Assessing employment relationships is a complex and essential aspect of entrepreneurship. In November 2024, the Dutch Tax Authority updated the Decision and Assessment Framework, which helps determine whether there is an employment contract or if a contractor genuinely operates as an independent freelancer. With stricter regulations starting in 2025, it’s crucial to be prepared. In this detailed blog, we cover everything you need to know.
What Is a Private Employment Relationship?
A private employment relationship, often referred to as an employment contract, is a working arrangement where an employee performs labor in exchange for wages under the authority of an employer. Three criteria are key to determining this relationship:
- Authority: Can the client give instructions on how and when the work must be performed?
- Labor: Does the worker perform the work personally, without the ability to delegate it to someone else?
- Wages: Does the worker receive compensation for the work performed?
If these criteria are met, there is often an employment contract, and the employer must pay payroll taxes.
Holistic Approach: Considering All Facts
The Dutch Supreme Court emphasizes that whether an employment relationship exists must be assessed based on all facts and circumstances in their entirety. This is referred to as a holistic approach. The assessment involves two stages:
- Explanation Stage: What agreements were made? What is documented, and how are these agreements executed in practice?
- Qualification Stage: Do the agreements and their actual execution meet the requirements of an employment contract? Practice is decisive in this stage.
The Deliveroo Case: The Nine Factors
The 2023 Deliveroo case outlined nine factors that are relevant when assessing employment relationships. These include:
- Nature and duration of the work: Long-term and simple tasks often indicate employment.
- Working hours and location: The less freedom the worker has, the more likely it is employment.
- Integration into the organization: Using the client’s tools and facilities suggests employment.
- Personal execution: If the contractor must perform the work personally, it points to employment.
- Compensation and commercial risk: Higher compensation and bearing commercial risk lean toward independent entrepreneurship.
Learn more about these factors here.
Enforcement Moratorium: What Changes in 2025?
Currently, an enforcement moratorium is in place. This means that the Dutch Tax Authority only issues warnings and levies back taxes in exceptional cases. However, starting January 1, 2025, this moratorium ends, and the Tax Authority will actively enforce compliance retroactively. Organizations must adhere to the following rules:
- Adjust agreements: Ensure agreements with freelancers are modified to eliminate any indications of employment.
- Correctly report in payroll tax filings: Register freelancers as employees in payroll filings when necessary.
Failing to follow these instructions may result in back taxes and penalties.
New Legislation: Clarification of Employment Relationships
From 2026, new legislation is expected to further clarify the assessment of employment relationships. Until then, the Tax Authority will apply the current framework. However, enforcement in 2025 will already focus on risks such as false self-employment and underpayment.
What Can You Do Now?
To avoid risks such as back taxes and penalties, proactive measures are essential. Here’s what you can do:
- Inventory: Map out all agreements and circumstances involving freelancers.
- Assessment: Analyze whether an employment contract exists based on the Deliveroo framework.
- Adjust: Use model agreements and ensure the criteria lean towards self-employment. Consider short-term assignments, flexible working hours, and the use of personal tools and resources.
- Consider: If agreements cannot be adjusted, consider employing the freelancer.
Soft Landing and Transition Year 2025
The Dutch Parliament has requested that enforcement in 2025 takes a more measured approach, focusing on cases such as forced self-employment or underpayment. In other situations, a case-by-case approach will be applied. If you demonstrate active steps to prevent false self-employment, no penalties for deliberate non-compliance will be imposed in 2025. However, administrative fines may still apply.
Why Is This Important?
Engaging freelancers carries financial risks. If an employment contract is retroactively established, it may result in additional payments for wages, premiums, and pension contributions. With the end of the enforcement moratorium, compliance becomes even more critical.
At Practical | Excellence in Finance, we are here to help you carefully assess employment relationships and minimize risks. Contact us for a no-obligation consultation and discover how we can support your organization.
Neem vandaag nog contact met ons op voor meer informatie.
