The DBA Act (Deregulation of Employment Relations Assessment) is back in the spotlight due to the lifting of the enforcement moratorium starting from 1 January 2025. This raises many questions for clients working with freelancers. But what exactly is changing? And how should businesses prepare for this enforcement? In this article, we discuss the key points of the DBA Act, what it means for clients, and how you can ensure compliance with the legislation.
What is the DBA Act?
Before delving into the changes in the enforcement of the DBA Act, let’s first cover the basics. The aim of the DBA Act, introduced in 2016, is to clarify the relationship between clients and freelancers.
The core of the Act is that clients and contractors must jointly determine whether the work is being performed under an employment contract or as a self-employed agreement outside of employment.
Although the law was introduced in 2016, it caused significant unrest and debate in the market, leading to the introduction of the enforcement moratorium. The enforcement moratorium essentially means that the tax authority does not impose retrospective fines or correction obligations (such as payroll tax reassessments), unless there is evidence of malicious intent or a prior warning has been issued.
Why is the DBA Act so important?
The DBA Act is intended to promote fair competition in the labour market and protect freelancers from false self-employment. It provides a framework that prevents clients from using freelancers to intentionally avoid certain responsibilities. Additionally, the law places more responsibility on clients to correctly define the nature of the working relationship.
Want to know how to assess the type of employment relationship you have as a client? Read our article: How to determine the right employment relationship as a company.
DBA Act versus VBAR – what’s the difference?
In discussions about the DBA Act, the VBAR Act (Clarification of Employment Relations Assessment and Presumption of Employment) often comes up. But what’s the difference between the two?
The DBA Act caused significant unrest when it was introduced in 2016. People found it extremely challenging to define the employment relationship within the context of the DBA Act. Under market pressure, the government of the time introduced an enforcement moratorium. Although the Act has been in force since 2016, the tax authority hasn’t actively enforced it. The idea behind the moratorium was to keep it in place until a clearer law could be established. However, there is currently no new law. There is a proposed bill under review by the Council of State. This bill is aptly named the VBAR Act (Clarification of Employment Relations Assessment and Presumption of Employment).
The VBAR Act is not yet a law. It is still a legislative proposal currently being reviewed by the Council of State and must be passed by both houses of parliament. It is a direct response to the unrest caused by the DBA Act in 2016 and aims to provide more clarity about when there is an employment relationship and when there is not. If this proposal is approved, we are likely to see its effects no earlier than 2026.
Changes to the DBA Act in 2025: what clients need to know
The DBA Act itself does not change from 2025, but there is one key issue that has caused some concern among businesses: the enforcement moratorium on the DBA Act will be lifted.
What exactly does the lifting of the enforcement moratorium mean? In short, it means that companies that do not comply with the rules may be fined and required to make payroll tax corrections immediately. Until 1 January 2025, businesses first received a warning, a so-called ‘directive’, but this measure will be removed.
It’s important to note that this correction obligation can only be applied from 1 January 2025 onwards, not retroactively.
Why will the tax authority start enforcing the law so many years after its introduction?
The DBA Act was meant to provide clarity, but in practice, it led to uncertainty, especially among clients concerned about tax reassessments. This is why the enforcement moratorium was introduced, to serve as a transitional period, during which the tax authority could not impose fines or correction obligations unless there was evidence of malicious intent or a prior warning had been issued.
From 1 January 2025, the enforcement moratorium will be lifted, but the government has also called for a 'soft landing'. Several motions have been adopted to support this, including one year of risk-based enforcement, with a focus on forced self-employment, underpayment, clear cases of false self-employment, and migrant labour arrangements.
Other motions suggest that in all other cases, enforcement measures, including prior warnings, should take into account the human factor and be tailored to the specific situation. You can read more about this in our article: End of enforcement moratorium: Risk-based enforcement strategy.
How will the tax authority enforce the DBA Act?
As mentioned earlier, the tax authority aims for a soft landing with a risk-based enforcement strategy. This means they will not perform ‘hysterical’ checks and will be cautious with fines. There will be no significant change in the intensity of inspections, and as the tax authority puts it, “there won’t be a tax inspector hiding behind every tree”. Inspections will be carried out by the same number of staff as before.
Businesses need not worry, as they can still work with freelancers as long as they can demonstrate that they are aware of the legislation and actively complying with it. During an inspection, the tax authority will follow the so-called layered approach:
Enforcement according to the layered approach
The tax authority has stated that inspections will be carried out using the layered model. When a company shows in the first check that it actively takes measures to prevent false self-employment, the tax authority will not immediately proceed with further investigation (‘not move on to the next layer’).
The advice is therefore: ensure that the first layer is well organised. This can be done in two steps:
- Document how the hiring process works in your organisation and specify the employment relationships. We can help you with this through our step-by-step guide.
- Then, review these employment relationships against case law (the Deliveroo ruling) and the DBA Act. We also provide assistance with this in our handy article: How to determine the right employment relationship.
If you do not have the above steps in place and the tax authority inspects your company, the layered approach will consist of two phases:
- First phase: An exploratory phase, during which the tax authority assesses whether there are grounds for further investigation into possible false self-employment. This includes looking at factors such as certification or quality marks used by the organisation. If there is cause for further inspection, the tax authority moves to the second phase, which is a thorough audit.
- Thorough audit: This involves reviewing not only administrative processes but also the practical implementation of work by freelancers within the organisation. The result may lead to a tax reassessment.
Want to know more? In our article on determining the right employment relationships, you’ll find nine helpful steps to decide if someone can work as an employee or freelancer.
About Temper
Temper provides organisations with easy access to a pool of flexible and high-quality freelance professionals, exactly when they need it. Through our online platform, you can find reviewed and verified professionals and quickly scale your workforce as required.
Since our inception in 2015, we have maintained close contact with the tax authority and policymakers to clarify the regulations around working with freelancers. We have taken several measures to prevent false self-employment, protecting both the client and the contractor. Learn more about this in our article on false self-employment.
Interested in working with freelance professionals via Temper to build a flexible workforce around your business? Book a free demo and we’ll be happy to explain more.
