Suppose that, as a company, you have engaged a self-employed contractor. Both you and the self-employed contractor explicitly do not want an employment relationship. You because of the flexibility and the absence of financial and tax risks, the self-employed contractor because of the higher pay. With the self-employment web module, you can check what kind of working relationship this actually is.
Years of uncertainty about qualifying as self-employed.
For years there has been uncertainty, due to inadequate self-employment legislation, about whether working relationships with these self-employed contractors will (afterwards) be assessed as employment or not. With all the accompanying tax and employment-law nightmare scenarios. After all, in that case there is legally still an employment relationship after all! That can have unpleasant employment-law consequences for you as an employer. The self-employed contractor then suddenly does have, for example, a right to dismissal protection and continued pay during illness. It can also have adverse tax consequences, such as still having to pay payroll tax and employee insurance contributions. In practice, we experience that self-employed contractors often only invoke the “fact” that the working relationship is an employment relationship when the assignment is terminated, or when the self-employed contractor falls ill.
Why the DBA is a failed piece of legislation.
Under the DBA (Deregulation of Labour Relations Assessment Act), you yourself are responsible for assessing whether a working relationship does or does not fall under employment. That depends on a great many factors. It seems like a secret magic formula of which only the tax authorities have the recipe. Not to mention deemed employment relationships. You actually also still need to check whether your working relationship is such a deemed employment relationship. In short, most entrepreneurs fail to make that assessment.
The model agreement is often (wrongly) used as a cover.
In the meantime, an idea has also arisen that as long as you use the Tax Authorities’ model contracts for services, you are safe. That the working relationship then automatically qualifies as a contract for services, because after all you’re using the model approved by the tax authorities. That is exactly where the big danger lies. The point is that you may only use that model agreement once you have qualified the actual performance as a contract for services. So qualify first, and only then select and use the corresponding model agreement. I do understand this mistake very well, by the way.
The whole problem is that only seasoned lawyers/tax specialists can make that qualification. The tax and legal magic formula that must be used is namely not transparent. That is because the criteria (especially the authority criterion) are scattered across many court rulings, legal literature, statutory explanatory memoranda, etc.
The new self-employment web module has therefore converted all relevant parts of that qualification into an online questionnaire. A certain point score is then attached to the answers to these questions, which gives you a clear outcome. This sounds almost too good to be true, so we put it to the test with various cases.
Below I will tell you everything about our findings.
What is the current status of the self-employment web module?
The web module is thus an online questionnaire for qualifying your working relationships with self-employed contractors. You can do this for your existing relationships or for new relationships. The web module is only intended for Dutch clients working with Dutch contractors. That has to do with Dutch law. For now, the web module is a pilot for a duration of 6 months. It is therefore not mandatory to fill in this web module when engaging a self-employed contractor, and the outcome does not yet have any legal status. I would, however, always take a screenshot of the completed questionnaire and the outcome. You never know when that might come in handy.
After the pilot phase, the cabinet may decide that the self-employment web module, in combination with new legislation, becomes mandatory to fill in.
What outcomes does the self-employment web module produce?
The (anonymous) questionnaire consists of 37 multiple-choice questions about the work, the client and the contractor. Filling it in takes about half an hour if you get help from an expert. If you do this alone, it could take longer. Does the answer lean more towards an employee-employer relationship, rather than a contractor-client relationship? Then you get more points. While filling in the answers, you do not see how many points this is costing you, otherwise you might start giving desirable answers that do not match reality.
In total, a maximum of 220 points can be scored. At the end of the module you get one of the following 3 outcomes:
– client’s declaration (0 to 45 points);
– no judgment (45 to 70 points);
– indication of employment (70 points or more).
0 to 45 points?
Then the outcome of the web module is that the self-employed contractor works independently. Once the legislation is in force, the client will then receive a so-called “client’s declaration”. If the self-employed contractor in practice actually works as indicated in the web module, then the client does not need to withhold payroll taxes for the self-employed contractor. So you have nothing to fear.
45 to 70 points?
In this case the web module gives no definitive answer. Some answers point to working outside employment, and other answers point to working within employment. Are you, as a client, close to 45 points? Then it is advisable to take another critical look at the questions where you score a lot of points. There is a good chance that with a few simple adjustments, by tweaking a few things, you can get your total score down. This could be done, for example, by removing a non-compete clause from the contract for services, or by allowing the self-employed contractor to wear their own work clothes (with logo), or to be entirely free to arrange their own replacement without your permission.
70 points or more?
Then there is no doubt possible. The situation, as outlined by the client, is only suitable for an employee in employment. The employer is then obliged not to engage the self-employed contractor, or to offer an employment contract and withhold payroll tax and pay social insurance contributions.
Agreements or elements with self-employed contractors that cost you a lot of penalty points.
We ourselves also filled in the web module based on an existing assignment from a cleaning company that engaged a self-employed contractor for specialist cleaning. The module produced no fewer than 93 points here.
It is notable that the web module heavily penalises certain situations/facts in the collaboration. Do you see these elements present in your client relationship? Then there is a good chance that no client’s declaration will come out of the module. We have listed the elements for you below.
- Do you outsource work to a self-employed contractor, without the contractor having specific knowledge and skills? Then you are most likely already 40 points further. This is mainly because the self-employed contractor is a fundamental part of your business operations. On top of this comes another 10 points if the self-employed contractor was employed by you in the past 6 months, or 5 points if the self-employed contractor has already carried out an assignment for you in the past 6 months.
- Let the self-employed contractor fend for themselves. They must manage with their own training, certificates, tools and materials. And certainly do not continue paying them if, for example, they are ill! If you avoid this, you can save 35 points.
- Require as little as possible of the self-employed contractor. Allow them, for example, to wear their own clothing (including logo) instead of your company clothing. That easily saves 10 points already. If you have properly arranged the previous items and score 0 points there, this agreement can possibly still be retained.
- On the other hand, do make sure the self-employed contractor has their administrative and tax affairs in order. The absence of VAT remittance and registration in the trade register costs you 10 points.
The outcome of our test?
Overall, we think the self-employment web module is a practical and workable tool for qualifying a working relationship. In practice, we often see that companies know that regulations exist, but do not fully implement them correctly. These companies, for example, are very strict about the number of hours the self-employed contractor works, but pay no attention at all to the type of work the self-employed contractor carries out.
The module also makes clear that you do not need to have a perfect contractor relationship to engage a self-employed contractor. You can quite well have a number of characteristics of an employment relationship, as long as this is not the case on all points (and as long as the points score in the self-employment web module does not run too high). As far as we’re concerned, the pilot has therefore succeeded.
Practice what you preach.
It is therefore extremely important that, in practice, the working relationship must actually be filled in exactly the way described in the questionnaire (and in the contract for services). After all, practice is decisive. Do you do that correctly? Then you avoid the unpleasant consequences of employment-law and tax false self-employment.
Help filling in the self-employment web module?
Because of the complexity of the regulations, we offer, via ZOOM, TEAMS or SKYPE session:
- A joint session to fill in the self-employment web module for your working relationships with your self-employed contractors (2 per hour is possible).
- Direct advice on what to do after the outcome.
The self-employment web module session lasts a maximum of 1.5 hours and costs €295 excl. VAT.
Interested? Contact us via our contact form or call 020-3450152 to schedule an appointment.
Masterclass Working with flexible workers, 15 and 22 April 2021
Employers and clients can limit the financial and legal risks of self-employed contractors and employees. You can learn exactly how during our online masterclass Working with flexible workers. This online masterclass is split into two parts of 1.5 hours, on 15 and 22 April 2021. More information and registration.
Questions or advice?
Do you, as an entrepreneur, already have questions about your self-employed contractors and/or need help/advice? The corporate legal advisers of The Legal Company can of course help you with this. We specialise in contract and employment law. Contact us via our contact form or call 020-3450152
Would you like to fill in the self-employment web module yourself? Then go to this website: Web module Assessment of Employment Relationship
Nothing changes as constantly as laws and regulations. Please note that our blogs may no longer reflect current laws and regulations and may therefore be outdated. If you have questions or an issue relating to this blog, or wish to obtain legal assistance, please contact us.
