British IR35 regulation has a Dutch Sibling – Heard of the DBA Act?

July 2, 2020

The Netherlands, like many other European countries, have been steadily working on implementing new regulations to look at different aspects of the employer/employee relationship. This especially with the increase of Independent Contractors or in Dutch jargon, ZZP’ers. With the Netherlands being a hub for European HQ of large multinational companies, now more than ever it is important to have the latest updates on these new regulations.

ZZP’er – Here we go…

Before diving into the ‘Law and Order – Employment Edition’ let me take a step back. As mentioned, the Dutch Jargon for Independent Contractors is ZZP’er. This stands for Zelfstandig Zonder Personeel (independent without employees) – in other words, a One-Man Band. Not only does this include Project Managers and Consultants, but also in the Netherlands it includes independent farmers, hairdressers, and basically anyone who runs a business without employing others. In Q1 of 2019, it was reported that 1.1 million people in the Netherlands were registered as ZZP’er. This is one of the reasons why identifying clear policy for this group of workers has been proven to be so difficult. Nevertheless, the government is keen to have some sort of regulation in place, not only because it is clear that there are a lot of ZZP’ers and employers benefitting financially from the current unclear policies, but also as the COVID-19 crisis has confirmed how vulnerable this group can be.

DBA act – What’s happened?

So, what is the fuss about this three-letter abbreviation? It stands for Deregulering Beoordeling Arbeidsrelatie, which can be (literally) translated as the Deregulation of the employment relation review. The DBA Act in The Netherlands was introduced back in 2016 (to replace the VAR act). However, similarly to the situation in the UK with IR35, there was a lack of clarity on the financial impact to the Independent Contractors (ZZPer’s) as well as their clients. Therefore, the act was never fully embraced by businesses.

Consultation phase – Looking forwards…

The Dutch government is currently working on improving the DBA act and replacing it with a digital registration and questionnaire, which sounds very similar to the IR35 CEST tool. The difference, it seems, is that the Dutch government understands that the relationship between ZZP’er and employer can be complex. The questionnaire can thus be used to identify or guide the employer with the result. The questionnaire can result in 4 options:

  • The project/assignment can be executed without direct employment
  • The result is unclear, however it strongly leans towards no direct employment
  • The result is unclear, however it strongly leans towards direct employment
  • There is a clear indication that the work delivered has an employment relationship between contractor (ZZP’er) and employer

Once it has been identified that there is no direct employment between ZZP’er and employer, a form needs to be filled in to declare this, called ‘Opdrachtgeversverklaring’.

The current test results showed that 73 percent of the assignments put through the questionnaire were able to identify the type of employment relationship between employer and contractor. Forty-eight percent were identified as having employer/employee relationship – which shows that there is a need to get this situation regulated. The next concrete step will be to run a pilot so employers can start identifying their relationship on a voluntary basis. This is planned to happen in Q4 2020 and will last for 6 months.

Another important conclusion in the current consultation phase is removing the minimum and maximum rate of the ZZP’ers. Initially government said they wanted to target ZZP’ers with rates between 16 -75 EUR per hour. However, identifying the hourly rate was proving difficult and this part of the act has been scrapped for multiple reasons:

  • It was putting an increased administrative burden on the ZZP’ers.
  • It was causing uncertainties and ambiguities for all stakeholders
  • ZZP’ers made clear they did not always want to be upfront with their exact costs
  • It was not always possible to identify exact hourly rate, resulting in inaccurate calculations.

So what now?

For those following UK news on IR35, the implementation of the new regulation has been delayed by a year to April 2021 due to COVID-19. The Dutch government hasn’t officially delayed the implementation of the DBA act, however as the pilot phase is starting Q4 2020 and lasting 6 months, it is impossible that the new act will be officially in place by 1 January 2021. Nevertheless the business world as well as the large group of ZZP’ers are very well aware of the situation (or they should be) and the Dutch Tax authorities have been carefully enforcing compliance by heavy offenders since 1 January 2020.

In conclusion, with the employment environment becoming ever more regulated, it is becoming more and more important to manage your external workforce headcount in the Netherlands.

Talk to your usual contact at Beeline to understand more about what we can do to help you facilitate the visibility within the tool. Stay tuned for a follow-up once the Summer recess is over to get an update on the pilot scheme.

This blog was written by Simonetta Hainebach, Beeline Solutions Consultant, EMEA.