As of April 1, 2016, the VAR (Declaration of Employment Relationship) has been abolished. As of that date, clients and self-employed individuals are expected to lay down their agreements in a so-called model agreement. What does this change imply for the client and the self-employed worker and should we be happy about it?
The VAR could be applied for by the self-employed person when he worked for one or more clients. The principal therefore knew that he was dealing with a self-employed person and could safely conclude an agreement without running the risk that at some point it would be interpreted as an employment contract. The government wanted to get rid of this VAR declaration in order to tackle so-called sham constructions, in which someone actually functioned as an employee, but still lacked legal protection. For the employer, the VAR relationship was attractive, because he did not have to withhold or pay payroll taxes and the relationship could easily be terminated without all kinds of employment-law prohibitions on dismissal.
As of May 1, 2016, the Deregulation of Employment Relationships Act applies. Clients and their self-employed colleagues can therefore only work together on the basis of a so-called model agreement, a document drawn up for each sector and for each professional group, which includes a description that the relationship between the client and the self-employed worker is not an employment relationship and what the specific agreements are about the work. These model agreements can be submitted to the Tax and Customs Administration, which will assess the agreement within six weeks of submission. The basic principle is that if a model agreement is approved, the parties can work together without any risk of concluding an employment contract. This agreement is then valid for five years. On the website of the Tax and Customs Administration there are already many model agreements as examples.
Passing on risk.
The question is whether this new law has the desired effect. After all, it is expected that the client will pass on the risk relating to this agreement and a possible levy to the self-employed person. The biggest risk is that these contracts only regulate the relationship with the client and that for the existence of self-employment (well regarded as the most important condition for the absence of employment) should generally be looked at in a broader sense than just the individual employment relationship. As indicated above, the number of clients of the person concerned plays a role in the assessment of whether there is an entrepreneurial risk, for example. Also when there is a high degree of economic dependence, the risk of being an employee will be high.
Drawing up a model agreement is not that simple for an entrepreneur. What must it contain to avoid that (in retrospect) the conclusion is that there is an employment agreement? Unlike the VAR declaration, when an agreement is still considered an employment agreement, both parties can be held liable to pay social premiums and the like. With the VAR, the principal ran no risk in this regard.
The yacht building industry (which makes extensive use of self-employed persons) will have to work with the new law and model agreements. When a yacht builder draws up the model agreement himself, here are a few tips.
Bear in mind that the criteria for concluding an employment contract consist of the following elements: personal work, against payment of wages and a relationship of authority.
The contractor must be able to be replaced without the employer having any say in the matter. Also important: avoid having a relationship of authority. In other words, the contractor is free to determine the concrete content of the work and carry it out in his own way.
The principal may not direct or supervise the contractor’s work.
Risky: when the contractor has to follow all directions and instructions of a principal or when he has to work according to directives of the principal.
Another important criterion: when the contractor works for only one principal, the principal also runs the risk of a quicker conclusion to an employment contract. It is important to inquire with the contractor whether he also has multiple principals. The contractor must provide his own tools, resources and materials and pay for them himself. Also agree clearly on when the assignment will be completed and delivered. When the job in question has been completed, it is important to conclude a new contract for a new job. In any case, the freelancer must be clearly identifiable as a self-employed person within the client’s company. If any damage occurs during the performance of the work, the contractor is personally liable for it. The contractor will also deal with complaints from third parties about himself and his work.
If in doubt, have the model agreement drawn up by a lawyer and reviewed by the tax authorities! A goodwill arrangement applies until 1 May 2017, but after that the relationship must be embodied in a model agreement!