Clients often prefer to conclude fee contracts (Honorarverträge). Fee contracts do not oblige clients to pay social security contributions. Artists with residence permits that only permit self-employment are also often hired on the basis of fee contracts. This entails a certain risk: Fee contracts are often concluded even though the contractual relationship actually involves employment that is subject to social security contributions (sozialversicherungspflichtige Beschäftigung). German law has developed criteria for determining when someone must be hired as an employee.
The following are examples of criteria that necessitate employment subject to social security contributions:
If artists work for a fee and even only partially meet these criteria, they may be engaged in what is referred to as "pseudo self-employment". If an audit by the pension insurance or health insurance bodies leads to the conclusion that an employment contract should have been established, both the artist and the employer may be liable for back payments and face criminal charges.
It is often assumed that an artist is automatically considered to be self-employed if he/she has several customers or clients. This is not necessarily true, however: each individual relationship between contractor and client must be considered.