False self-employment: German education sector relieved over extension of section 127 of Book IV of the Social Security Code

The clock is ticking for educational institutions

There is nervousness in Germany's education sector. Lawmakers have granted a reprieve once again, but no long-term planning certainty. What is rarely discussed outside the field has the potential to plunge many schools, music schools and universities as well as private training centres and educational providers into crisis: from 1 January 2028, every teacher who currently works on a self-employed basis could suddenly be classified as an employee. This would have dramatic consequences, especially for educational institutions that are already struggling financially.

Herrenberg judgment: where does dependent employment begin?

What caused this uncertainty is the Herrenberg judgment handed down by Germany's Federal Social Court (Bundessozialgericht) in 2022. This decision clarified the criteria for determining when a teacher is genuinely self-employed or in fact an employee. In prac- tice, different rules had often been followed for years. For many education providers, whether private or public, the ruling was both a wake-up call and a shock.

Section 127 of Book IV of the Social Security Code: grace period with an expiry date

Politics responded and in record time a lifeline was agreed: section 127 of the Book IV of the German Social Security Code (SGB IV) suspends strict social security back payments until 31 December 2026. This brought a sigh of relief to many institutions as well as to teachers – at least for the time being, since this transitional arrangement was originally due to expire at the end of this year.

Questions, but hardly any answers

The sense of uncertainty was therefore considerable. In mid-February 2026, the Green parliamentary group addressed formal written questions to the federal government, rais- ing central questions: What legislative changes are being prepared? Will there be guidelines providing for greater legal certainty? Are the CDU/CSU and SPD planning to include key points for the period after the end of the transitional phase in their coalition agreement? And will the arrangement be extended to other sectors facing similar uncer- tainties?

The government's response was sobering: a draft bill for the reform was still "under dis- cussion". Concrete details? Further safeguards? None whatsoever. The education sector was described as a special case because of its significant social importance; the trans- itional arrangement would not be extended to other sectors. There was not even a hint of an extension for the education sector itself. Consequently, anxiety mounted.

No extension of section 127, but postponement of the grace period

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Last week, the German lower house of parliament, the Bundestag, delivered a surprise. Whether this was prompted by the enquiry from the Alliance 90/The Greens parliamentary group or by a keen awareness of the sector's intolerable lack of ability to plan remains unclear. In any case, during its deliberations on 4 March 2026 on the planned restructur- ing of the "citizen's income" benefit (Bürgergeld) into a new means-tested basic income support (Grundsicherung), the Bundestag Committee on Labour and Social Affairs pro- posed extending the current rules for another year. The Bundestag accepted this recom- mendation in the vote held on 5 March 2026 and resolved to extend the transitional ar- rangement contained in section 127 of Book IV of the Social Security Code. The law will come into force in summer 2026. Section 127 now suspends the strict back payment re- quirements of social security until 31 December 2027. This means that the education sector can once again breathe a sigh of relief – at least for the time being. Educational institutions and teachers now find themselves facing a critical decision. Those who continue to rely on the old structures may incur additional social security contributions and status determination proceedings in accordance with the Herrenberg judgment start- ing from 1 January 2028. Financial risks are lurking – especially for already struggling local authorities and private institutions. There is no guarantee the present arrangement will be extended year after year.

Time for change

Given this situation, a change in thinking is required. There is time until 31 December 2027 to adapt existing employment models to the new requirements. This also means proactive communication with teachers, transparency towards parents and students and, where necessary, the courage to change.

Need for action in the education sector – no time to be wasted

While parliament has extended the grace period one more time, the need for action has not gone away. Whether you are the head of an educational institution, a self-employed individual or a political leader, it is essential to assess the risks of false self-employment within your team and take advantage of the grace period to adjust your structures before the transition period ends. Parliament has granted extra time, which should not be wasted.