DBA Act

In July 2018, the Cabinet announced the company visits of at least 100 Principals. In the second progress letter in November, they informed that they have made the selection of Principals and have already conducted the majority of the company visits. Further details of enforcement will not be known until later. Until there is a full-fledged successful replacement for the DBA Act, we anticipate that large risk-averse Principals will be looking for certainty.

Traffic light model
HeadFirst offers solutions to this: by using its own agreement, approved by the Belastingdienst, combined with a set of measures and controls at ourselves and Clients. Part of this is the DBA Scorecard. A tooling that determines whether an independent professional can be hired for an assignment or whether there is a relationship of authority, which makes this not wise under the current DBA Act. This is tested on the basis of 20 questions in which the traffic light model is central:

• Green > hiring is possible because there is clearly no relationship of authority.
• Orange > hiring is possible, but there are indications of a relationship of authority. Monitoring of the actual situation is thus necessary.
• Red > hiring not possible, as there is clearly a relationship of authority. HeadFirst can offer alternatives in this case, such as a payroll construction or adjust the circumstances of the role - where possible.

Optimal DBA compliance
Mediq, one of the largest providers of healthcare solutions in the world, was the first client to embrace the DBA Scorecard, thus relieving them of the risk-free hiring of external professionals. After Mediq engaged HeadFirst to guide it in the process to optimal Wet DBA compliance, the traffic light model was also applied to them. During the HeadFirst Insights Event "Risk Joy" on October 30, 2018, this client case was explained based on results it has given them:

• Complete control over the hiring of Independent Professionals.
• Awareness among Principals (HR and hiring managers): what roles can be performed by an Independent.
• Awareness among self-employed: focus on being an entrepreneur, avoid the appearance of a relationship of authority with the Principal.
• The hiring of Independent Professionals conforms to the current frameworks of the legislation and the organization thus demonstrates that it is not a malicious Principal.

"HeadFirst has found a good form of risk hedging with us in partnership. We are very satisfied with that."
Govert Laninga, Manager HR Services Mediq

Want to know more about our DBA Scorecard? Request a consultation at info@headfirst.nl.

In early 2018, Minister Koolmees extended the suspension of enforcement on the DBA Act until 2020. That postponement still does not appear to be sufficient. He announced this on Monday, November 26, through a second progress letter to the House of Representatives. Koolmees suspects a delay of one more year, pushing back the revised DBA Act to January 2021.

'Bottom of the market' solutions at odds with EU law
Koolmees held talks with the European Commission earlier this year, from which he concluded that the measures to protect low rate workers may be at odds with EU law. In the letter, he wrote, "in particular, the conversion of the contract of assignment of the self-employed covered by the Low Rate Employment Contract (ALT) into an employment contract creates tension, as this is likely to infringe on the freedom of establishment (Art. 49) and the freedom to provide services (Art. 56) of self-employed workers in the EU Treaty on the Functioning of the European Union (TFEU)." Therefore, in addition to further elaborating on the measures, the Cabinet is also focusing on exploring "alternative routes.

The measures for "the bottom of the labor market" will be further elaborated and turned into legislation in the coming period. "The aim is to put these out for Internet consultation in the first half of 2019." In the spring, the Cabinet will inform the House of Representatives about this.

Opt-out for 'top of the market'
The measure for "the top of the labor market," the so-called opt-out, is included in the same Internet consultation. "In the letter of June 22 last, it was indicated that the Cabinet will examine the way in which the group of self-employed entrepreneurs will be delineated for whom the opt-out applies and that the further elaboration will also look at the consequences for employee insurance rights." No new information is added in the second progress letter.

'Authority' criterion on track
Koolmees did take steps in other areas, including the 'authority' criterion. As previously agreed in the coalition agreement, the criteria for a relationship of authority will be clarified. To this end, a number of scientists have been asked to write a position paper, which again shows that clarifying authority is no easy task. "However, by working with indications for authority, contraindications for authority and examples, it is possible to clarify the authority criterion. This clarification of the authority criterion will be included in the Tax and Customs Administration's Payroll Tax Handbook." This should give clients guidance on how to self-assess whether an employment relationship exists.

Research into operation of web module continues
According to the progress letter, the elaboration of the web module is also on schedule. It is expected to be ready by the end of 2019. However, the letter also reveals that the Cabinet is still investigating whether the proposed web module 1) is feasible and enforceable, 2) offers certainty to entrepreneurs and their principals, and 3) does not involve an unnecessary administrative burden. Koolmees describes the current state of affairs as follows: "A questionnaire has been developed that asks as many relevant questions as possible for the assessment of the employment relationship. [...] The coming months will be used to elaborate this extensive questionnaire into a manageable decision tree, in order to see whether a well-considered judgment can be reached with this even within the aforementioned balance." Based on this, the actual arrival of the web module still seems all but uncertain.

Tax authorities energetic with company visits
On July 1, 2018, the Tax and Customs Administration published the Labor Relations Supervision Plan, which announced the company visits of at least 100 principals. The Cabinet informs that the selection of principals has already been made and the majority of the company visits have been carried out. However, Koolmees is not releasing much about this yet. "No conclusions can yet be drawn from the first feedback on the visits." More will also not be known about the further details of enforcement until later. "The moment the elaboration of the measures is more advanced and there is insight into whether and how an optimum between the preconditions has been found with the web module, you will be informed about the phasing out of the enforcement moratorium."

Friday, June 22, Minister Koolmees of Social Affairs and Employment informed the House of Representatives through a letter, titled "detailing measures for self-employment", about the progress of the replacement of the DBA Act. HeadFirst outlines the main points for you.

No easy task
In recent months, the cabinet has been busy working out the measures to replace the DBA Act, which you can read more about in our white paper. "The cabinet has made steps forward in this, but also still has work to do," Minister Koolmees reported in his letter. "Making new legislation around zzp is no easy task. That was clear when the DBA Act was introduced, when the coalition agreement was drawn up and it is also apparent now. But new laws and regulations are needed unabated."

Follow-up Actions
The Cabinet is taking several follow-up actions in the coming months:

The measures for "the top and bottom of the labor market" are being further developed. "However, several bottlenecks have been identified in this process which are being addressed. In the fall, the Cabinet will come up with a further proposal."

An external study is currently being conducted on rates, rate structure and characteristics of self-employed workers and their assignments. "The results of this research will be used to arrive at a demarcation of the groups covered by the low-rate employment contract and the opt-out. Effects of such demarcation on the labor market will also be identified."

- The Cabinet will enter into talks with the European Commission on the protection of low-rate workers. "Knowing that this issue plays out in more countries".
- The Cabinet is examining in what way demarcation of the group of contractors "at the top of the market" - to whom the opt-out will apply - is necessary. "After all, if it is already established for the client and contractor that the contractor performs the work as a self-employed person, then an opt-out is not necessary."
- The Cabinet will examine whether the proposed web module is 1) feasible and enforceable, 2) provides certainty to entrepreneurs and their principals, and 3) does not impose an unnecessary administrative burden.
- On Sept. 3, 2018, the Cabinet will organize a follow-up to the kick-off meeting with field parties on Jan. 24, 2018, in which it will again discuss how to develop the measures in the best possible way.
- "The emergence of new forms of working relationships between client/employer and contractor/employee raises fundamental questions about the labor market, labor law and social security. In order to be prepared for the future, an independent commission will be set up to investigate these issues, including the possibility of introducing an enterprise contract and revising the definition of the temporary employment contract."

Important dates
Some dates that were already known remain:

- Enforcement on the DBA Act will remain suspended until at least January 1, 2020, with the exception of malicious parties.
- From July 1, 2018, enforcement will no longer be limited to the most serious cases of malice, but will be broadened to all malicious persons. More on this below.
- By January 1, 2019 at the latest, the Cabinet will have clarified the criterion of "authority.

Enforcement: 100 principals to be visited
On July 1, 2018, the Tax and Customs Administration will publish a plan that fleshes out the supervision of labor relations from this date. The details are already known in outline. For example, the Tax and Customs Administration will plan company visits with principals, during which it will discuss their working methods with contractors. "The Tax Authority will select at least 100 principals to visit. This selection includes both principals who have submitted a model agreement, which may or may not have been approved, and principals who have not yet been in the picture of the Tax Authority in this context. From each category, a number of clients are selected that the Tax Office will visit. The selection is made in such a way that various industries and sectors are visited. (...) The focus is on those principals who have not yet been in the picture (ed., this seems to mean 'principals who have not submitted a model agreement to the Tax Office for approval') or who are not working with an approved (model) agreement."

"Depending on what the Inland Revenue determines in its discussions with - and visits to - clients, the supervision plan will be adjusted in the interim. This may mean, for example, that other or different types of clients are selected. Supervision takes place where there are the greatest risks of false self-employment. (...) If, during its supervision, the Tax and Customs Administration suspects (fictitious) employment and malicious intent, it will launch a further investigation. (...) The plan is to have the visits completed by the end of 2018."

Are you curious about Minister Koolmees' complete letter? Download it here.

The suspension of enforcement on the Deregulation Assessment of Labor Relations Act (DBA) has been extended until January 1, 2020. This writes Minister Koolmees of Social Affairs and Employment and State Secretary Snel of Finance in a letter to the Lower House. Enforcement on "malicious parties," principals who knowingly violate rules, will remain in place and will even be expanded. The letter also makes clear that there is no prospect of an interim solution for specific groups of self-employed, such as the opt-out scheme for Independent Professionals with rates above €75 per hour.

Enforcement on malicious principals broadened
As of July 1, 2018, enforcement will no longer be limited to the most serious cases of maliciousness, but may also be applied to other malicious principals. These are principals "who intentionally allow a situation of evident false self-employment to arise or continue". Specifically, this means that the Internal Revenue Service can enforce if it can prove all three of the following criteria:

1. There is a (fictitious) employment relationship.
2. There is evident false self-employment.
3. There is deliberate false self-employment.

In such cases, an unfair advantage is often gained and/or the playing field is unfairly affected.

Planning: more information before summer recess
Whether there is fictitious employment depends heavily on whether there is a relationship of authority. In its letter, the Cabinet has indicated that it will come up with clarification of the definition 'employer-employee relationship' before January 1, 2019, as this is the core of much ambiguity surrounding the DBA Act. This has been urged by MPs Van Weyenberg (D66) and Wiersma (VVD), the latter of whom was recently a guest on our radio program HoofdZaken.

Before the summer recess, the Cabinet will send an "outline letter" to the House of Representatives, explaining in more detail how the various measures will be worked out. The aim is then to come up with a bill still in 2018, so that its parliamentary consideration can be started in the first half of 2019. The aim is to have the specific measures, intended for 'the bottom and the top of the labor market', as well as the client declaration (web module) enter into force on January 1, 2020.

No faster solution for top end
There was talk of faster introduction of measures for the top and bottom of the market, but these are not coming. "We are working on one package of measures that we are going to introduce at the same time. We are not going to introduce measures like the minimum rate or the opt-out for the top before then," Social Affairs and Employment Minister Koolmees told ZiPconomy. State Secretary of Finance Menno Snel added: "I don't have the impression that the biggest problems are now at the top end of the market. That group doesn't have much to worry about now either, so we don't really see the need to accelerate there separately either."

As for the situation until 2020, Minister Koolmees stated, "For the market, the message is clear: working with self-employed people is possible! Provided you are not malicious."