The die seems to have been cast: from 2021, a self-employed person must earn at least €16 per hour. If their hourly rate is €75 or higher, they can opt for self-employment by submitting a declaration of self-employment.
Soap
We have often described the whole fuss surrounding the ‘Self-Employed Without Staff’ (ZZP-ers) as a soap opera. It began with the Declaration of Employment Relationship (VAR), which allowed the client and the contractor to establish that their relationship was not an employment relationship. The advantage of this was that the client did not have to deduct payroll taxes from the self-employed person’s remuneration. Nor were any employee insurance contributions payable.
With the introduction of the DBA Act (Deregulation of the Assessment of Employment Relationships) the VAR has been abolished. The main reason for this was that the VAR was being abused too frequently, resulting in bogus self-employment and underpayment. Furthermore, in many cases where it was deemed necessary, the social safety net (particularly in the event of unemployment and incapacity for work) was lacking, and no provision was made for the self-employed person’s retirement (pension).
Under the DBA Act, work is supposed to be carried out using (model) agreements that have either been approved in advance or not. However, it became apparent as soon as the Act was introduced that this system did not work (properly). Consequently, pending the introduction of new regulations, enforcement was limited to cases of obvious abuse. Enforcement has since been extended to some extent. You can read more about this in our article News regarding the tax position of self-employed individuals.
With effect from 2021
The broad outlines of the new system, which is due to come into force on 1 January 2021, have already been outlined. Minister Koolmees of Social Affairs and Employment has now presented the draft of the draft bill published. Anyone can voice their opinion on this draft bill as part of an online consultation.
The bill is entitled Act on the Minimum Rate for Self-Employed Persons and Receipt of Self-Employment Declaration. This is abbreviated to WMZ. As the title suggests, it concerns two measures, namely the introduction of:
- a minimum rate (€16 per hour);
- the option to opt for a self-declaration (for rates of €75 per hour or more).
For self-employed people who do not fall within the scope of these measures, the web module that has been announced on several occasions will be introduced. This is not yet set out in detail in the draft bill.
Minimum rate
The minimum rate of €16 per hour is, of course, exclusive of VAT, but also excludes direct costs. This means that the costs of materials and the like are added on top of the hourly rate. When setting the minimum rate, account was taken of the fact that self-employed professionals, on average, have to spend a third of their time on other tasks (such as administration).
To assess whether the minimum rate has been met, the following calculation must be carried out:
(fee for the assignment (excluding VAT) – costs directly attributable to the assignment) / number of hours directly attributable to the assignment
, where ‘hours directly attributable to the assignment’ refers to the time spent on the assignment. This includes, for example, not only the time spent on carrying out the assignment itself, but also the preparation time.
According to the Ministry’s calculations, a self-employed person working at the minimum rate earns a gross annual income of €19,870. This is based on a 40-hour working week, one-third of which is spent on non-billable work. The government assumes that the self-employed person works for 46 weeks a year:
2/3 * 40 hours = 27 hours per week, meaning that a total of 1,242 hours are claimed over 46 weeks, resulting in gross earnings of: 1,242 * €16 = €19,872. That’s not exactly a fortune, but according to the Minister, the net amount is roughly equal to the minimum subsistence level (which stands at €12,340). No provision is made for a pension contribution because the state pension (AOW) is already above the level of the social minimum (in other words: this self-employed person is expected to make ends meet on the state pension alone).
To ensure compliance with the minimum rate of pay within a supply chain, a new form of supply chain liability is being introduced. This has the same structure as the existing supply chain liability for the payment of the (minimum) wage.
Declaration of Self-Employment
By means of a self-employment declaration, the client and the contractor jointly agree that the self-employed person will work on a self-employed basis. In addition to the minimum rate of €75 per hour, the self-employed person must be registered with the Chamber of Commerce.
Where a self-employed person works through a private limited company of which they are the sole employee, the minimum rate of €75 must be paid to the company.
The self-employment declaration is valid for a maximum of one year. The aim is to create a barrier for employees who wish to switch from employment to self-employment. Periods of less than six months between assignments for the same client count towards the one-year period. It therefore makes no sense to split jobs into smaller tasks.
During this one-year period, the client runs no risk of facing additional assessments for payroll taxes and social security contributions. Furthermore, as much certainty as possible is provided regarding the implications under employment law, pensions and the collective labour agreement. For example, under Dutch law, an agreement accompanied by a valid self-employment declaration does not constitute an employment contract. Should the self-employed person nevertheless be classified as an employee under European law, he or she is entitled to a basic scheme under employment law. This means, for example, that they are entitled to annual leave, but not to continued payment of wages or a transition payment.