time Self-Employment Affect My Regular Job?

The answer is simple: it shouldn’t affect it at all. There are, however, a few things you should pay attention to, to make sure you don’t get yourself into a pickle. As a rule of thumb, it’s only fair to inform your boss about your plans – depending on your contract, you may even be legally obliged to do so. You should assure him/her that it won’t interfere with your regular gig and, of course, misusing company time for your own personal pursuit is a strict no-no. That means clearly splitting your time is essential. Obviously, it should go without saying that poaching clients from your 9-5 can get you into a lot of trouble and is definitely not the recommended way to fast-track your career!

How to Properly Split Your Time

A word of caution: as long as you are an employee, this job should continue to be your priority, at least during the hours you’re obliged to work. As a general rule, in Germany you can work up to 18 hours per week in addition to your regular job. You should also be aware that you can’t hire someone, as consequently your part-time self-employment will immediately be classified as full-time self-employment.

Do I Have to Register My Part-Time Self-Employment?

Unfortunately, bureaucracy is something you can’t avoid, even if you’re only pursuing your boss-dream part-time. This means that you’ll have to register your business with either the trade office, the tax office, the trade association, the trade register or the IHK (chamber of industry and commerce), depending on what you do. The office where you need to register depends on the legal form you’ve chosen for your business.

What Legal Form Should I Choose?

If you are a freelancer (journalist, artist, academic etc.), you just need to register with the Finanzamt /tax office and obtain a tax ID number and you’re good to go. But there are also many different legal forms that you can choose for your business and many different factors which determine which one is right for you.

The IHK says: “If you start up your buspart-time-self-employmentiness alone, it will be a sole proprietorship from then on. A partnership constituted under civil law (GbR) or a general commercial partnership (OHG), if your enterprise requires a commercially organised business operation, is set up as a team effort. Since the legislation which applies to your business depends on its legal form, it stands to reason that the choice of legal form is of particular importance.”

For more details, check out their extensive PDF document here or, if your German is good/you have a German buddy to hand, this test by GO AHEAD can help you determine what’s right for you!

What about Book Keeping and Tax Declarations?

Regardless of whether you’re self-employed in part or full-time, whether you’re earning a lot or a little, you’ll need to deal with book keeping and tax declarations.

Low Income & the Small Business Regulation

If you don’t have more than 17,500€ revenue a year, the Kleinunternehmerregelung or small business regulation will apply to you. This means that you are not VAT liable and don’t have to add VAT to your invoices or pay it in advance to the tax office. On one hand, this is great – it means less work for you. However, it also means that you’re not eligible to offset VAT on business expenses. Some argue that VAT is a good thing because clients are likely to take your business more serious if they know you’re making more than 17,500€ a year.

How Does Part-Time Self-Employment Affect My Health Insurance?

There is definitely an advantage to being self-employed on a part-time basis when it comes to health insurance. If you’re your own boss 24/7 you will probably be burdened with a stately sum that you have to pay each month. However, if you’re employed and have public health insurance, the amount you earn additionally from self-employment won’t affect this. You also won’t have to pay extra contributions towards old-age care, unemployment or pension insurance, saving you a lot of money.

The Pros and Cons of Part-Time Self-Employment

For some, being self-employed part-time is the perfect mix of security and flexibility: it gives you the freedom to be your own boss without sacrificing the monthly pay cheque. But before opting for this career move, take a look at our pro and cons list below.

You can test whether self-employment works for you without taking a huge risk.You may be faced with double the amount of work – when colleagues call it a day, you’ll probably go on to do your side gig.
You will continue to have a monthly pay cheque which covers your costs and ensures that you can keep up your current lifestyle.You will be faced with additional paperwork and bureaucracy. For example, you have to take care of your book keeping.
Part-time self-employment doesn’t affect your contributions to healthcare, old-age care and pension insurance.The work that goes into customer acquisition and signing new projects is often underestimated. It will take up a lot of your time.
You can figure out whether being your own boss is for you or not.Some clients might not take you seriously if they realise that you’re only working “on the side”.
You have the option to become self-employed full-time whenever you wish.Your “regular” job will mean that you won’t be as quick to reply to clients or as flexible time-wise as you would be if you were full-time self-employed.
You can make extra money and you get to decide how much and when you work in addition to your full-time gig.You still need to commit 100% to your “day job” and can’t slack off, even if you would like to focus your energies on other things.
You can improve your credit rating – especially if you’re earning more thanks to your self-employmentAs a rule of thumb, you’ll need to inform your employer about your part-time self-employment plans. Worst case: he/she won’t allow you to work part-time on the side (contract depending).