End of the “unrestricted substitution” model agreement


Unrestricted substitution model agreement

Until recently, the following guarantee was in place for clients and self-employed workers: if they used an agreement based on unrestricted substitution, there would be no employment relationship. They would have an agreement for services, not an employment contract. In that case, the client is not required to withhold payroll taxes.

Unrestricted substitution means, briefly put, that the work in question does not have to be performed by the contractor him- or herself: he or she can be freely substituted.

On August 14, 2023, the Dutch Tax and Customs Administration announced that the model agreement “unrestricted substitution” would be repealed on January 1, 2024. This is the result of the ruling by the Dutch Supreme Court in the Deliveroo case (March 24, 2023), according to which an agreement on unrestricted substitution does not rule out an employment relationship if substitution hardly occurs. The contractor is then “pseudo self-employed.” Furthermore, in determining whether there is an employment relationship, the entire set of circumstances of the individual case should be considered, and not just whether there is an obligation to perform the work personally.

Both the approval of general model agreements as well as industry agreements and individual agreements based on unrestricted substitution will be withdrawn. Despite the immediate effect of the ruling, the Dutch Tax and Customs Administration is delaying the repeal to give clients and contractors the opportunity to reconsider the nature of their employment relationship in view of the actual work being done.

What are the practical implications of this withdrawal of approval?
Anyone who has submitted an “unrestricted substitution” model agreement to the Dutch Tax and Customs Administration which has been approved will receive a letter no later than October 1, 2023. Individuals and organizations using a model agreement that they did not submit themselves will not receive a letter.

The Dutch Tax and Customs Administration will continue to make company visits and carry out audits, which could lead to clients being instructed to adjust their employment relationship if there are indications of the existence of an employment relationship. However, given that the enforcement moratorium is in place until January 1, 2025, no correction obligations or additional tax assessments will be imposed except in the event of malicious intent. This will only be assumed if the client ‘deliberately allows a situation of obvious pseudo self-employment to arise or continue because it knows – or could have known – that there is in fact an employment relationship’. Enforcement could also occur if the client does not comply with the instructions given by the Tax and Customs Administration or does not do so sufficiently. In short, if the model agreement is not updated after January 1, 2024, then retroactive taxes could eventually be imposed on the grounds of malicious intent.

Our advice
In short, the “unrestricted substitution” model agreement is to be repealed on January 1, 2024 but the enforcement moratorium will be in place until (at least) January 1, 2025. What to do now?

In addition to the “unrestricted substitution” model agreement, there is also the “no employer authority” model agreement. This requires the absence of any management and supervision of the contractor’s work. The client may, however, give directions and instructions regarding the outcome of its instructions.

The possibility of unrestricted substitution usually also implies a fair degree of individual responsibility and independence on the contractor’s part. This type of model agreement will be valid until June 1, 2026 and offers an excellent alternative, particularly since the enforcement moratorium will remain in place until at least January 1, 2025. The alternative of shifting to an employment contract will be less appealing to many.

The outgoing Dutch Minister for Social Affairs and Employment may continue with her plans for labor market reform, so we can expect new specific rules on working under an employer’s authority and the hiring of self-employed workers as of January 1, 2025.

Nadia Gandar / Dennis Veldhuizen

Lees deze blog in het Nederlands hier.




About the author

Dennis Veldhuizen

+31 (0)6 261 12 757


Latest news

Would you like to stay informed of the latest developments? View all articles on our blog.

Schedule a consultation.


In need of a second opinion? Or some planning for a case? Contact one of our labor lawyers or mediators.