NL: Enforcement of bogus self-employment

 

The Tax and Customs Administration has announced that as of January 1, 2025, it will carry out stricter checks and enforce false self-employment among self-employed persons. Both clients and self-employed people would be wise to re-examine their cooperation in order to avoid high fines and additional tax assessments.

Bogus self-employment, what is it?

If a self-employed person is formally self-employed and is hired on the basis of a contract for services, but actually functions as an employee, this is false self-employment. This occurs in all sectors, but we often see it in construction, healthcare, education and childcare. The decisive factor in determining whether there is false self-employment is not what the parties have agreed, but how it actually works. And while it may seem financially interesting to hire a contractor instead of hiring an employee, such situations can entail major risks for both parties.

The consequences of bogus self-employment

• Tax consequences include: correction obligations with regard to wage tax and social security contributions, additional assessments and fines, but also loss of self-employed person's deduction and/or the SME profit exemption.

Employment law consequences include:

• As an employer, you are responsible for continued payment of wages in the event of illness.
• The self-employed person is entitled to paid holidays, holiday pay, etc.
• There is protection against dismissal, so the assignment cannot be terminated just like that.

 

Criteria

In order to assess whether there is false self-employment, several criteria from the law and case law are used. And the specific facts and circumstances of the case will determine whether you are self-employed or an employee. The criteria set out in the law are as follows:

• Authority: is the client authorised to give instructions on, among other things, the work to be carried out and the working hours? Is this management comparable to the management of employees or, for example, only focused on the result to be achieved? Is there a hierarchical relationship between the client and the self-employed person? The degree of control versus independence is crucial here.
• Personal labour: is the self-employed person obliged to carry out the work himself? (Or can he/she outsource the work to someone else?)
• Wages/allowance: is a fixed amount paid per month, or only for the hours worked, and how much is that remuneration?

In the Deliveroo judgment, the Supreme Court gave nine points of view, whereby it is not one aspect that is decisive, but all circumstances considered in relation to each other. The following points of view are important:

• The nature and duration of the work: Is there an obligation to perform to the best of one's ability or to achieve a result? Does the client give few or many instructions? Are you a short assignment or have you been working for years?
• The way in which activities and working hours are determined: The freer the self-employed person is in this, the sooner they become a real self-employed person.
• The extent to which the work and the contractor are part of the organisation ('the embedding'): Is the work similar to the work of the employees? Is the relationship between client and self-employed equal to the relationship between employer and employee? Is the work of the self-employed person an essential part of the business operations? But also, for example: Does the self-employed person go to staff outings?
• Obligation to carry out the work in person: Can a self-employed person be replaced without the client's permission?
• The way in which agreements were made: Did the self-employed person have a lot of room for negotiation, did he really have a free choice to contract as a self-employed person?
• The way in which the reward is determined and how it is paid: Is invoiced by the self-employed person, paid by the hour or a fixed salary per month?
• The amount of the reward: Remuneration higher than the remuneration of salaried staff?
• The extent to which the self-employed person runs a commercial risk: What is the distribution of risks in the event of damage (to third parties), illness and accident? If the result is not good, will it be repaired by the self-employed person in their own time and at their own risk?
• The extent to which the self-employed person behaves as an entrepreneur ('entrepreneurship'): Does the self-employed person have his/her own website, does he/she do acquisition, does he/she have multiple clients, does he/she wear his/her own workwear, is there a non-competition/non-solicitation clause?

 

What can you do as a client?

- Make an inventory of all freelancers in the organization;
- Make an inventory per self-employed person

• What is stated in the contract (free replacement, no continued payment in case of illness, etc.)
• Which position it concerns and whether this is a 'core function' or 'work outside the company'. Is it temporary or structural work, and to what extent is this position embedded in the company (e.g. participation in staff outings and work meetings, use of company resources)
• What about financially? Is there a VAT number, what about the invoicing process, multiple clients? Do you have your own insurance? Own acquisition?
• Assess the degree of direction, authority to instruct and control over the self-employed person.

- Decide for each self-employed person whether he/she can stay on as a self-employed person, whether he/she can be hired through an agency or whether you want to transform him/her into an employee. And adjust the contracts accordingly.

Advice and (false) self-employment test

With the attached guide to false self-employment, you can make an initial assessment of whether there is (false) self-employment. If you are in doubt, or if you would like an assessment of your specific situation, we will be happy to help you assess the contract for services and we will be happy to advise you on how to proceed with this self-employed person. Think of adjusting the contract/working method or hiring this self-employed person in a different way. 

 

For further information, contact:

Tamara de Leeuw-Jansen, Lawyer

Keizers Advocaten, Eindhoven

e: t.deleeuw@keizersadvocaten.nl

m: +31 (0)6 41 75 19 90

 

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