Legislation to replace DBA as of January 1, 2021, and explanation of authority by the Tax and Customs Administration

The government is working on legislation to replace the DBA Act (Deregulation Assessment Employment Relationships) as of January 1, 2021. The aim is to take measures to combat bogus self-employment and competition on employment conditions at the lower end of the labor market. In addition, more clarity is needed for self-employed persons and their clients. The following measures are envisaged:

1. Client declaration: clients can obtain a “non-employment relationship” declaration via a web module if the answers show that there is no employment relationship. This provides clarity on the qualification of the employment relationship. An exemption from payroll tax, employee insurance premiums and income-related contribution to the Healthcare Insurance Act is also obtained. The web module is based on case law.
2. Clarification of authority: as agreed in the coalition agreement, it will be clarified when there is a relationship of authority. The Tax and Customs Administration has published “Assessment of Authority,” which provides insight into the elements that play a role under current law and case law in assessing whether there is a relationship of authority. This is further explained below and can also be found at https://www.belastingdienst.nl/bibliotheek/handboeken/html/boeken/HL/bijlagen-beoordeling_gezagsverhouding.html .
3. Employment contract at a low rate (ALT): using an hourly rate of 15 – 18 euros per hour, in combination with a longer duration (3 months or longer) or deployment in regular business activities, automatically leads to an “ALT employment contract.” This is to protect bogus self-employed persons and to prevent competition on employment conditions. The measure will affect approximately 14% of current self-employed persons who are currently working at this low hourly rate (at the lower end of the labor market). However, automatically converting these contracts for services into an employment contract creates tension with EU law on freedom of establishment (art. 49) and freedom to provide services (art. 56 TFEU) for self-employed persons. For this reason, the government is also looking at alternatives, including the introduction of a minimum rate for self-employed professionals. In a recent draft guideline, the ACM (Netherlands Authority for Consumers and Markets) stated that the Competition Act does not apply to self-employed persons who work side by side with employees. In view of the government’s intention to introduce a minimum hourly rate as of 2021, the ACM has announced that it will not take action against self-employed persons who make agreements on minimum hourly rates https://www.acm.nl/nl/publicaties/acm-zzpers-kunnen-afspraken-maken-over-minimuminkomen .
4. Opt-out: at the top end of the labor market for self-employed professionals with a high hourly rate (75 euros or more per hour), there will be an opt-out from payroll tax and employee insurance premiums. This must be requested jointly (contractor and client). If it later turns out that there is an employment contract, the employee is not entitled to employee insurance and there is a mitigated labor law regime.

Manual Assessment of Authority

In order to clarify how the Tax and Customs Administration applies the current DBA Act, the Manual Assessment of Authority has been drawn up. The relationship of authority is one of the characteristics of an employment contract (HR March 22, 2013, ECLI:HR:2013:BY9295). There is a relationship of authority if the employer has control over the way in which the work is performed (material authority). Even if the employer does not interfere with the content of the work but does give instructions regarding working hours, interaction with third parties, etc., there may be formal authority. The tax authorities take both material and formal elements into account in the overall assessment of the relationship of authority (art. 7:660 BW), the so-called “holistic” assessment. The most important elements that the Tax and Customs Administration tests are:

1. Management and supervision
2. Comparability of personnel
3. Working hours, location, materials, resources and tools
4. The way in which the employee presents himself to the outside world;
5. Other relevant aspects

Ad 1. Management and supervision
-> indications for the presence of a relationship of authority: can the client / hirer influence the way in which the assignment is carried out; is the result not clearly defined; does the contractor manage employees within the organization; does the employee not have the legally required certificates (but the client does); regulations make it impossible for the employee to perform work “outside authority” without management and supervision.

Ad 2. comparability of personnel
-> indications for the presence of a relationship of authority: the employee has previously performed the same work in an employment relationship for the client; the work performed by the employee forms an essential part of the business operations (core activity); agreements and regulations for the employee are comparable to those for the personnel; the work consists of absorbing the pressure during peak moments or illness of personnel and is normally performed by employees with an employment contract; ; the employee participates in company training, activities, performance reviews

Examples of activities that form an essential part of business operations: – a driver who drives for a transport company, a pizza delivery person who delivers pizzas for a pizza seller, an interviewer for an survey agency, a fruit picker for a fruit nursery.

-> contraindication of the presence of a relationship of authority: If the employee possesses specific knowledge that is not available in the organization, if he receives a clearly higher reward, if he has such a high social position that he can conduct an equivalent negotiation with the client.

Ad 3. working hours, location, materials, resources, tools: if the employee is not free to choose these, this is an indication of the presence of a relationship of authority. However, if the nature of the work entails that work must be carried out at a certain place or time, for example on a construction site, this is not automatically an indication. If the employee uses his own business resources (e.g. company car, sawing machine), this is a contraindication of a relationship of authority.

Ad 4. Way in which employee presents himself to the outside world:
indications for the presence of a relationship of authority: the employee is obliged to wear company clothing or a uniform of the client; is obliged to use business cards of the company when contacting customers.

5. Other relevant aspects:
indications of the presence of a relationship of authority: client is liable for risks such as damage caused to third parties; prescribes mandatory company or professional liability insurance; the responsibility for mistakes made by the employee lies with the client; the employee is not allowed to work for other clients, the inclusion of a non-competition / relationship clause, the continued payment of wages during illness and vacation.

Author: Femke Luijkx