Measures on labour relationships of self-employed persons have changed

22/06/20

The Government Plans for a minimum rate of 16 euro per hour for self-employed persons and the introduction of a self-employed persons' declaration will not be carried out. However, the plans for the development of the web module will be continued. This module aims at giving as much certainty as possible to employers and clients about their labour relationship with contractors.

Criticism on proposed minimum rate and self-employed persons' declaration

The Dutch Government had previously worked out a draft bill for a minimum rate of 16 euro per hour for self-employed persons, aiming at protecting self-employed persons with a lower hourly rate. In addition, the Dutch Government was planning to introduce a declaration of self-employment for self-employed persons with an hourly rate of 75 euro or more.

The proposals involved a considerable administrative burden for both self-employed persons and their clients in determining the hourly rate to be paid. This burden would affect all self-employed persons and clients, even in cases where the agreed hourly rate for self-employed persons was (much) higher than the minimum rate.

There has been a very critical response to the draft bill and the related internet consultation. The Government stated that it has appeared that the proposed measures involve a large administrative burden, create a great deal of uncertainty, have no stakeholder support, and are not enforceable for the implementing bodies. For this reason, the Government decided not to further develop the proposed measures.

Web module

The development of a web module was also part of the Government's plans concerning labour relationships for self-employed persons. The Government will continue to focus on this module, the aim of which is to provide clients with certainty in advance that no payroll taxes need to be withheld and paid.

The use of the web module will not be mandatory: it is only a tool for clients and contractors to get (more) clarity about their working relationship. More specifically, via the web module, the client answers a list of questions about the labour relationship with the contractor. The answers lead to three possible outcomes for the client:

Client statement;
Indication of employment;
No judgement can be made.

If the web module leads to a “client statement”, this gives the client the assurance that no payroll taxes need to be withheld, provided the questions have been answered truthfully and the contractor is working in accordance with this. The “Indication of employment” will have no legal consequences, but according to the assessment of the web module there is a real chance that there is an employment relationship. Finally, the outcome may be that “no judgement can be made”.

The questionnaire that makes up the web module (in its current form) and the weighting given to the answers have also been published. The Government's explanation of the development of the web module does show that the results of the web module do not in all cases fully match the assessments made by experts.

The questionnaires were tested among employers who have assigned work to freelancers. For these test cases (fully completed questionnaires), the web module would give the result 'Indication of employment' in about half of the cases. The Government considers this to be a high level of non-compliance due to the combination of financial incentives to work outside employment, the complexity of the assessment of the employment relationship and the current enforcement moratorium.

Pilot web module

The Government is expected to launch a pilot of the web module in autumn of 2020. The outcome of the web module during the pilot phase has no legal status yet.

After the pilot phase, a decision will be taken on the further continuation of the web module. When introducing the web module, the Government aims to attach legal consequences to the client statement, so that a client can obtain security for the payroll taxes.

Enforcement moratorium

In the autumn, the Government will also take a decision on the further extension of the enforcement moratorium of the Dutch “DBA” Act (in full: “Wet deregulering beoordeling arbeidsrelaties”; by this Act the former Declaration of Independent Contractor Status was abolished). The current enforcement moratorium will end on 1 January 2021.

However, the possibilities for enforcement during the moratorium have been strengthened with effect from 2020: from 1 January 2020, the Dutch Tax Authorities are also able to enforce the moratorium if clients do not (or insufficiently) comply with the Dutch Tax Authorities’ instructions within a reasonable period of time.