What is the added value of the new Labor Relations Clarification and Presumption of Law (VBAR) Act? The Council of State has its doubts ⚖️

On Nov. 11, 2024, The Council of State published its long-awaited opinion on the controversial VBAR bill. The identification of certain problems is justified, however, the Council doubts the added value of the bill. On the other hand, the elimination of the enforcement moratorium by the Tax Administration is a good development, according to the Council. 

The bill 

A loyal reader of our blogs is already somewhat familiar with the gist of the bill, however, repetition is the strength of the message. Briefly, it seeks to tighten the distinction between employees and the self-employed and introduces a legal presumption. Any worker earning less than 33 euros per hour will be deemed an employee.

The Council of State on the distinction between employees and self-employed workers

The Council doubts that the VBAR bill solves the problem of the tax outcomes associated with answering whether someone is an employee or a self-employed person. The underlying problem is that employed persons - if they have the choice - prefer to market themselves as self-employed, mostly because it is more financially advantageous. This bill codifies existing law, which can be quite useful, but it does not address this underlying problem. According to the Council, this would be better solved by, for example, phasing out the self-employed deduction and the SME profit exemption, and requiring self-employed people to take out disability insurance. These are precisely solutions that did not make it into the bill.

Added value of the legal presumption?

The Council is also not convinced by the legal presumption. For example, the Tax Administration may not even test the legal presumption independently, but will be dependent on the court ruling that establishes employment status. In order to make use of this, working people will therefore have to go to court, which is usually too big a step for this group. How many (supposed) workers, with an hourly wage of less than € 33, will do so is indeed doubtful.

Removal of enforcement moratorium

Whereas the VBAR bill comes under considerable fire from the Council, this does not apply to the lifting of the enforcement moratorium under the DBA Act. In principle, the Council thinks this is a good idea. Indeed, it wonders whether the VBAR law is even needed in addition to this. 

Pay pension contributions retroactively? 

In principle, not much new under the sun, except that the Council asks how the government intends to deal with pension contributions. The Inland Revenue is only going to retroactively deduct over the period that the enforcement moratorium (from Jan. 1, 2025) is lifted (unless there is malice). Whether pension funds adopt the same approach if a sham self-employed person is nevertheless a retroactive employee is nowhere apparent at present. The Council literally wonders what the pension funds will do if it is determined retroactively that a self-employed person was an employee all those years. Will those years then count toward the pension calculation? In this regard, the Pension Federation has suggested that bogus self-employed people should not be given pension entitlements for the past. That would mean that, for example, a self-employed person who has always worked in Construction and has not built up any pension of his own, would soon have to live on just an AOW benefit. You can argue that a self-employed person who really chooses entrepreneurship is just out of luck, but what about those self-employed persons who do have to work as self-employed persons because otherwise they have no income? For this reason, the Council recommends that the bill be supplemented in this regard.

As a result, do you have any questions about hiring self-employed workers? If so, please contact Dennis Oud, Tessa Sipkema, Tim van Riel or Elke Hofman-Bijvank. 

You can read the opinion of the Council of State for yourself here.