SAP Freelance Consulting
For SAP consultants looking to take their careers in a new direction, transitioning to independent contracting can be an attractive proposition. With the current extremely high demand for SAP services, now is a great time to consider your options.
As an independent SAP freelancer, you have the freedom to choose your own projects, set your schedule, and take control of your career. However, successfully making the leap does require careful planning and effort. In this guide, we’ll cover the key steps and considerations involved in becoming an independent SAP contractor.
Defining Independent Contracting
An independent SAP contractor (or freelancer) is self-employed, so they run their own business and find their own contracting roles rather than being a permanent employee of an organization.
Independent SAP contractors (freelancers) fill skill gaps and SAP talent needs on a temporary basis for companies running or implementing SAP systems. Contract roles may last a few weeks, several months, or even multiple years depending on the project scope.
As an independent contractor, SAP consultants take on all the legal, financial, and administrative responsibilities of self-employment. However, they also enjoy advantages like setting their own rates, choosing which projects to take on, building a personal brand, and having more input on where they develop future skills.
German Tax Law Concerning Independent SAP Consultants
For those aiming to work as freelancers in Germany, the typical routes are either creating a GmbH or becoming a certified freelancer, A.K.A. ”Freiberufler”. It is important to understand the different forms of company in German tax law before making this decision.
Here are the relevant types of German company to consider before choosing whether to create a company or register with the German government as a certified freelancer:
GmbH (Gesellschaft mit beschränkter Haftung): This is a private limited liability company. It requires a minimum share capital of €25,000. Profits are subject to corporate tax and trade tax.
UG (Unternehmergesellschaft) – This is a variant of the GmbH with a minimum share capital of just €1. Profits are subject to corporate tax and trade tax, same as a regular GmbH. It is intended for small startups and entrepreneurs. After the share capital reaches €25,000 it must be converted to a GmbH.
SAP consultants in Germany looking to work as freelancers would likely prefer to form a GmbH for the following reasons:
GmbH provides the liability protection of a corporation, which is important for consultancy work where advice carries risk. (Liability cover is of course possible without a GmbH as we will explain in this post.)
As freelancers, the €25,000 minimum share capital requirement of a GmbH is achievable.
Unlike a UG, the freelancers won’t have to convert to a GmbH later when their business grows, as the share capital can stay at €25,000.
The GmbH profits will be subject to corporate tax and trade tax, avoiding personal income tax rates which are higher in Germany.
So, the liability protection, reasonable capital requirements, lower corporate taxes, no dividend taxes, and private structure of a GmbH make it an ideal company form for SAP consultants transitioning to freelance work in Germany.
Registering As A Freelancer With The German Government
The other option of registering as a “Freiberufler” or certified freelancer with the German government has pros and cons to keep in mind. These should be compared with the benefits and disadvantages of setting up a GmbH:
Simpler registration process and lower costs to set up.
Don’t need to maintain GmbH formalities and accounting.
Taxed only on personal income versus GmbH corporate taxes.
Need to set up separate liability insurance and indemnity like a GmbH.
Higher personal income tax rates than GmbH corporate rates.
Need to do own accounting and documentation for taxes.
No ability to retain profits in the company.
Built-in liability protection for the consultant.
Lower corporate tax rates on profits.
Ability to retain profits in the company.
Clear company structure for contracts and accounting.
More complex incorporation process.
Annual accounting overhead and tax filings.
Higher professional services fees.
Overall, the GmbH provides more benefits in terms of liability protection and ongoing operations. The simpler Freiberufler option works well for small independent contractors. But for those seeking an ongoing consultancy business, the GmbH structure provides more long-term stability and credibility. Either option can be compliant from a legal perspective.
Liability And Indemnity For Freelancers Without A GmbH
Freelancers registered with the german government (Freiberufler) need public liability insurance and indemnity. Here are some tips about how to protect yourself as a registered freelancer:
Get specialized IT liability insurance (IT-Haftpflichtversicherung) to cover damages from IT services you provide. This protects against financial losses faced by clients due to your mistakes, security breaches, loss of data, etc.
Consider getting a cyber risk insurance (Cyber-Risko-Versicherung) as an add-on. This covers damages from data breaches, hacking, malware attacks, etc. Useful if clients store data on your systems.
Look into professional indemnity insurance (Vermögensschaden-Haftpflichtversicherung) to cover advisory errors and omissions. Useful if providing consulting services.
Evaluate coverage for criminal legal protection (Strafrechtsschutz) in case clients take criminal action against you.
Pay attention to policy limits for data recovery, software repairs, legal costs, fines, lost profit coverage, etc. Get appropriate limits.
Disclose all IT services, clients, data types, security measures etc. accurately to the insurer. Update them on changes.
Review exclusions like gross negligence, contractual penalties, lost data recovery, collateral damages etc. Narrower is better.
Get proof of your liability insurance to show clients. Some may require it in service contracts.
Keep detailed paperwork of all services, contracts, communications, security measures taken, etc. to defend against claims.
Stay up to date on changing laws, regulations and compliance rules relevant to IT services in Germany.
Laws For Scheinselbstständigkeit or “fake self-employment”
Another feature of German tax law to consider when working as an independent SAP contractor in Germany is avoiding being classed as being in Scheinselbstständigkeit or “fake self-employment”.
The key rules are:
If a freelancer works primarily for one client, the tax office may classify them as a dependent employee, not self-employed.
The rules aim to prevent employees being wrongly classified as freelancers to avoid payroll taxes.
Factors like supervision, integration in the client’s operations, and lack of own business infrastructure can lead to Scheinselbstständigkeit classification.
For SAP consultants in Germany:
If working for multiple clients, less risk of being deemed Scheinselbstständigkeit.
But if one client is over 70% of work, risk increases of being seen as their employee.
Taking contracts from non-German companies does not reduce the risk of Scheinselbstständigkeit.
The rules focus on the type of work relationship, not the client location.
To reduce risks:
Maintain multiple clients with no single dominant one.
Have an independent office, marketing, registered business, etc indicating self-employment.
Have contracts clearly framed as business-to-business, not employment.
Overall, Scheinselbstständigkeit has similarities to the IR35 provision in UK tax law, and SAP consultants in Germany need to take steps to clearly demonstrate independence and avoid deemed employee status.
Making the Transition
For SAP consultants considering contracting, the first step is deciding if you have the skills, experience, and professional network to succeed as an independent contractor. Technical, functional, or project management expertise in your SAP focus area is crucial. At least several years of SAP implementation experience is needed (preferably more), in a wide variety of contexts so you have confidence handling complex projects independently. More importantly, your ability to attract and retain clients is determined by your skills and employment history.
Just as important is having a wide network of industry connections who can recommend you for contract roles. Join SAP user groups, connect with peers on LinkedIn, and nurture relationships with previous managers and colleagues. The more people that think of you when SAP contracting opportunities arise, the better.
Once you’ve determined SAP freelancing is a viable option for you, begin planning the transition from permanent employment. Give your current employer proper notice as dictated in your contract and finish up any existing projects so as not to burn bridges.
In Germany, employment contracts often mandate notice periods of 3-6 months depending on seniority. Ensure you review your own contract and behave in accordance with that. Keep things professional as you may collaborate with ex-colleagues again.
Consider contacting somebody with lots of experience working as an independent SAP contractor and ask them for advice, or even if they would consider mentoring you to help guide you through the process. Although they may refuse as you will be a potential competitor for their business, they may well be nearing the end of their career and want to pass on their hard-won knowledge, or feel it is important to mentor freelance SAP consultants for other reasons.
Setting Up Your Business
As we discussed, most SAP contractors in Germany register as a Limited Liability Company (GmbH in Germany) or register with the German government as a freelancer (Freiberufler). Either option separates your business and personal assets for liability protection, though registered freelancers require separate liability and indemnity insurance. You’ll need to officially register a GmbH with the local trade office and German tax authorities.
Next, open a business bank account to keep your contracting income and expenses separate, and assess business your insurance options.
Independent contractors in Germany must pay quarterly prepayments of income tax and VAT. Hire an accountant experienced with freelance SAP contractors to ensure compliance. Your accountant must also be aware of the complexities of tax law for those taking contracts from abroad as you will most likely want to take advantage of opportunities for SAP contracts in other countries.
Independent SAP contractors in Germany can use an umbrella company or payroll company to simplify their tax obligations, especially for foreign contracts. The umbrella company acts as the formal employer and handles all tax, social security, and administrative processes for the contractor’s client engagements. For foreign clients, the umbrella company can invoice the client, receive payment, deduct taxes and social contributions, and pay the contractor their net salary.
This avoids the complexity of direct cross-border contracting and ensures proper taxation of foreign income. The contractor benefits from the umbrella company’s tax compliance expertise and doesn’t have to register abroad. Using an established German umbrella company for foreign contracts also lends credibility and reliability to independent SAP freelancers in Germany. The umbrella company charges a service fee but takes care of tax and compliance obligations, minimizing risks and simplifying administrative processes for the contractor.
Also budget for health insurance, retirement savings, and other social contributions normally covered by an employer. These costs to your business will now need to be covered by the contracts you deliver, so your rates will need to reflect this.
You will require a business phone number, a website, create branded marketing materials, and to develop templates for statements of work, NDAs, invoices and other client documents. The contracts you create, working with a legal professional, need to provide for all potential scenarios that arise as part of your profession. You will be accountable for the work you carry out and should provide clauses in your contracts that make customers aware of the extent of your liability.
Having these administrative tasks running smoothly with the help of other professionals will let you focus on delivering for clients once projects begin.
Finding Contracts Through Networking
In order to achieve a sustainable income stream you must be proactive about building and nurturing your network to secure a steady flow of projects.
Start by creating a master list of all your previous managers, colleagues, clients and professional contacts. If appropriate, reach out personally (not just as your business) to let them know you are now an independent contractor available for SAP projects. Stay in regular touch to remind them of your services.
Ask for introductions or recommendations from key decision makers in their organizations who hire SAP contractors. References and testimonials from mutual connections carry tremendous weight.
Make sure your profiles on LinkedIn, XING and other networks are up-to-date. Perhaps even show your availability date in your tagline on LinkedIn so prospects can get in touch with you in advance and at the right time to discuss new projects.
Connect with other SAP professionals and engage regularly by liking and commenting on posts. Join relevant SAP groups and forums to establish yourself as an expert in your area of SAP.
Attend local SAP meet-ups, events, and conferences whenever possible. Prepare an elevator pitch summarizing your SAP focus areas, skills, and ideal projects. Collect business cards and connect with attendees afterwards to build rapport.
Look for speaking and writing opportunities to increase your professional visibility. For example, submit presentations to SAP conferences, write blog articles highlighting your capabilities, or start a podcast or YouTube channel demonstrating your expertise.
Your best opportunity for networking is during the contracts themselves, when you have an extended period of time in which to demonstrate your professionalism and value to customers. If your project is successful and you have been an easy collaborator to work with, then your chances of being engaged by the same business again are much higher.
By continually expanding your network and nurturing connections, you will be considered when new SAP contracting opportunities emerge.
Managing Client Relationships
Once you secure a contract, dedicating time to manage the client relationship is key to getting re-hired and referred for more projects.
Start by clarifying business requirements and objectives, milestones, budgets, roles and responsibilities. Maintain transparency through consistent status updates on progress and impediments to progress. Make yourself readily available via phone, email or chat to address questions.
Always remember to explain the purpose and benefits of SAP projects in business terms, your clients are not necessarily SAP professionals but will understand the value of SAP when you can show the efficiency savings and other operating cost reductions, as well as greater revenue derived by successful implementations of SAP solutions.
Anticipate potential issues and proactively suggest solutions. Show how your adherence to SAP Best Practices, standardized SAP processes and methods means they are getting professional level SAP services. Bring fresh ideas to the table that add value for the client. Talk about solutions that save money and reduce workload like automation of business processes. Demonstrate you are genuinely invested in their success, not just completing the statement of work.
For longer engagements, periodically review progress and solicit informal feedback on your work. Ask what other areas they need support on and how you can provide additional impact. This attention to detail over the long term builds trust.
Towards the end of a contract have an open discussion about follow-on opportunities. Highlight your interest in continuing the relationship. Offer to help transition knowledge on any new resources or provide other business user training.
Finally, request written testimonials and LinkedIn recommendations that can help you land future roles. Share these references with your network as social proof, giving you further prominence in your SAP community.
By focusing on exceptional service delivery and relationship management, you can build a network of recurring SAP clients that provide continuous contracting opportunities.
One major advantage of contracting is exposure to different SAP environments, industries, and innovations. Capitalize on this by being a continuous learner and keep up with changes in the portfolio of SAP solutions. Reserve time between contracts for training and certifications. Experiment with new technologies relevant to clients, and develop knowledge around your particular niche within SAP services.
Stay on top of SAP product releases and roadmaps so you can advise clients on how new capabilities apply to them. Your value to clients lies in bringing fresh perspectives and expertise.
Also build knowledge outside of SAP skills. Brush up on project management approaches, change management, improving stakeholder communications and engagement, and other critical soft skills. A combination of hard and soft abilities makes you a well-rounded contractor, who facilitates delivery of a project and its adoption by business users.
Impacts of SAP’s Strategic Changes
SAP’s transition to cloud-based solutions like S/4HANA Cloud and a business model focused on subscription revenues is disrupting the SAP consulting market. Meanwhile, emerging technologies like AI and automation are changing how SAP systems are implemented and optimized. These factors directly impact independent SAP contractors.
As clients migrate legacy systems to S/4HANA before the 2027 end of support deadline (2030 for those SAP customers with extended support), demand for contractor expertise in cloud, integration, and migration will be high. The accelerated pace of these projects requires quickly learning new methods and tools.
The shift from large, monolithic implementations to faster, iterative deployments also favours more modular and agile project engagements. Longer-term roles get divided into smaller work packages. This means a potential source for more regular engagements.
Being comfortable using cloud-based delivery tools, integrating cloud and on-premise landscapes, and applying AI to find automation opportunities will be mandatory. Focusing on legacy skills could limit contract options.
The strategic takeaway for SAP contractors is to constantly expand your skills into your own niche, but also emerging SAP solution areas, and to leverage new technologies like automation through the entire implementation lifecycle. Bringing added value through innovation will make you an indispensable partner for clients.
While SAP’s transformation brings some uncertainty, overall it provides motivated contractors many opportunities to apply their expertise. Combining core SAP experience with adaptability and understanding requirements from a business’s point of view is key to thriving in this new era of SAP.
The Pros and Cons of Independent SAP Contracting
Like any career path, independent SAP contracting has both advantages and potential risks:
Freedom and flexibility – Choose your own projects, set your hours.
Higher earning potential – On average, contractors in Germany earn 35-45% more per hour than permanent employees (according to a study by lohnspiegel.de).
Career control – Build skills and brand on your own terms.
Variety – Work on diverse projects across industries.
Lack of corporate politics – Focus on delivery rather than office dynamics.
Unpredictable work – No guaranteed roster of projects.
No paid time off – Must budget for your own vacations/sick time.
Responsible for own benefits – Pay your own insurance, retirement, taxes.
Irregular work cycles – Income fluctuates with demand.
Work/life balance – Can be harder when you manage your own time.
Solitary Work – Lack of office community and camaraderie (some may prefer this!).
The independence and rewards of SAP contracting make it an appealing path for many consultants. However, because freelancers are effectively starting their own business, the level of business acumen, self-motivation and networking it requires should not be underestimated. Proper planning and execution is essential to making the transition from permanent employment smoothly and setting your contracting career up for success.
Are you a freelance SAP professional? Our team of dedicated recruitment consultants can help match you with your next contract and help negotiate it according to your requirements so join our exclusive community at IgniteSAP.