The Ministry of Social Affairs and Employment Clarifies Approach to False Self-Employment and the Tax Authorities Will Resume Enforcement

The government announced on 16 December 2022, that it would clarify the rules on the assessment of employment relationships and reduce the grey area between employees and the self-employed workers. The call for more clarity is strong, partly in response to a few major cases in the media, such as Deliveroo and Uber. After all, the stakes are high; if the contracts of self-employed workers are (retrospectively) qualified as employment contracts by the Tax Authorities or the judge, the Tax Authority can impose a supplementary assessment for social security contributions and income tax owed. Furthermore, labor law is retroactively applicable, which means that the (strict) dismissal regulations apply, and often wage and pension claims follow (up to 5 years back!). On July 12 of this year, the Ministry has provided more clarity on its plans in this area.

Qualification of employment relationship

According to the ministry, it is primarily the responsibility of the parties (employer and employee or client and contractor) to determine whether an employment contract exists or if work can be performed outside an employment relationship. The Ministry states that the draft legislation which is being prepared will provide more clarity for the parties involved, the tax authorities and the courts to determine whether self-employment or employment is involved.

To determine whether an employment contract exists, the following (legal) criteria are important; labor, salary and authority. In addition, according to the ministry, “entrepreneurship” and the “embedding criterion” play a role in the assessment employment relationships:

  • In the Deliveroo judgment last spring, the Supreme Court ruled that entrepreneurship is considered a contraindication for the existence of an employment contract. In particular, case work is performed on own account and at their own expense and own risk.
  • The ministry also confirms that the “embedding criterion” can be used in assessment of the element of authority. This criterion states that if the work is organizationally embedded in the core business of the company, the “relationship of authority” criterion is met. In other words ’if a self-employed person performs work which is organizationally embedded in the core business of the company, then the existence of an authority relationship is assumed. It is then likely that it will be ruled that an employment contract exists.

Controls starting in 2025

Finally, the minister emphasizes the role that the Tax Authorities will play in tackling false self-employment. In recent years, the Tax Authorities have not performed any checks to determine whether an assignment contract is in fact an employment relationship, because of the lack of clarity in the law. The Ministry has previously indicated that the Tax Authorities will resume enforcement of the law. The Ministry now confirms that this will indeed happen, and preparations are being made for full enforcement by 1 January 2025 at the latest. It is therefore important to critically assess the contracts of self-employed workers timely and also the practical implementation and embedding in the organization, and make adjustments when necessary.

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