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Act Deregulation Labour Relations (DBA-law) damaging to labour market: government should act

Recruitment company Michael Page calls on the government to acknowledge the negative consequences of the Act for Deregulation of Labour Relations (DBA) and take corrective measures quickly. With the introduction of the new law, which has replaced the Declaration of Independent Contractor Status (VAR), a clients risk for fines and back taxes when hiring independent professionals increases.

Despite a one-year transition period, during which the Tax Authority has promised not to impose any fines, negative consequences for independent professionals are already visible. Mischa Voogt, Managing Director of Michael Page: ‘The government has completely misjudged the corporate world’s response. The DBA Act appears to be damaging to independent professionals. The government must act quickly to limit this damage.”

Just before the new law came into effect, Michael Page conducted research into the mood amongst Dutch employers and independent professionals.  This showed that the great majority was not happy with the new set-up: 79 percent of employers surveyed expected to hire fewer independent professionals after the law came into effect. For the freelancers, 74 percent of respondents expected fewer assignments due to the disappearance of the VAR.

Now that the first effects of the law are becoming visible, these predictions appear to have been conservative. “Many of Michael Page’s large clients are already indicating that they no longer want to work with independent professionals,” says Voogt. “They simply feel the risk is too high and will only consider temporary or interim workers through an agency. This uncertainty is largely caused by the lack of clarity surrounding the assessment of independence, with the Tax Authority able to decide that there is an employment relationship after the fact. The government seems to have entirely disregarded the fact that risk management is the basis for most companies’ decisions. Independent professionals will feel the consequences in the sense that they will lose work opportunities.”

Poor communication

The uncertainty is amplified by the government’s poor communication. For example, Undersecretary Wiebes initially estimated the number of falsely self-employed professionals between two and fourteen percent. But information that has since become available has led Mischa Voogt to conclude that the real percentage will be much higher.

Voogt: “A substantial portion of independent professionals will have trouble gaining independent contractor status any longer. For example, independent professionals would no longer be considered as such when acting as replacements for pregnancy or illness, according to the Tax Authority’s webinar. And what about a temporary assignment while recruiting a new employee? “Any role in a semi-hierarchical context would technically no longer be open to independent professionals. And this suddenly affects a much greater portion of the freelance market, instead of the aforementioned two to fourteen percent. Of course this has caused some unrest among companies and freelancers.”

One size fits nobody

Moreover, the law apparently offers no solution to the problem of false self-employment outlined by the government.  The new arrangement is intended to protect at-risk groups, particularly in lower-rank operational roles, from exploitation. “Of course it is a good thing that the government is attempting to combat exploitation,” says Voogt.

However, it is now becoming clear that many more people are affected by this measure. “One could wonder if this path was the right choice. The law intended to be a ‘one size fits all‘ solution, but the result suits hardly anyone. I think the law should be amended to differentiate more between various professions, with regulations and criteria for each market or salary segment. The VAR set-up certainly had its limitations, but with this system the government is throwing the baby out with the bathwater.”

Negative stimulus for intermediaries

Another typical problem signalled by Voogt is a criteria for self-employment in case of mediation by parties such as Michael Page. In such cases, the freelancer enters into a contract with the mediator rather than the client. “If we as a company arrange several consecutive assignments with various clients for one candidate, the Tax Authority could label this false self-employment after the fact,” she says. “After all, the candidate is signing a contract with us for these various assignments, and the Tax Authority could mark that as a consecutive and therefore permanent employment contract. But this candidate has certainly run entrepreneurial risks, as he did not know in advance whether or not we would have a new assignment for him once the previous one ended. This is not taken into consideration as the assessment takes place in hindsight. It may even create a negative stimulus for intermediaries: they will not propose certain high-performing candidates to new clients directly from their current assignment. This affects a sizeable part of the market: just think about support functions in the financial sector or HR, where people often do not have the right personal network to help them obtain assignments and are thus dependent on intermediaries. The government should not rock this boat with such measures.”

The entrepreneurial Netherlands

The Netherlands is a particularly entrepreneurial country: at the end of 2015 nearly a million people were working as freelance professionals. This is something that needs to be handled carefully, Voogt warns: “Independent entrepreneurs are an essential part of the Dutch economy, and the DBA Act is causing much ambiguity and unrest among this group. That is why I would urge the government to restore peace to this portion of the labour market and amend the law. If its intention is to address abuses, then that is what it should focus on. In its current form, the law is a bull in a china shop, negatively affecting a sizeable portion of the labour market.”