On 11 June 2024, the new bill for the basic dis­ab­il­ity insur­ance for inde­pend­ent con­tract­ors went into pub­lic con­sulta­tion. While this bill may ini­tially seem primar­ily import­ant for the inde­pend­ent con­tract­ors them­selves, there are also sig­ni­fic­ant implic­a­tions for busi­nesses that fre­quently work with inde­pend­ent con­tract­ors. We explain this below.

 

Why this bill?

The num­ber of inde­pend­ent con­tract­ors in the Dutch labor mar­ket has sig­ni­fic­antly increased in recent years. Most of these inde­pend­ent con­tract­ors are not insured against income loss due to dis­ab­il­ity. The gov­ern­ment finds this prob­lem­at­ic and deems it neces­sary to inter­vene with this bill, among oth­er meas­ures, to pro­tect inde­pend­ent con­tract­ors against this risk.

With this bill, the gov­ern­ment aims to intro­duce a sep­ar­ate sys­tem for inde­pend­ent con­tract­ors. The new sys­tem allows for (policy) con­di­tions to be set for inde­pend­ent con­tract­ors that dif­fer from those for employ­ees. The bill intro­duces a dual sys­tem, where inde­pend­ent con­tract­ors can choose between pub­lic or private insur­ance (with the private insur­ance meet­ing vari­ous con­di­tions to be at least equi­val­ent to the pub­lic insur­ance).

 

What does the bill entail?

Every inde­pend­ent con­tract­or who has to declare profits from their busi­ness for income tax pur­poses (IB-entre­pren­eurs) must take out man­dat­ory basic dis­ab­il­ity insur­ance. The premi­um for this insur­ance is approx­im­ately 6.5% of the busi­ness profit, up to a max­im­um of €195 per month. This applies to both pub­lic and private insur­ance. The insur­ance oblig­a­tion applies until the inde­pend­ent con­tract­or reaches the state pen­sion age (AOW age).

Every inde­pend­ent con­tract­or who has taken out dis­ab­il­ity insur­ance will receive a bene­fit of 70% of their income before they became dis­abled, up to a max­im­um of the min­im­um wage. Thus, the bene­fit is not always dir­ectly related to the actu­al premi­um paid. The premi­um is tax-deduct­ible. The inde­pend­ent con­tract­or is entitled to the bene­fit only after a wait­ing peri­od of 52 weeks. The inde­pend­ent con­tract­or must there­fore cov­er the first year of ill­ness them­selves, which can be a top­ic for imme­di­ate dis­cus­sion. For example, what counts as the first day of ill­ness? The bill men­tions that inde­pend­ent con­tract­ors can report their ill­ness to the UWV, but this is not man­dat­ory. The UWV will ulti­mately have to determ­ine what counts as the first day of ill­ness based on the inform­a­tion received. Without the report­ing oblig­a­tion, we can ima­gine that this could lead to many dis­putes right away.

Addi­tion­ally, it is import­ant to note that the bill uses an abso­lute dis­ab­il­ity cri­terion: it assesses wheth­er the inde­pend­ent con­tract­or is still able to earn at least the stat­utory min­im­um wage per month through work. This cri­terion dif­fers from the one applic­able to employ­ees who fall ill. Employ­ees fall back on the Work and Income (Capa­city for Work) Act (Wet WIA), under which a rel­at­ive dis­ab­il­ity cri­terion applies: a person’s per­cent­age loss of earn­ing capa­city is the basis for determ­in­ing wheth­er someone is dis­abled.

The man­dat­ory dis­ab­il­ity insur­ance does not apply to:

• Dir­ect­ors-major share­hold­ers (these indi­vidu­als are employed by their own private lim­ited com­pany (B.V.))
• So-called res­ult recip­i­ents (income from oth­er work). They pay taxes on income from oth­er work, such as a side job or a fee for lec­tures or volun­teer work. In any case, it involves income that does not qual­i­fy as busi­ness profit.
• Life part­ners who work in the busi­ness.

 

Pos­sible impact for busi­nesses

If the bill (in this form) is passed, it could affect the cost struc­ture for inde­pend­ent con­tract­ors. Because inde­pend­ent con­tract­ors are required to insure them­selves against dis­ab­il­ity, they will likely pass on the monthly costs to cli­ents to cov­er the premi­ums. This can lead to:

• High­er costs for busi­nesses that reg­u­larly use the ser­vices of inde­pend­ent con­tract­ors. This will be espe­cially notice­able in sec­tors where mar­gins are already tight and where the rates for inde­pend­ent con­tract­ors con­sti­tute a sig­ni­fic­ant por­tion of oper­a­tion­al costs.
• Increased pro­ject costs: if a busi­ness relies on inde­pend­ent con­tract­ors for spe­cif­ic pro­jects, the total pro­ject costs could rise due to high­er rates. This could affect your budget­ing and the pri­cing of your own ser­vices or products.
• Passing on costs to cus­tom­ers: if a busi­ness incurs high­er costs due to the increased rates of inde­pend­ent con­tract­ors, this may need to be passed on to its own cus­tom­ers. This could impact your com­pet­it­ive pos­i­tion and the price per­cep­tion of your ser­vices or products.

 

What can you do as a busi­ness own­er?

• Con­duct a clear cost ana­lys­is and eval­u­ate cur­rent col­lab­or­a­tions and con­tracts with inde­pend­ent con­tract­ors.
• Adjust your stand­ard con­tracts to include a clause in which the inde­pend­ent con­tract­or con­firms com­pli­ance with the leg­al oblig­a­tions regard­ing dis­ab­il­ity insur­ance.
• Keep track of the bill’s devel­op­ments. Responses to the bill can be sub­mit­ted until July 24, 2024. We will, of course, keep you informed of devel­op­ments.

By fol­low­ing these steps, you can man­age the impact of the bill on your busi­ness and be pre­pared for the changes it brings. We are happy to think along with you on this mat­ter.

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

Want to know more about everything related to inde­pend­ent con­tract­ors? Click here!