For years, governments have tried to come to grips with bogus or false self-employment, otherwise known as independent contractor misclassification. The complex nature of freelancing — and the various work arrangement structures — have proven problematic.

Dutch determination. The Dutch, for example, are proposing legislation to address these issues — though not for the first time. In 2005, the VAR (Verklaring Arbeidsrelatie) system was introduced but was deemed insufficiently robust to curb tax evasion. Whether intentionally or inadvertently, it permitted businesses to rather easily misclassify employees as independent contractors.

In 2016, the VAR was replaced with the Wet DBA (Wet Deregulering Beoordeling Arbeidsrelaties), which was intended to provide clearer guidelines for the classification of independent contractors. However, it hasn’t fulfilled its brief either, even with the introduction of an online questionnaire called the “Web Module Assessing Employment Relationships” (WBA) in 2021.

The WBA questionnaire was intended to clarify the nature of working relationships and whether assignments fell outside an employment relationship. Yet it had mixed success due to difficulties caused by the diverse nature of work across different sectors and its failure to consider important nuances of self-employment relationships.

In addition, the WBA did not guarantee any given outcome in terms of tax liability.

A moratorium on enforcement. Ultimately, the government issued a moratorium on the enforcement of the Wet DBA, which postponed audits and fines related to the act, except where it is a deliberate tax evasion practice. This moratorium has been extended several times, essentially suspending full enforcement for years.

However, the moratorium is set to end on 1 January 2025, when the Dutch Tax and Customs Administration will resume its full enforcement powers, including conducting audits and issuing fines where necessary — although any fines or corrective measures will only come into effect from 2025 onwards and won’t be enforced retroactively.

A third attempt. Meanwhile, the Dutch government is proposing yet another law — Wet verduidelijking beoordeling arbeidsrelaties en rechtsvermoeden (VBAR) — to provide the clarity the Wet DBA failed to deliver.

Key features of VBAR. A key feature of the VBAR is a presumption of employment for contractors earning below a certain hourly rate, currently proposed at approximately €33. Contractors earning below this threshold would automatically be presumed to be employees unless the businesses can demonstrate that these individuals genuinely are independent contractors. This could lead to increased scrutiny of contracts and working conditions, potentially requiring businesses to reclassify these workers as employees, thus providing them with employment rights and benefits. This provision is designed to simplify the classification process and reduce the administrative burden on both businesses and freelancers.

Another significant aspect of the VBAR is its emphasis on clarifying work relationships between employers and independent contractors through a structured three-step test. Step one, “Work Content Management (A),” examines the client’s control over the work, including oversight and evaluation methods. Step two, “Organisational Embedding (B),” assesses the integration of tasks into the employer’s core activities, adherence to organisational rules, and whether the tasks resemble those of employees. Step three, “At the Employee’s Own Expense and Risk (C),” considers financial risks borne by the worker, highlighting their independence. Another element, called C+, further evaluates economic behaviours like having multiple clients and fiscal entrepreneurship if A and B are inconclusive.

This formal assessment process requires end-hirers to ensure compliance; if a contractor is performing tasks typical of an employee, reclassification as an employee may be necessary, including providing employment benefits and adhering to labour regulations.

VBAR is currently under review to determine whether and which parts of the bill should be amended. While it remains uncertain when the VBAR will come into effect, it would not be before 1 January 2026.

Stay informed. It is important for employers and contractors to stay informed about both the Wet DBA and the VBAR to maintain compliance. To do that, businesses and contractors should regularly consult legal experts, attend industry seminars, subscribe to relevant government and industry newsletters, and closely monitor updates from the Dutch Tax and Customs Administration. Remaining proactive will help ensure compliance and avoid potential legal challenges and financial penalties.