Dutch hiring rules explained for startups: freelance and model contracts

Many companies choose to hire people as freelancers (Dutch: ZZP). Hiring people through ZZP contracts is however not without risks, and the rules have recently been changed. We provide a practical summary on how to hire freelancers under the new rules.

We noticed that there is a lot of explanation about laws and rules such as model-contracts for Dutch entrepreneurs, but that the same information is not available in English. And even if there is English information, it is often not suitable for startup founders. In this article we therefore provide a practical summary in English, with a focus on international startups. Do you like these articles? Let us know.

When to hire a freelancer

There is a large talent pool of independent professionals in The Netherlands, and you can hire a freelancer for almost any task: design, coding, growth hacking, marketing, social media but also construction, advice or general management. Whenever you have a sudden need to strengthen your team, you can use freelancers as a way to get things done.

One could argue that the ZZP-ers are one of the hidden assets of the Dutch economy, and one of the engines behind startup growth: freelancers provide access to talent and flexibility to scale up and scale down to startups, and also act as a network for knowledge sharing between startups. Many startups are founded by freelancers, and some startups are bootstrapped by founders who do freelancing on the side. Understanding the concept of the Dutch freelancers is therefore important for international startups that want to come to The Netherlands.

The ZZP phenomenon

Hiring people as employees in The Netherlands is not harder than it is in other countries, but it still is complicated and caries some risks. Many companies therefore prefer to hire people as freelancers. Especially for startups this can be attractive since they operate in an uncertain environment.

At the same time, the Dutch tax regime has been structured in such a way that there are large financial benefits for freelancing: one often has to pay no taxes at all in the first few years. As a result, many people have opted to start an one-man-business and become a ZZP-er (independent professional without personnel). The ZZP-ers are officially entrepreneurs, but in practice for a middle group between employees and entrepreneurs with personnel: they are more risk-taking than traditional employees, but often do not make large investments in offices and business assets. Indeed for many ZZP-ers, freelancing is a part-time activity and for some it is even a temporary activity between jobs.

Misuse of the ZZP status

The ZZP benefits are so attractive that they have been misused: people with no intention to be independent have registered as ZZP. They were immediately rehired by their previous employers for doing exactly the same work as they were doing before, except with a lot more tax benefits.

This was seen as unfair by some lawmakers, and rules were made to prevent misuse. The old rules, valid until May 1st 2016 involved a VAR statement, The new rules, in effect since May 1st 2016 re based on model contracts.

The main risks that model contracts try to prevent

If you pay someone as a freelancer, you pay the person and VAT but you pay no extra taxes or benefits. If it later turns out that the person worked for you exactly like an employee, you should have paid benefits and you will be liable for paying the benefits and a substantial fine.

In addition, all Dutch labor laws would apply and there are a lot of labour laws: There are fines applicable if you underpaid the person, did not provide a proper work environment, paid them afterwards, etc. This is not a risk you want to run as a startup, so it is important to get clarity beforehand on whether your contract with the freelancer will be seen by the tax authorities as a proper freelancing contract.

Step 1: KvK and invoicing

First of all, the basics. You should, when hiring someone, check whether they are registered as a company at the KvK. The KvK is a public register that you can check for free online. If someone is not registered yet they can register. Secondly, you should only pay freelancers after you have received a proper factuur or invoice, that specifies the services delivered, time period, name and address of company, VAT amount and invoice number.

Step 2: contracts

The second step when hiring someone as a freelancer, is to make sure that there is an accepted proposal or contract in place, that describes what the freelancer is doing in your company. Without a contract, there is no documentation that can be used for determining whether someone is an employee. The contract can take two forms:

• You can hire someone for creating a certain result, say a website, logo design, piece of code or office remodelling. If the contract is fixed price and has a specific result, it is clear that the freelancer has enough freedom in the way the job is done to qualify as a freelancer.
• You can hire someone for a fixed fee per hour to work for you for some time. This sounds to the tax authorities a lot like an employer-employee situation so this is tricky. In this case, you need to put certain elements in the contract to assure that this qualifies as a freelancer situation.

The new law, Wet Deregulering Beoordeling Arbeidsrelaties describes what elements the tax authorities should use in assessing contracts. The following elements are relevant:

• Does the contract state that the freelancer have freedom in how the work is done? Or are there work instructions and close supervision?
• Does the contract state that the freelancer can send someone else to do the work if needed, e.g. in case of holidays?

There is a guidelines document that tries to explain the criteria, but the guidelines document itself concludes (p.4) that using the criteria is ‘not an exact science’. Apparently, the law is not completely clear to the tax authorities. There is also a more complete list of criteria that the Tax authorities use to decide whether freelancers are entrepreneurs.

Model contracts

As a solution to the insufficient clarity of the law, the lawmakers have introduced the idea of model contracts. Model contracts are contract templates that have been reviewed beforehand by the tax authorities. If you use a model contract and you stick to the contract, the tax authorities promise that your freelancer will not be seen as an employee.

Using model contracts is not mandatory, but can be a convenient solution. There are model contracts for many uncommon situations: if your startup hires an musician, doctor, midwife or dentist, there is a good model contract available. There are also a few model contracts that are more widely applicable and that are probably more useful to startups. We believe that the following contracts are most applicable:

• Modelovereenkomst geen werkgeversgezag (model contract with no position of authority)
• Modelovereenkomst with option to send some-one else

There are no English language model contracts yet.

Alternatives to freelancer contracts

If you would like to hire someone and they are not a freelancer, you can either hire them directly as employee, or use a payrolling company. Payrolling companies charge you extra but take care of all labour law details.

Questions and next steps

We hope that this explanation was helpful and that you are able to help yourself directly. If not, you probably need professional advice based on your specific situation. There are many Dutch lawyers who can help you, or legal services from Dutch startups such as Ligo, VraagHugo and Legalloyd that provide legal advice.

Image by Olu Eletu @ Unsplash