The risk can be limited with documentation and warranties.
If contracts, practice and payroll position are consistent, targeted warranties, disclosure and documentation may be sufficient.
Employment law
False self employment and freelancers in a business acquisition
False self employment in an Austrian acquisition: freelancers, payroll audit risk, provisions, warranties and indemnities before signing.
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26 July 2026 · Mag. Bernhard Brandauer, Rechtsanwalt
Freelancers, contractors and free service providers can create material claim risks in a business acquisition. If a relationship is later classified as employment, social security, payroll taxes and employment law effects may follow.
This is not a general employment law guide, but a specific M&A review point. The buyer must understand which individuals are permanently integrated, how they are managed and whether provisions or indemnities are needed.
The article complements employee provisions, tax due diligence and transfer of business employment law.
Assess the transaction
Assess the risk before signing
Answer two questions on the starting point and contractual readiness.
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Are freelancers permanently involved in core processes of the target?
Permanent integration, instructions, operating resources and economic dependence are typical warning signs.
All paths at a glance
Overview of all answers.
The risk can be limited with documentation and warranties.
If contracts, practice and payroll position are consistent, targeted warranties, disclosure and documentation may be sufficient.
Status risks should be valued before signing.
If classification is unclear, buyers should consider provisions, price reduction or indemnity. Sellers should disclose problem cases before a later payroll audit burdens the deal.
Why freelancer structures are sensitive in deals
Why freelancer structures are sensitive in deals
In the data room, freelancers may appear as suppliers or consulting costs. In practice, they may be integrated into workflows, teams and instructions. Later reclassification can have significant economic consequences.
The review must not stop at contract headings. Actual work pattern, organisational integration, resources, right of substitution, remuneration logic and duration of cooperation matter.
Which information buyers should request
Which information buyers should request
Buyers should review framework agreements, statements of work, invoices, communication channels, project roles, onboarding documents and a list of continuously active freelancers. Prior audits and claims are also important.
In platforms, IT, sales, marketing or production, individual freelancers may be central to operations. Then the buyer must also ask whether the person remains available after closing and whether a contract conversion is needed.
How provisions and warranties should be drafted
How provisions and warranties should be drafted
The purchase agreement should disclose known freelancers and free service providers, specify warranties on payroll and employment compliance and allocate undisclosed claims to the appropriate party.
A general employee matters warranty is often insufficient where status risks are visible. Clear disclosure, indemnity for pre-closing periods and cooperation in later audits are useful.
Review points
Review status risks in the acquisition
The table shows points that matter before signing.
| Review point | Why it matters | Deal solution |
|---|---|---|
| Integration Integration | Part of ongoing operations? | Status review |
| Instructions Instructions | Technical and time control | Document practice |
| Duration Duration | Regular service instead of project | Review provision |
| Payroll Payroll | Claims may arise | Indemnity |
| Continuation Continuation | Availability after closing | Closing plan |
Caution: The label freelancer does not protect against employment or social security reclassification. What matters is how cooperation actually works.
FAQ
Common questions on this topic.
Why is false self employment a buyer risk? +
Because claims or employment law effects may become visible after closing although their economic cause lies in the pre-closing period.
Is a contractor agreement enough evidence? +
No. The contract is important, but actual performance is decisive. Documents and practice must be reviewed together.
How can the buyer reflect the risk in the SPA? +
Through specific warranties, disclosure, provisions, price adjustment or indemnity for undisclosed pre-closing risks.
Further reading
Further topics on business acquisition
Topics
False self employmentFreelancersPayroll auditEmployment lawDue diligence
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