Suzan van de Kam
Partner | Lawyer
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In many cases, it is clear whether someone is working under an employment contract or under a service contract as a self-employed professional. Sometimes it is not that simple.
On Budget Day, the Dutch government announced its intention to clarify the rules on this topic. A bill will be introduced to provide greater job security for flexible workers, with measures aimed at better protecting temporary workers, agency workers, and on-call employees. The proposal also aims at clarifying when someone works as employee or as self-employed. A mandatory disability insurance scheme for self-employed professionals will be introduced in order to better protect self-employed professionals against income loss against long-term disability and to increase the level playing field between different types of workers. In addition, the Dutch tax authorities will resume the enforcement of the employment classification rules for wage tax purposes to combat false self-employment.
This alert provides an update on several key points of the legislation on self-employed professionals (ZZP).
Three focus areas
To ensure that individuals work under the appropriate contract type, the government will focus on the following three areas:
1. Lifting the Enforcement Moratorium on 1 January 2025
As from 1 January 2025, the Dutch tax authorities will fully enforce regulations against false self-employment. Companies and organizations which hire individuals as self-employed professionals for work they do not perform independently may face fines and additional tax assessments. It is therefore important to assess whether self-employed professionals work as independent service providers or should actually be classified as employees.
The government wants to normalize the enforcement of the employment classification rules for wage tax purposes as much as possible. Lifting the enforcement moratorium, which has been in place since 2016, is a first step in that direction.
The government wants to prevent that substantial fines (in Dutch: ‘vergrijpboetes’) immediately will be imposed to parties which are actively engaged to correct classification of employment relationships after the enforcement moratorium will be lifted. In the year 2025 the Dutch tax authorities will therefore be lenient in imposing substantial fines on employers and workers who can demonstrate that they are actively working to reduce false self-employment. However, minor penalties (in Dutch: ‘verzuimboetes’) could still be imposed.
2. Level playing field between different contract types
The unequal treatment of different contract types under labour law, social security and tax law can create inappropriate incentive to work outside of employment relationships. Several announced measures aim at levelling the playing field between employees and self-employed professionals. One example is the possible introduction of a mandatory basic disability insurance for self-employed professionals.
On 11 June 2024 an internet consultation started on the draft bill on the Basic disability insurance for self-employed professionals Act. The objective of the bill is to improve the balance between employees and self-employed professionals and to provide income security for self-employed professionals in case of disability. Another objective is to reduce pressure on social assistance and to strengthen the social security system.
3. Clarifying the rules on the classification of contracts: ‘Act on the clarification assessment of employment relationships and legal presumption’ (VBAR)
The VBAR is a draft bill designed to clarify the status of employment relationships, i.e. determining when someone is working as an employee and when they can work as a self-employed professional. The VBAR introduces a new assessment framework, the "WZOP test", which will help determine whether someone is self-employed or an employee. In addition, the WZOP introduces a presumption of employment for self-employed professionals who charge an hourly rate below a certain threshold. This presumption means that self-employed professionals with a low hourly rate are considered employees unless proven otherwise.
The WZOP Test
The WZOP test is the core of the bill. This assessment framework will determine whether there is a genuine employment relationship (employer-employee) or whether someone is working as a self-employed professional. The test examines several elements of the working relationship:
Presumption of employment relationship
The bill also includes a presumption of an employment relationship based on hourly rates. This presumption makes it easier for workers at the lower end of the labour market to prove they work under an employment contract. If a worker or a trade union invokes the presumption, they must prove that they receive less than the applicable hourly rate of EUR 33. The burden of proof then shifts to the employer. The government expects that this measure will have a preventive effect, encouraging employers to be more critical in deciding whether an employment contract is necessary at the start of the relationship.
If the bill will be adopted, employers will need to reassess whether self-employed professionals engaged under a service agreement are genuinely independent or should actually be treated as employees for legal and (wage) tax purposes.
The VBAR is expected to enter into effect on 1 January 2026. On 21 June 2024, the Minister of Social Affairs and Employment submitted the bill to the Council of State. The bill has not yet been presented to the Lower House. The precise details of the VBAR remain unclear. Despite the intended date of entry into force of 1 January 2026, there are doubts on the feasibility of this date and whether on the bill will be adopted at all.
Conclusion
If the VBAR will be adopted, there will be significant changes for companies working with self-employed professionals and for the professionals themselves. The introduction of the WZOP test and the presumption of an employment relationship for self-employed professionals charging a low hourly rate will cause that clients must closely monitor the conditions under which they engage self-employed professionals. Moreover, clients risk fines and additional tax assessments if employment relationships are not correctly classified due to the lifting of the enforcement moratorium on 1 January 2025. It is therefore essential to take action now.
Do you have any questions about how these measures might impact your organization? Please do not hesitate to contact us. We would be pleased to assist you with preparing your organization for the upcoming changes.
Thanks to Emma Daramaja
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