The things I wish I'd known about 'Elterngeld' as a freelancer in Germany

The day I found out I was expecting my baby daughter will stay in my memory forever.

I had a gynecologists’ appointment booked and was too nervous to eat all morning. For a week or so, I’d suspected something was ‘up’ and had decided to ask the doctor for a pregnancy test.

Instead, I found myself on the examination bed, being given an ultrasound and seeing the shape of a tiny human pop up on the screen in front of me.

On that day, the last thing on my mind was my financial situation. I didn’t wonder if I’d optimised my tax return for Elterngeld (parental leave allowance), when to submit my application, or the different rules that apply to freelancers.

And I certainly wasn’t mulling over words like Bemessungszeitraum (more on this in a moment).

Of course, in Germany the paperwork will catch up with you sooner or later – and for me, it certainly did. Though things have worked out fine, I realised too late that the process of applying for Elterngeld could have been a lot less stressful.

Here are the things I wish I’d known earlier about applying for Elterngeld as a freelancer.

1. Employees and freelancers are treated differently

One thing I learned very late - and which came as a nasty shock - is that the Bemessungszeitraum for Elterngeld is different for employees and freelancers.

This unwieldy German word refers to the time frame used to calculate your average earnings before the birth, which in turn is used to calculate your Elterngeld entitlement.

For employees, it’s the 12 months before the birth. For freelancers, it’s the previous calendar year. This arbitrary difference is probably to do with ease of administration. Since freelance income is complicated to prove, the Elterngeldstelle (parental leave allowance office) usually uses the tax return from the previous year, whereas employees can provide contracts and payslips.

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Of course, that means if your child is due in summer (as mine was), it’s no use trying to maximise your earnings in spring in the hope that it will boost your Elterngeld. It won’t.

All that matters are your profits the calendar year before the birth. Your parental allowance will be around 65 percent of this figure - up to €1,800 per month.

2. There are very few exceptions to the rules

As most freelancers will know, businesses can have good years and bad years.

For me, the year that was used to calculate my Elterngeld was a very bad one. One of my clients had fallen off the face of the earth at the start of the year, while another had a lot less work for me than they previously did.

At first, I spent a lot of time banging my head against a brick wall, thinking there must be some way for them to use my earnings from a different year. Surely an exceptionally bad business year must count as an exception to the rules?

As it turns out, it doesn’t. While there are exceptions, they mostly only apply to illness, having been on parental or maternity leave that year, or the Covid pandemic.

In these cases, you can usually apply to use a different year to provide evidence of your earnings. But if you just have a run of bad luck in your business? Well, that’s just tough, I guess.

3. Your taxable profits are the basis for your Elterngeld

This is something I wish I had understood better.

For freelancers, Elterngeld is calculated based on your taxable profit (Gewinn), which equates to your income minus business expenses. That means your declared profit in the relevant tax year can significantly influence how much parental leave allowance you receive.

In practice, this can be counterintuitive. Normally, freelancers aim to reduce their taxable profit by claiming as many business expenses as possible. However, because Elterngeld is based on profit rather than turnover, a lower declared profit can also reduce your entitlement.

READ ALSO: What German health insurance benefits can you get during pregnancy?

Depending on your income level, the financial impact of a higher Elterngeld payment may, in some cases, outweigh the tax savings from additional deductions.

For example, an extra €1,000 in annual profit could translate into roughly €650 more in Elterngeld, while the tax saving from deducting €1,000 in expenses at a 25 percent tax rate would be around €250.

This doesn’t mean you should omit legitimate expenses, but it can be worth understanding how major investments or timing decisions may affect your parental leave calculation. If you’re unsure, speaking to a tax adviser or Elterngeld specialist can help you plan in advance.

4. Elterngeld Plus is your best friend

For employees in Germany, having a free year off to care for their new family member feels like a luxury. For freelancers, it may be tinged with anxiety. You may well fear losing clients if you disappear for that long, even if there's a very good reason for it.

The answer I found was Elterngeld Plus, which lets you work part time and earn a little extra during your parental leave.

You generally get around half what you’d get for the Basis Elterngeld, but you can have an income alongside it and claim it for twice as long - so 24 months instead of 12. (Or even longer if your partner also takes some leave.)

READ ALSO: Elterngeld Plus - How new parents in Germany can stretch parental leave payments

What’s more, the amount you get while claiming Elterngeld Plus could even work out higher over time than claiming Basis Elterngeld, because it’s calculated based on your “lost” income.

For example, if you earned €2,000 per month before the birth and are planning on earning €400 per month afterwards, your Elterngeld Plus would be 65 percent of the difference - in this case, €1,600. That would work out as €1,040 per month alongside your €400 income, compared to around €1,245 Basis Elterngeld (and you’d get it for twice as long!)

If you’d like to see which is better for your specific circumstances, there’s a handy online calculator. There’s also the option of mixing the two, for example by starting with Basis Elterngeld and moving to Elterngeld Plus when your baby is a little bit older.

READ ALSO: What parents can expect to pay for daycare in all 16 German states

5. You can take Elterngeld 'breaks'

This is one absolutely every self-employed person should know, as it’s one major advantage that freelancers have over employees.

If you plan on working a little during your parental leave, any income you earn usually impacts your Elterngeld allowance. But that’s only if you actually receive Elterngeld that month.

If you take what’s known as a Pausemonate (monthly pause), you can submit your invoices during the break, get paid during that month, and it generally won’t impact your allowance.

If you’re concerned about making ends meet during parental leave, this is one of the best options for earning a little extra income. Just be aware that you’ll have to claim Elterngeld Plus continuously from the 14th month, so your Pausemonaten will have to be taken early.

Also, be sure to keep careful records of what you earned and when so you can answer any questions from the Elterngeldstelle at the end of the year.

6. Don’t wait around to apply

You may well ask how I didn’t know this, but things in Germany take a long time - and Elterngeld applications are no exception. What’s more, they only backdate the payments for up to three months, so if you apply more than three months after the birth, you could miss out on months of earnings.

You can officially apply for parental leave allowance as soon as your child is born. Naturally, your mind will probably be on other things straight after the birth (“Who is this tiny squealing human? What does it want?”), so it makes sense to get everything ready beforehand and just submit it once your baby arrives.

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Don’t worry too much if you’re missing documents like the birth certificate - those can easily be added later, once they arrive.

Did I do this? Of course I didn’t. I left my application until almost three months after the birth, scrambling around for different documents, and ultimately ended up living off savings during the interminable wait for my application to be approved.

So don’t be like me. Get organised. And file your documents online as soon as possible.