Current Enforcement Approach: Until 1 January 2025

Since the introduction of the Dutch Employment Relationships Deregulation Act (Wet Deregulering Beoordeling Arbeidsrelaties or Wet DBA) in 2016, the classification of employment relationships in the Netherlands has been governed by a framework aimed at reducing contractor misclassification risks. Under the Wet DBA, companies and self-employed individuals were encouraged to use model agreements to clarify the nature of their working relationships.

Up until now, enforcement by the Dutch tax authorities focused solely on cases of malicious intent. This applied to companies that knowingly allow or create false self-employment scenarios in the Netherlands, and enforcement requires proof of:

1. A real or deemed employment relationship.

2. Obvious false self-employment.

3. Intentional false self-employment.

If malicious intent isn’t found, companies are instructed to:

• rectify the situation by either restructuring the relationship; or

• report the relationship as an employment relationship in wage tax filings.

Companies typically have three months to comply. Failure to do so during this period could result in penalties, fines, and additional assessments.

However, enforcement of the Wet DBA has been limited due to practical challenges and widespread criticism, with the Dutch tax authorities largely refraining from active enforcement except in cases of malicious intent. The upcoming changes mark a significant shift in how these rules will be applied.

The Netherlands Combating False Employment: What Changes on 1 January 2025?

Starting 1 January 2025, the Dutch tax authorities will actively enforce rules against false self-employment even in the absence of malicious intent. This enhanced enforcement will include: correction obligations, additional tax assessments and fines, penalties and interest for non-compliance.

Key considerations:

• No Retrospective Enforcement: Enforcement won’t apply prior to 1 January 2025 unless malicious intent or failure to follow prior instructions is evident.

• Transition Period: A one-year leniency period is in place. Organizations will not face penalties during this time if they can demonstrate steps toward compliance.

Facilitating a Smoother Transition to Avoid Contractor Misclassification

On 1 October 2024, motions were adopted to ease the transition to stricter enforcement to avoid contractor misclassification in the Netherlands. These include prioritizing severe cases of false employment during the first enforcement year, continuing the use of model agreements and offering preliminary consultations on employment relationships and publishing a framework for hiring employees on the tax authority’s website by 1 November 2024.

Implications for Dutch Employers

To ensure compliance, Dutch employers should take proactive measures:

• Review Workforce Structures: Assess and adjust relationships with self-employed personnel to meet compliance standards.

• Analyze Employment Relationships: Address any instances of false self-employment, taking steps to mitigate associated risks.

• Implement Controls: Establish robust controls for monitoring and testing compliance.

These efforts will not only reduce legal and financial risks but also ensure smooth adaptation to the upcoming regulatory environment.

How Atlas Can Help

As the Netherlands prepares for stricter enforcement of false self-employment regulations, businesses must take proactive steps to safeguard compliance and mitigate risks. Atlas can support your business in navigating these complexities. Our expertise in global employment compliance, combined with tools like the Risk Calculator and Employer of Record (EOR) solutions, empowers organizations to assess misclassification risks, adapt to regulatory changes, and maintain seamless operations. Let us help you stay ahead of the curve and build a compliant, sustainable workforce.