Bureaucracy drives SMEs to despair and freelancers abroad

According to recent studies, bureaucracy in Germany is a major problem for SMEs and the self-employed. According to a representative survey conducted by DZ BANK and the Federal Association of German Cooperative Banks (BVR), 82% of SMEs say that increasing bureaucracy is a burden on their business success. Six months ago, 75 percent still stated this. This means that concerns about bureaucratic burdens have reached an all-time high since the first survey in 2013, according to the BVR and DZ Bank.

The fear of an increasing number of complicated laws, rules and regulations is also prevalent across all size categories and sectors of the SME sector. This means that the problem of bureaucracy has now also outstripped the shortage of skilled workers, which three quarters of SMEs complain about. Around one in two SMEs also complained about an excessive tax burden. "The jungle of regulations must be cleared to unleash existing growth potential and strengthen Germany as a business location," commented BVR President Marija Kolak on the survey results.

According to the results, the outlook is also gloomy. Capacity utilization among industrial companies has been falling for a good year and is currently only at around 80%. The willingness to invest has also fallen to 67% and is therefore below the long-term average of 73%. According to the information provided, owners and managing directors of more than 1000 medium-sized companies in Germany were surveyed for the study.

The spectre of status determination procedures

Meanwhile, freelancers and the self-employed are particularly concerned about a bureaucratic obligation, as revealed in a study by the Institute of the German Economy (Institut der deutschen Wirtschaft, IW), which is close to employers: the status assessment procedure. This procedure is used to check whether a person is bogusly self-employed or not. A reform in 2022 was supposed to simplify the procedure, but critics point to ongoing legal uncertainties and a lack of reference to the reality of work, particularly for IT freelancers.

Almost 60% of the self-employed people surveyed by the IW who are going through a status determination procedure stated that they had to put in considerably more effort to obtain new orders. Around a third had even lost contracts because of this. 58% stated that they were "barely informed" or even "overwhelmed" by the procedure.

Emigrate or give up?

As a result, 35% would consider moving abroad and 27% would consider ending their self-employment. According to the IW, this even applies to respondents who have not yet been affected by a procedure themselves - apparently the status determination procedure has a deterrent effect. Younger, well-educated self-employed people with high profits were more likely than average to consider such drastic steps. They were often self-employed in the IT sector.

Around three quarters of those affected by the procedure reported that their status determination procedure ended with confirmation of self-employment. Over half of those surveyed who had already undergone one of these procedures were said to have been "very satisfied" with the outcome. A further 23 percent were "partially satisfied". Of the 6300 self-employed people surveyed by the IW, 21% had already undergone a status determination procedure.

(axk)