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Many Interim Managers say abolition of Declaration of Independent Contractor Status (VAR) defeats purpose

  • Most freelancers and clients unhappy with new arrangement
  • Freelancers expect to lose work
  • Most respondents expect this change will offer no solution to false self-employment

Amsterdam, 31 March 2016 - As of 1 May 2016, the Declaration of Independent Contractor Status (also known as VAR) will be phased out. Clients and freelancers can use agreements that have been drafted or assessed by the tax authority. Michael Page conducted a survey regarding the new change of law among Dutch employers and self-employed professionals, which shows that the overwhelming majority is not happy with the new arrangement, and even expects it to result in less work for freelancers. “Of course we have to see how it works out in practice, but at first glance the new arrangement appears too cumbersome a solution which will cause much unrest on the employment market,” says Mischa Voogt, Managing Director at Michael Page.

Feasibility of enforcement

The survey results show that Dutch employers and freelance professionals expect to see few positive outcomes from the new scheme: a whopping 84% of freelance respondents and 87% of companies feel that the change does not offer a solution for the problem of false self-employment the government aims to tackle. “I think that largely has to do with the practical feasibility of enforcement,” Voogt says. “Remember: the biggest problem with the VAR declaration was the lack of checks on employer and employee working agreements and the lack of tax authority capacity. Since VAR declarations were automatically renewed in recent years, enforcement was lacking and no ex-post monitoring was done. There is still a great deal of uncertainty as to how the government will implement effective screening for this new arrangement. Have the tax authorities suddenly freed up a lot more capacity?”

One difference from the old VAR arrangement is that the tax authorities will now assess a person’s self-employment status during or after a project rather than determining it in advance. Moreover, responsibility no longer rests with the freelancer, but with the client. “This creates a great deal of uncertainty for clients,” says Voogt. “In the old situation, the VAR declaration provided certainty from a tax and civil law perspective beforehand. It was difficult to claim the existence of an employment relationship after the fact, and the employee was responsible for any taxes or premiums that had not been paid. This certainty is now removed, and clients are no longer guaranteed a risk-free relationship in these areas.” This could be a good explanation for the fact that 79% of corporate respondents expect to use fewer freelance professionals after the changes take effect, and 74% of freelancers expect to receive less work.

Does the new arrangement defeat its purpose?

The new arrangement is mainly intended to protect at-risk groups, particularly in lower-rank operational roles, from exploitation. But because the regulations apply to all self-employed professionals, every occupational group will be burdened with the increased administrative pressures of the VAR’s abolition. And that does defeat the purpose, according to Voogt: “Companies hiring freelance professionals for several different tasks will have trouble keeping up with all the administrative issues as a contract must be drawn up for each role. We expect that organisations like ours will be engaged to broker a contract with the candidate. As we can sign standardised contracts with the candidate and bill our clients on an hourly basis. This will streamline things again. However, this does not alter the fact that although our candidates are not part of the at-risk group targeted by the government, they must still deal with the increased administrative pressure. With this new arrangement the government has opted for drastic measures, causing much unrest. Perhaps the problem of false self-employment will be partially resolved, but for a large part of the market you’re only creating trouble.”

In practice

Only time will tell whether or not the new regulations will actually result in the anticipated problems and loss of work for freelance professionals. “At the moment much is unclear as to implementation and enforcement. And that is not a good sign,” says Voogt. “We doubt the abolition of the VAR declaration will achieve its purpose, because we simply don’t know how the government will monitor all the template contract adjustments in practice. That is why we will conduct a follow-up survey once the new regulations take effect. We’re keeping a close eye on it.”