The dis­course sur­round­ing the leg­al status of inde­pend­ent con­tract­ors is pil­ing up in the media. Does the cur­rent situ­ation remain com­pre­hens­ible to you? In many art­icles and opin­ions, only one ele­ment of this sub­ject is dis­cussed, while this sub­ject should be viewed from mul­tiple per­spect­ives . What factors, then, war­rant your atten­tion? Below is an over­view of crit­ic­al con­sid­er­a­tions per­tin­ent to enga­ging with, and func­tion­ing as, an inde­pend­ent con­tract­or.

 

Tax and employ­ment law assess­ment

While the assess­ment of the employ­ment rela­tion­ship under tax and employ­ment law is in prin­cip­al identic­al, a morator­i­um on tax enforce­ment is cur­rently in effect. Pur­su­ant to this morator­i­um, the Tax and Cus­toms Admin­is­tra­tion will refrain from enforce­ment actions in cases of appar­ent self-employ­ment until at least 1 Janu­ary 2025, unless there is inten­tion­al non­com­pli­ance or fail­ure to adhere to dir­ect­ives from the tax inspect­or. The Tax and Cus­toms Admin­is­tra­tion will not seek ret­ro­act­ive remit­tance of payroll taxes and social secur­ity con­tri­bu­tions until 1 Janu­ary 2025. How­ever, the approach to hand­ling future instances of inten­tion­al non­com­pli­ance remains uncer­tain. Will the cri­ter­ia estab­lished by the Supreme Court in the Deliv­eroo rul­ing be applic­able in this con­text (see this earlier blog by HVG Law)?

 

Implic­a­tions under employ­ment law

Con­trary to the tax domain, there is no enforce­ment morator­i­um with­in employ­ment law. Con­sequently, a ser­vice con­tract may be reclas­si­fied as an employ­ment agree­ment, both pro­spect­ively and ret­ro­spect­ively, irre­spect­ive of the ori­gin­al cli­ent-con­tract­or des­ig­na­tion. It is not uncom­mon for inde­pend­ent con­tract­ors to assert the exist­ence of an employ­ment rela­tion­ship when faced with ill­ness or when seek­ing pro­tec­tion against dis­missal, sev­er­ance pay, or bene­fits under a col­lect­ive bar­gain­ing agree­ment. Not only inde­pend­ent con­tract­ors but also pen­sion funds and labor uni­ons may con­tend the pres­ence of an employ­ment rela­tion­ship. For more detailed inform­a­tion about this, see also the earlier blog of HVG Law.

 

Cli­ent con­sid­er­a­tions

Should cli­ents not pro­act­ively opt for an employ­ment agree­ment when the cri­ter­ia for such an agree­ment are already met? What course of action should be taken if a tax inspect­or immin­ently man­dates the pay­ment of payroll taxes and social secur­ity con­tri­bu­tions for all inde­pend­ent con­tract­ors, effect­ive from a past date such as 1 July 2024? Can your organ­iz­a­tion com­ply with­in the stip­u­lated time­frame? Will this chal­lenge your com­pet­it­ive edge in the labor mar­ket? The guid­ance from the Tax and Cus­toms Admin­is­tra­tion could be pivotal for busi­ness oper­a­tions in the cur­rent con­strained labor mar­ket, par­tic­u­larly for organ­iz­a­tions that rely heav­ily on inde­pend­ent con­tract­ors. It appears that every employ­er will need to address this issue as from 1 Janu­ary 2025, when the enforce­ment morator­i­um on payroll tax expires.

 

Inde­pend­ent con­tract­or con­sid­er­a­tions

Inde­pend­ent con­tract­ors must con­sider vari­ous ele­ments, includ­ing VAT com­pli­ance. How to deal with the scen­ario where an inde­pend­ent con­tract­or issues VAT-inclus­ive invoices but is sub­sequently deemed an employ­ee? Is a ret­ro­act­ive adjust­ment neces­sary? In cer­tain sec­tors, such as health­care and edu­ca­tion, many inde­pend­ent con­tract­ors are exempt from VAT. How­ever, in oth­er indus­tries, VAT invoicing is oblig­at­ory. In these non-exempt sec­tors, the ques­tion arises as to wheth­er incor­rect VAT invoicing should be rec­ti­fied, and if so, by what means?

 

Moreover, are inde­pend­ent con­tract­ors fully con­scious of the vari­ous factors influ­en­cing their inde­pend­ence? These include the com­plex­ity of tax fil­ings (VAT and income tax) and the increased dif­fi­culty in secur­ing a mort­gage.

 

Gov­ern­ment policy ini­ti­at­ives

The gov­ern­ment is act­ively devel­op­ing strategies to enhance the leg­al cer­tainty for inde­pend­ent con­tract­ors and employ­ees (see, for instance, the Dutch progress report on labor market policy).

 

While bet­ter pro­tec­tion for employ­ee may be desir­able, it is debat­able wheth­er this addresses the root issue. Does man­dat­ing dis­ab­il­ity insur­ance for inde­pend­ent con­tract­ors truly serve their interests? A crit­ic­al exam­in­a­tion raises the ques­tion of how many genu­ine inde­pend­ent con­tract­ors will per­sist and wheth­er this con­cern will remain per­tin­ent.

 

Pref­er­ences of inde­pend­ent con­tract­ors

Cur­rently, numer­ous cli­ents exhib­it a strong pref­er­ence for offer­ing employ­ment con­tracts to work­ers, yet the work­ers them­selves often reject this pro­pos­i­tion, favor­ing ser­vice con­tracts and the autonomy of inde­pend­ent con­tract­ing. The reas­ons cited typ­ic­ally include:

 

• High­er net income
  This rationale pre­sup­poses that mar­ket dynam­ics enable inde­pend­ent con­tract­ors to com­mand high­er rates, coupled with the bene­fits of self-employed tax deduc­tions. How­ever, these deduc­tions are slated for sig­ni­fic­ant reduc­tions in the near future. Addi­tion­ally, the net income advant­age is partly due to the absence of insur­ance cov­er­age for income loss due to ill­ness and the non-pay­ment of pen­sion premi­ums, among oth­er factors.
• Flex­ib­il­ity
  The abil­ity to choose one’s work envir­on­ment, sched­ule, and type of work is highly prized by inde­pend­ent con­tract­ors. This pref­er­ence is par­tic­u­larly pro­nounced in the health­care sec­tor, where the value placed on flex­ib­il­ity often super­sedes the secur­ity of a per­man­ent con­tract. It is note­worthy that, in many cli­ent set­tings, inde­pend­ent con­tract­ors are giv­en pri­or­ity in select­ing their assign­ments over per­man­ent employ­ees, des­pite col­lect­ive bar­gain­ing agree­ments in health­care stip­u­lat­ing oth­er­wise to pro­tect employ­ees from less desir­able tasks.

 

Con­clu­sion

To fully com­pre­hend the dynam­ics gov­ern­ing the util­iz­a­tion of inde­pend­ent con­tract­ors, it is imper­at­ive to con­sider all rel­ev­ant factors togeth­er and in mutu­al con­text. Legis­lat­ive and reg­u­lat­ory adjust­ments may be forth­com­ing, but if inde­pend­ent con­tract­ors are averse to employ­ment status, the issue becomes moot. In the cur­rent com­pet­it­ive labor mar­ket, it appears that inde­pend­ent con­tract­ors are shap­ing the nature of employ­ment rela­tion­ships, pending decis­ive inter­ven­tion by the gov­ern­ment and reg­u­lat­ory bod­ies such as the Tax and Cus­toms Admin­is­tra­tion. It is essen­tial to ensure that the risk of reclas­si­fic­a­tion is adequately addressed in con­trac­tu­al agree­ments. The tax experts at EY Belastingad­viseurs LLP and the spe­cial­ists at HVG Law stand ready to offer com­pre­hens­ive mul­tidiscip­lin­ary sup­port, address­ing the tax, employ­ment law, and pen­sion law aspects of inde­pend­ent con­tract­ing-related inquir­ies in uni­son.

 

The tax part of this blog was writ­ten by Miri­am Michiels, tax spe­cial­ist at EY Belastingad­viseurs. The employ­ment law inform­a­tion was writ­ten by Jeannet van Vleuten, attor­ney at law at HVG Law. In the Neth­er­lands, HVG Law LLP has a stra­tegic alli­ance with EY Belastingad­viseurs LLP. We approach issues from a mul­tidiscip­lin­ary per­spect­ive.

 

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