Meaning of Parental Allowance for Self-Employment

Parental Allowance for Self-Employment

Parental allowance is a matter of course for employees and the calculation is also easy. The situation is different with the self-employed, because there the procedure for applying for parental allowance is much more complex. But it is paid.

The self-employed are also entitled to parental allowance

According to PHONEJUST, the Federal Parental Allowance and Parental Leave Act has a few pitfalls in store for applying for parental allowance for the self-employed, but also a few options. Anyone who does not know their way around and applies for parental allowance “on good luck” will lose a lot of money. Please note the change due to the “Elterngeld Plus”, which applies to children born on or after July 1st, 2015. It is particularly advisable for the self-employed to seek advice before submitting an application.

What is relevant for the calculation of the parental allowance?

First, the so-called assessment period is determined by the parental allowance office in order to determine the relevant calendar months for the parental allowance calculation. Applicants who have earned income from self-employment or from a commercial enterprise before the birth of the child, the last financial year, i.e. not the last 12 months before the birth of the child, accessed. If no different financial year is specified, the assessment period for the self-employed is usually the calendar year before the birth of the child. As far as income is concerned, this is always considered for 12 months, as is the case with employees.

Note: This regulation has been in effect since January 2013 and serves to simplify the administrative work. Previously, the self-employed had the opportunity to influence which assessment period was used as the basis for calculating the parental allowance.

Only if it can be proven to the parental allowance office that you were ill due to pregnancy in the relevant assessment period and that this resulted in a loss of income (e.g. by receiving an income replacement benefit such as daily sickness allowance) or parental allowance for an older sibling. If one of these so-called exclusion and postponement requirements apply, then a postponement of the assessment period can be requested. In this case, the previous financial year is used to calculate the parental allowance and it is checked again whether the facts of the exclusion can be asserted.

Can a self-employed person continue to work and earn money while receiving parental allowance?

Parental allowance will be drawn for a maximum of 12 months and for at least two monthly amounts. The number of monthly amounts must be distributed within the child’s first 14 months of life. Employment may be carried out while receiving parental allowance; however, this may not exceed an average of 30 hours per week. This applies to the sum of all jobs that are carried out! If you work 31 hours a week, you are no longer entitled to parental allowance for the relevant reference month.

Every euro that is earned through employment is offset against the parental allowance and this also applies to the income that is earned in the reference period (e.g. if a customer settles an older bill).

Can a self-employed person structure his parental allowance reference period?

In principle, everyone can interrupt their reference period. Because no applicant is forced to apply for their parental allowance “in one go”. So it may make sense to leave out certain months of life when applying for parental allowance. The profit made while receiving the parental allowance is taken into account, not the turnover. If income and expenses balance each other out, this will result in a zero euro profit and thus not in a reduction in parental allowance.

However, it should be noted here that this model only works for sole proprietorships and freelancers who have a strong influence on their invoicing and thus also on the receipt of payments. This inflow principle does not apply to self-employed persons who have to show a balance sheet.

When it comes to the crediting of the income in the reference period, the so-called cap must also be observed. Through this, the calculated monthly income before the child’s birth is capped to a maximum of 2,770 euros, because 65% results in the maximum possible parental benefit amount of 1,800 euros per month of life of the child.

Parental Allowance for Self-Employment