New policy regarding contractors to replace the DBA Act worked out in more detail

01/07/19

The Minister of Social Affairs and Employment and the State Secretary of Finance have worked out the measures on the labour relationships of self-employed persons in more detail. The new legislation must take effect on 1 January 2021. There are considerable changes compared to the measures proposed earlier in the coalition agreement. We present the amended proposals for each measure.

We also know more about the enforcement of the DBA Act by the Dutch Tax Authorities. The current enforcement moratorium will be extended until 2021. However, the possibilities for enforcement during the moratorium will be tightened up by 2020: from 1 January 2020, the Tax Authorities will also be able to enforce the moratorium if organizations fail to follow the Tax Authorities’ instructions (or fail to do so to a sufficient extent) within a reasonable period of time.

Minimum rate for self-employed persons

As already announced in the media, a minimum rate of € 16 per hour will apply to contractors. The deemed employment contract for self-employed persons who work at a low hourly rate has been abolished. This initially proposed measure to protect contractors at the bottom of the labour market, does not appear to be compatible with European legislation and regulations. The obligation to pay the minimum rate will also apply to private clients.

How does the minimum rate work in practice?

The responsibility for checking and paying the minimum rate is transferred to the client. The contractor must make an estimate of the direct costs and hours prior to each assignment. He must provide the client with this information in the form of an overview of hours and costs (it is assumed that this will be done via the quotation), so that the client can calculate the hourly rate. The contractor must also provide the business customer (not the private client) with an overview of the hours and costs after the end of the assignment. If it turns out that more direct costs and/or hours have been incurred, as a result of which the rate falls below the minimum rate, the business customer is obliged to make additional payments. This means that part of the entrepreneurial risk is actually transferred to the client. In addition, the business customer is obliged to assess both beforehand and afterwards whether the information provided by the contractor is plausible, because there is a risk that the contractor may feel compelled to provide incorrect information, which may mean that the minimum rate may not be met.

Self-employed persons' declaration

For self-employed persons at the top end of the labour market, there will be a self-employed persons' declaration, to be signed by the contractor and his client. This is the final elaboration of the opt-out measure for this group. The following conditions apply:

The contract of engagement states that the parties do not intend to enter into an employment contract;
The employment remuneration amounts to at least € 75 per hour (price level 2019);
The agreement is entered into for a maximum period of one year;
The employer and the contractor both sign the declaration of self-employment;
The contractor must be registered with the Chamber of Commerce.

If the conditions are met, the client will be indemnified against payroll taxes, even if it turns out afterwards that the labour relationship was an employment. The scope of the opt-out is extended to include parts of labour law and (under certain conditions) the applicability of pensions and collective agreements. For example, a worker with a self-employed persons' declaration can no longer claim continued payment of wages in the event of illness if it turns out afterwards that he or she was an employee according to the law.

Consequences if conditions are not met

It is very important, however, that if it turns out that the conditions for a self-employed persons' declaration have not been met, the safeguard effect and the legal effects of the declaration of self-employment do not apply retroactively. Such a determination can be made by the civil court, the Tax Authorities and the UWV. The contractor and the client must then still assess whether it is possible to work outside employment, for example by means of the web module (see below). If the conditions for the declaration of self-employment are not met, and there is evidence of employment, additional wage tax assessments and fines may be imposed by the Tax Authorities. The burden of proof that the conditions of the self-employed persons' declaration have been met, lies with the client.

In particular, the condition of a minimum rate of € 75 per hour requires attention. This requirement is only met if a minimum of €75 per hour has actually been paid. The client must establish in advance that a minimum of € 75 per hour is expected to be paid, and he must establish afterwards that this minimum amount has actually been paid. In this context, the contractor must provide the employer, after completion of the work, with an overview of the costs and hours directly attributable to the order, which the employer may not blindly rely on, for that matter.

The condition that the maximum duration of the contract is one year is subject to an aggregation arrangement. All work carried out by a worker for the same client counts, regardless of the form of the contract. If, after completion of an assignment, no work has been carried out for that client for at least six months, a new term of one year starts at the start of the work. If work is delayed and lasts longer than one year, the declaration of self-employment will no longer apply for the period after that year.

Web module and client statement

The web module that can provide clients with certainty in advance by means of a client statement (which states that the work is done outside of employment) will be further developed. The client statement gives the assurance that no wage tax needs to be withheld and paid and that no social security premiums need to be paid by the client. The client statement is valid as long as the web module has been filled in truthfully and work is carried out accordingly in practice.

The questionnaire that forms the basis for the decision tree of the web module was previously distributed to 1000 clients. On the basis of these experiences, 50,000 clients have now been sent a letter asking them to complete the questionnaire. The completed questionnaires are used to develop an algorithm and to test the decision tree. The aim is to arrive at a decision tree with as few questions as possible, which gives as much certainty as possible, and has the smallest possible margin of error. After the summer, the Parliament will be informed about the results of the test phase.

Follow-up and phasing out of enforcement moratorium

The government aims to publish the legislation on the above measures in the third quarter of 2019 for internet consultation. The intention is for the legislation to enter into force in 2021. For this reason, the current moratorium will be extended until 1 January 2021. After that date, the enforcement moratorium will be phased out.

However, the possibilities for enforcement during the moratorium will be tightened up by 2020: from 1 January 2020, the Tax Authorities will also be able to enforce the moratorium if clients do not (or insufficiently) comply with the Tax Authorities’ instructions within a reasonable period of time.

In preparation for the phasing out of the enforcement moratorium by 2021, the Tax Authorities' capacity to supervise labour relationships will be increased by 30 FTEs from the fourth quarter of 2019; in 2020, a further 20 FTEs will be added to the capacity to supervise labour relations.