Labour market sham construction

The labour market in the Netherlands is in a state of flux. We also see that traditional forms of employment are increasingly giving way to flexible working arrangements, which is not surprising. Indeed, the popularity of freelancing has risen sharply in recent years. More and more people are choosing to be self-employed and set their own hours. The desire to combine different projects, experience a lot of autonomy and have multiple sources of income is in line with a new generation of workers who value freedom and self-development.

Yet this is not only a choice of employees, as organisations also have an interest in a flexible workforce. They want to be able to scale up or down quickly, depending on economic trends and the growth or shrinkage of their organisation. The growth in flexible forms of work also creates unintended side effects. Sham labour market constructions are examples of such side effects. We at Striive would be happy to tell you more about them.

Unintended side effects of this movement

The increase in so-called sham constructions is one of the main side effects. These are partnerships that appear to comply with all legal requirements on paper, but in reality seek or even exceed the limits of the law. They often involve situations in which a client gives the impression that someone is a self-employed person, while there is a disguised employment relationship. This may seem advantageous for both parties, as the client pays less employer's contributions and the freelancer enjoys more freedom on paper. But appearances can be deceptive.

What exactly are sham constructions?

In a sham construction, the employee is not employed, but hired as a self-employed person. So on paper it looks like a freelance contract, but in practice there is a relationship of authority. The client determines working hours, working environment and responsibilities. Obligations such as pension accrual, insurance and paid holidays are then missing, creating a form of competition on working conditions. Such constructions are problematic because they increase uncertainty for the employee and undermine solidarity. The government may also lose revenue due to non-payment of employer contributions.

What exactly are sham constructions?

In a sham construction, the employee is not employed, but hired as a self-employed person. So on paper it looks like a freelance contract, but in practice there is a relationship of authority. The client determines working hours, working environment and responsibilities. Obligations such as pension accrual, insurance and paid holidays are then missing, creating a form of competition on working conditions. Such constructions are problematic because they increase uncertainty for the employee and undermine solidarity. The government may also lose revenue due to non-payment of employer contributions.

New legislation in the Netherlands

One of the best-known rules for freelancers is the Deregulation of Assessment of Employment Relationships Act (DBA), designed to combat false self-employment. This law still raises a lot of confusion and uncertainty among zzp n clients. The tax authorities used different criteria to determine whether someone was truly self-employed, but did not always take enforcement action. This created a situation where many organisations kept waiting and self-employed people did not know where they stood.

The government is currently working on new laws and regulations to combat sham constructions and create more clarity. These include stricter supervision of authority relationships and more transparency around rates, so that the ‘real’ self-employed can continue to work and the sham constructions come to light faster. These bills focus on clarifying what exactly a self-employed person is, how the employment relationship is shaped and what tariff limits are in place to better protect vulnerable workers.

Rate limits and model contracts

In the future, as a freelancer, you may have to deal with rate limits that determine whether you can work as a self-employed person. Think of a minimum hourly rate, meant to prevent false self-employment at the bottom of the market. Anyone who structurally works for rates that are too low will come across as a disguised employee. At the same time, stricter criteria will be introduced to check whether entrepreneurship actually exists. Are you investing in your own branding, are you taking entrepreneurial risks and/or do you have multiple clients?

To reduce uncertainty, freelancers and clients are increasingly using model contracts. These contracts have been tested by the Tax Authorities and provide guidance on the rights and obligations of both parties. Note, however, that model contracts are not a licence! The situation on the shop floor may turn out differently from what is described in the contract. So stay alert and make sure you honour the contractual agreements in practice

Choose fairness over false security.

A key factor is cooperation between all parties: the government, unions, clients and freelancers themselves. Only when there is a shared interest in a fair labour market can things really change. This is why open communication is so important. As a freelancer, do you think the client is actually giving too much guidance? Discuss this then, and suggest that you get more freedom in your work content. Or do you notice as a client that you actually have an employee-employer relationship with the ‘freelancer’? If so, it is better to adjust the relationship to permanent or temporary employment.

Networking among freelancers is also important. By exchanging experiences, you learn from each other's mistakes and successes. Who knows, you might find a new assignment that suits you better through a fellow freelancer or a platform like Striive. Also consider attending webinars or information sessions on the latest labour law changes. The more informed you are, the less likely you will accidentally end up in a sham construction.

Define your professional identity

As a freelancer, it is good to clearly communicate who you are, what you offer and what you specialise in. Strong branding and a clear proposition will help you stay independent and not fall into a sham construction. Do you have your own website, a professional LinkedIn profile and work on visibility in your industry? Then it is immediately clear to clients that you are a real entrepreneur and not just ‘lent’ by a client.

Ensure sound business management

Self-employed entrepreneurs are responsible for things like pension accrual, insurance and building up a buffer. Perhaps you have already thought about disability insurance (AOV), professional liability or business liability insurance. By covering such risks, you avoid getting into trouble in case of illness or unforeseen events. It is also wise to spar with an accountant or tax expert in good time. This way, you will be sure to file the correct tax return and also know how to deduct investments in your business.

Maintain a professional network

A solid network can bring you a lot. You receive tips on interesting assignments, gain insight into market rates and learn about innovations in your field. A network can also help with the pitfalls of freelancing. By talking openly about rates, you avoid undervaluing yourself or unintentionally overcharging. Through your network, you may even find opportunities for co-creation, where you carry out a project together with other freelancers. This can strengthen your position on the market and expand your knowledge.