Misclassification: Independent Contractor or Employee in the Netherlands

    Last updated: 12 December 2024

     

    Starting in January 2025, the Dutch government will introduce a new rule called the Wet DBA. This rule is designed to address cases of false self-employment. If someone’s status as a freelancer is challenged, it could lead to serious consequences. The employer might face large fines, be required to pay back taxes, and even take on additional responsibilities like covering sick leave or making pension contributions. To help you avoid this, we will explain everything you need to know below. 

     

    Misclassification explained

    In the Netherlands, misclassification occurs when a worker is incorrectly identified as an independent contractor or self-employed, while they should officially be classified as an employee. 

     

    Criteria to avoid Misclassification

    Project scope


    A self-employed individual is typically engaged in specialized, short-term projects. In contrast, straightforward, long-term tasks are more likely to suggest an employment relationship.     
    Autonomy and control


    Contractors     generally manage their own schedules and focus on tasks with clearly defined requirements. However, if clients impose restrictions, such as requiring attendance at company events or assigning tasks beyond the agreed scope, it may indicate an employment relationship.     
    Integration
    When a person is highly integrated into a company, it often points more towards an employment relationship rather than being self-employed. This could include situations where the person     regularly uses company equipment, such as computers or tools provided by the company, or when their work is closely directed and monitored by a supervisor. These factors make it seem like the person is part of the company as an employee, rather than working independently.     
    Contractual flexibility
    Employment contracts typically give workers less freedom to negotiate terms compared to independent contracts. With employment agreements, the conditions are often set     by the employer, leaving limited room for customization or changes based on individual preferences.     
    Non-compete clauses
    Employees may have restrictions that prevent them from working for competitors, as their employment contract might include non-compete clauses. In contrast, independent professionals or outsourced workers have the freedom to select their clients and work with multiple companies, including competitors, without such limitations.     
    Financial risk
    Employees typically receive payment if they fall ill or if a project is cancelled, as they are often entitled to sick leave or other benefits. On the other hand, freelancers bear the full commercial risk and are only paid for the work they complete. If a project is cancelled or they become ill, they may not receive any payment unless they have specific agreements in place.     

     

    Consequences


    Currently, if someone breaks the rules on purpose, they usually just get extra charges or a fine. If they didn’t mean to break the law, they normally have 3 months to fix the problem. If they don’t fix it in that time, the Tax Authority will take further action.     

    Starting in 2025, the Tax Authority will be stricter. They won’t give warnings if someone accidentally breaks the law. If someone breaks the rules on purpose, they might have to pay taxes for up to 5 years back. 

    taxes notes

     

    More information

    If you have any further questions, feel free to connect with our CCO, Monique Ramondt-Sanders via email at m.ramondt@eurodev.com.

     

    Spread the value

    Category