Taxes & business banking for the self-employed


Transition tips: employment to freelance or self-employment

Last updated on Feb 21, 2020

Kate Bailey

Freelance Editor

Nov 1, 2019

You’re ready to pack the chattels, say goodbye to bosses who do not appreciate you - and make the move to working for yourself. What do you need to know to make that transition as easy as possible? Well, you can definitely start with arming yourself with all of our blog posts about getting started as a freelancer or self-employed person in Germany - which we have talked about here)! And of course, familiarising yourself with the German tax law and things like VAT and your obligations in relation to what kind of business you set up is a major, precursory step that needs to be dealt with and again, is one we have covered on the blog here (because, you know, we are indeed a bank account and service designed to help you and your life!). These are the kinds of steps which are unavoidable, daunting, challenging and often incredibly sobering. We recommend these bureaucratic steps are taken before you even consider the transitional factors and tips we will discuss today. So, let’s assume you’re awesome and totally onto it and have all these boxes checked and balanced, and offer some more holistic advice about the transition from employment to freelance or self-employment.

First, we understand that for some freelancers, they actually have decided to work for themselves due to a lack of opportunity in their field or a sudden firing. We do understand that not every freelancer or self-employment situation is a person who is ready to stick it to the man and begin a whole new life. What we do hope however is that the tips we share today will in some direct or indirect way be applicable to the circumstances you have personally and are at least a foundational jumping point for you to start to plan (or live out) this transition. So, we have come up with a list. Let’s get started.


Heading: Adjust your attitude and expectations of ‘’working’’

Yes, we are really starting off with the most existential and humanised concept to make our first transition tip. The reality is that coming from a situation where your start and finish times, and break times, are dictated to you can really impede a more individualised approach to working. Similarly, even the amount of hours you expect from yourself and the rate of your work output needs to be readdressed. But here is the cool thing - it is totally up to you what this redefinition looks like. Maybe you’re happier doing 30 hours over three days, then two half days? The point is you get to decide. But the broader point is also: changing your attitudes and expectations can make it a lot easier to adjust to the self-affirming nature of working for yourself.  

Staying Motivation and Understanding Why You Chose This Route

As mentioned at the top of this article, not every person moving to self employment or freelance work is doing so out of a desire to work on beaches in Thailand with a permanent middle finger to the man. Though, that is an appealing idea for many (especially in the cold German winter months…) What we are saying is, it is very important to be aligned with your motivation for making these changes. Your motivation is the driving force that you WILL need at some point in your career - it is what helps you stay focused, persevere and overcome the challenges that come with the lifestyle. It will also help you balance said lifestyle, especially if there are requirements of you to do so based on your circumstances - and, there are many circumstances. Here are a few:

  • Are you wanting to find more time for family, like a new baby or an ill family member?
  • Do you have concerns about retirement or want to grow your earning capacity?
  • Are you seeking to build a new long-term financial plan around providing for a family or absorbing health care costs of more elderly family members?
  • Do you want to be able to move to a new location or relocate without job concerns?
  • Do you need the flexibility of remote work to support a partner or your own othered ambitions?
  • Are you looking to diffuse a current financial situation?

There are many reasons that often coincide with opportunity. Do not lose sight of ‘’special reasons’’ as to why you are choosing this new path - it will help you in the long run!


The slow transition

Commonly, many people and maybe even most people will factor the dissatisfaction in their current job or role into their decision to become freelance or self-employed. And for most of those to whom this is relatable, there is a transitional process involved. You might already be looking for, accepting or beginning work in a self-employed or freelance capacity, so it is deeply important to begin to differentiate these two pathways. Your current role is likely providing needed income while you make the transition, despite how unhappy it makes you. Keep that separate from the glittering promise of your new life. When you start thinking of your job as part of a larger strategic plan you’re implementing to create work you love, your perception of your situation can change dramatically. This is especially helpful for those who face long notice periods or mitigating factors during the transition from ‘’last employed role’’ to self employment or freelancing.

Cover your health insurance needs!

This is something that needs to be planned with absolute precision when it comes to the timing and transitions. In Germany, the health insurance laws and policies and intensely policed and explicit. Ideally, you can speak with an insurance professional about what will be required of you in regards to self employment but the most crucial part is aligning this with the employer you are leaving to ensure no one overpaid or underpaid during the transition - the penalties for which you could be liable. Your HR department or financial officers within your current place of employment should be able to assist you in aligning this with their insurance program - of course, only begin this process when you have a date you want to cease employment and have formally given notice.

Use all your free time in the transition wisely

Does you head hurt from all the registration and tax information? Likely. Are you concerned at the sheer workload of the transition? Maybe. These, and other questions, are a matter of inevitability of the new life choice you have made. So, maybe you have given notice and have a date and are looking at workspaces, but - any free time you have to devote to your new venture should be spent on ensuring you are legally and financially secure to do so. Once you are in your new life, you will be chasing work and having meetings and making work - great - so why not make sure there is no leftover red tape to be dealing with once all that fun stuff starts happening and use the free time of your transition to do so! We may sound like nagging parents - but the logic is obvious.

Plan financially for your first year. Savings go quickly!

This is one we cannot recommend enough. First time self employed or freelancers often go into it with some form of savings while they get started - but many are surprised how quickly that goes. Remember, in the first year, beyond pensions and insurance is monthly tax payments and no certain income. Before or during the transition, apart from saving, here are a few small things you could consider doing financially to ease the burden once you’re fully in the deep end of self employment or freelancing: 

  • You can get your credit in order.
  • You can eliminate your debt.
  • You can downgrade and move into a smaller home or cheaper apartment.
  • Do you have a bank account that suits the world of freelancing and self-employment? You know, like Kontist… cheeky, we know! But it is an entirely valid point. An account like Kontist, which separates tax income and various other items is a pretty great way to grasp the financial realities of freelancing.

Of course, there are many more examples - but we just want to make sure you’re thinking about the true financial burdens you could face in your first year - and to be prepared for them the best you can.

The first year of freelancing and self employment is notoriously and well documented to be one of the hardest things to do and overcome. Ultimately, you are most likely to be capable to face these challenges, it is just a case of both mentally and financially ensuring the transition process is smooth. A majority of challenges faced by freelancers and self employed have been faced before - so the good news is you can totally prepare, and we hope this article has helped get the brain thinking in this direction!