DBA Act: what now? – again

In its report, the working group presented ten variants to the DBA Act, from which a new cabinet will be able to choose. Alternatively, they could opt for a combination of variants. The variants are grouped in two categories. Variants A through D from the Category I only envisage implementation/enforcement of the Act in unchanged form. Category II (Variants E through J) do call for emendation of the Act. In its report, the working group also called attention to the fact that none of the alternatives is perfect and equipped to solve all of the relevant problems at a stroke.

Below, a succinct description of all ten variants:

Category I (no emendation of the Act needed):

Variant A: Transition to enforcement as from 1 January 2018 (‘zero option’)

With this variant, referred to as the zero option, nothing would change: the DBA Act in its present form would be enforced as from 1 January 2018.

Variant B: Definition of independent contractor status (OSA)

Under Variant B, the introduction of an online tool would provide clients with clarity and legal certainty concerning the qualification of the status of independent contractors. The drawback of this variant is that constructing the tool would take a minimum of one year and would be extremely complex and call for a major (IT) effort on the part of the Tax Authorities.

Variant C: Criteria for qualifying to use a model agreement (‘Boot variant’)

This variant provides for enforcing three criteria through which it would any case become clear whether an employment relationship is involved: the term of the agreement, the fee paid and whether core tasks are involved. However, as these criteria can be interpreted variously, circumventing the law could be possible. Further, with this variant, model agreements would still be required for work outside fixed employment.

Variant D: Legal presumption for the lack of an employment relationship

Under this variant – in fact the mirror image of Variant C –  the same criteria are employed to determine whether there is in any case no question of an employment relationship. Its disadvantages are the same as those of Variant C.

Category II (emendation of the Act required):

Variant E: Detailed specification of the criterion ‘person-related work’

In the context of tax and social-security law, it can also be stipulated by law that an employment relationship can be involved even where the individual in question is not obliged personally to execute work, but does execute (a portion of) it de facto. The disadvantage of this option is that there are now model agreements in circulation under which person-related work is not a requirement, all of which would have to be withdrawn and modified.

Variant F: Fictitious employment relationship with an exception for entrepreneurs

With this variant, fictitious employment relationships within the context of employee insurance and income tax deducted at source would be adjusted. As a result, a larger group of so-called employees would qualify for this insurance, which in turn would have a positive effect on the jobs market. Insecurity would however increase amongst commissioning parties, as they would be unable in advance to verify whether a contractor is an entrepreneur.

Variant G: Prerequisite of employment agreement in certain sectors

In certain sectors, paid work is only possible on the basis of an employment agreement. Thus, working on the basis of a model agreement is not an option. In the postal sector, a variant of the requirement of an employment relationship is already in use. However, as this variant involves treating all employees within a certain sector uniformly, it could result in arbitrariness or disproportionality. In addition, there is a possibility of conflict with European legislation in respect of the single market.

Variant H: ‘Opt-out employment relationship’

Variant H provides for an ‘opt-out employment relationship’ for employees at the high end of the jobs market, who could opt not to fall within the withholding tax and employee insurance regimes. Unfortunately, this variant would also result in a risk of circumvention. In addition, it would affect the entire social security system, as the obligatory character of employee insurance system is intended as a way of realising mutual solidarity, and an opt-out would therefore mean an exception to this.

Variant I: Entrepreneur’s declaration

Under Variant I a select group of contractors would, on the basis of strict criteria, be categorised in advance as entrepreneurs. The parties commissioning such contractors would be exempted from both withholding tax and employee insurance and would receive assurance of this in advance. As a result, this variant is the one which most resembles the old declaration-of-independent-contractor-status (VAR-verklaring) regime. However, despite the appeal of this variant at first glance, it, too, has drawbacks: detecting bogus self-employment would be virtually impossible and every employment relationship would have to be verified individually: a highly inefficient and work-intensive undertaking.

Variant J: Uniform remuneration of contractors and employees

Under this variant, both parties would receive the same remuneration, provided they did the same work at the same company. The aim: to reduce the cost advantages resulting from calling in contractors as compared to hiring employees. With this variant, as well, enforcement and verification would be time consuming and difficult. In addition, determining the appropriate remuneration is anything but straightforward, as the employment-law regime in respect of rights and obligations does not apply to contractors.