A Dutch legislative proposal could affect the use of independent contractors by ending tax incentives and making it less appealing for companies to hire them.

The number of independent contractors in the Netherlands, known locally as zzp’ers, has risen 26.6 percent since 2009. If the growth remains unchecked, the country could have more than 1 million independent contractors by 2020.

The primary concern for the government is the growing number of independent contractors are “hollowing out” the system. Zzp’ers are eligible for start-up tax breaks and corporate tax breaks available to small companies. However, they also receive a tax-free allowance of €7,280 per year on earnings.

The three financial incentives combined mean that independent contractors pay very little tax on the first €24,000 they earn. Ending the incentives could net the government as much as €1.8 billion each year.

Ministers are also making efforts to make it less attractive for employers to use independent contractors by tightening up the definition of what constitutes self-employed. An independent contractor who is deemed to have only one employer would be considered pseudo self-employed and the employer could face a fine from the tax office.

Companies that hire independent contractors could become liable even if the independent contractor provided false or incomplete information about their employment status and the employer failed to carry out appropriate checks. 

The proposal has already proven controversial, with comments from the public pointing out that independent contractors are currently not entitled to unemployment or incapacity benefits. They also have to pay for their own pensions and incur greater health insurance costs.