The new DBA law and freelancers
To be a freelancer or not to be a freelancer, is a question on the lips of a lot of people right now. Not simply from a business perspective but also from a legal one. Quite a bit has been written about the changes in the new labour law implemented in the Netherlands on 1st May 2016, relating to independent workers. Yet confusion remains as to what this actually means in practice so here is our view on things.
What defines a freelancer
There is a large talent pool of independent professionals in The Netherlands, that do work ranging from: design, coding, growth hacking, marketing, social media and much more. This is an invaluable skilled labour pool for companies both due to its flexible nature and cost effectiveness – as the usual employer costs are removed.
In the business sense a freelancer (Dutch: ZZP) is someone who offers their services for a fee and usually with no expectation of a permanent a single client, although the work relationship can be on-going, such as contract work. This is also true in the legal sense where ZZP-ers are officially considered entrepreneurs, even though they do not employ others. It follows that they operate with a level of business risk-taking, as compared to traditional employees, as they have to find their own clients to ensure work. Conversely, where a person registered as a ZZP-er is in actual fact working as a quasi-employee, for one organisation, without having their own visible business (website, business cards, clients, etc) then this would be “deemed employment” under the new law.
The implications of the new DBA
The new DBA law, called the Deregulation Review of Labor Relations Act, replaces the Declaration of Labor Relations Act. The new law is actually intended to protect freelancers against disguised employment and to hold employers liable for evading social security contributions and payroll taxes. While the law was implemented on May 1st of 2016 its enforcement was set to start on May 1st of 2017. In the interim, this law has caused concern among corporations who have employed freelancers under contract, but in all likelihood were not real freelancers under the definition of the new law.
The new law looks at the substance of the relationship (its reality) whereas the old law merely considered whether a person was simply registered as a freelancer or not. Right or wrong, the knock-on effect of this shift in legislation is that considerable number of companies have stopped using freelancers in this way. Such that the Dutch times reported that some 122,00 freelancers to not have their contracts renewed. For the genuine independent worker, this does not change anything, for those who had a long-term freelancer contract (up to three years) this may mean the end of that singular arrangement.
As with all things, these changes are good news for some and less for others, because the Dutch economy has a strong dependency on this flexible workforce. Yet the defensive measures taken by companies in response to the legislation is very real, due to the risk of fines they expose themselves if not working with genuine freelancers. Clearly, this is of concern from a political and economic perspective which is why the enforcement of the new law has been postponed until January 1st, 2018. This holdover period is essentially there to give time to all persons and companies affected to re-arrange their affairs without incurring fines.
While this holdover period was essentially there to give time to all persons and companies affected to re-arrange their affairs without incurring fines, it also seems that a wider political debate has now fired off. Eric Wiebes Secretary of Finance send in April 2017 a letter to parliament strongly criticizing the new law. An official working group is currently taking the law and the problems that go with it under the microscope and Wiebe is expected to quickly put their findings on paper, to send it before the House or representatives. So while the jury is clearly out for deliberation, the uncertainty remains, companies will no doubt continue to take precautions on how they engage with freelancers.
How to work as a freelancer today
Under the old rules, a freelancer was any person registered with the KVK public register and who had their status confirmed with a VAR - a certificate of statement. Under the new rules a freelancer is now determined by the real nature of the relationship and the contractual relationship he has in place with those counterparties. To reassert what we have already state, this means that as of today even if a person is registered as a ZZP-ers they may not actually be deemed a freelancer for the purposes of this new law. So, what can be done, if anything?
For those freelancers who clearly have several clients, operate as a solo entrepreneur and therefore assume a degree of business risk, they are on safe ground. In fact, the advantages of the new law means that the need to actually register as a freelancer is removed. For those persons who are border-line and work with one company as a freelancer it is important to put in place the correct contract. To support this, the tax office has now provided a number of model contracts that must be used in order to ensure the correct legal relationship. Despite this, for some companies this is not enough and many are protecting themselves by working with freelancers via third party payroll companies. This is particularly true for the larger corporates, but may also apply for smaller companies.
Our view is that if done correctly, the opportunities for being a freelancer has never been greater than before. Part of what we do at Keen Folk is to facilitate the exchange of value between freelancers and companies, while create a wider community where we invite persons to, grow, connect and thrive.