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Establishing the correct employment relationship has always been important, but with the enforcement moratorium on the DBA Act soon to be lifted, it carries even more weight. The employment relationship defines the legal standing between a business and the individual performing the work, helping to avoid false self-employment. In this article, we explain what an employment relationship entails and how to determine the right form together with your contractor.
What is an employment relationship, and why is it important to define it?
An employment relationship is the legal framework between a business and the individual performing the work, based on an agreement.
The relationship outlines the rights and obligations of both parties, including the method of payment, working conditions, and liability. Clear definitions prevent misunderstandings around key aspects such as remuneration, terms of employment, and social security entitlements. Moreover, it ensures compliance with tax obligations and labour laws, offering protection to both sides.
Most importantly, it helps prevent false self-employment. Learn more about false self-employment in our blog article: What is false self-employment and how to prevent it?
Types of employment relationships: employment contract or self-employed?
With the lifting of the enforcement moratorium on the DBA Act and the tax authority’s checks on false self-employment, the need to clarify employment relationships has grown. When is there an employment contract in place, and when does it involve self-employment?
Working under an employment contract or as a self-employed professional (freelancer) are two different forms of employment. Employment typically involves a worker performing duties under the direction of an employer, with clear conditions such as pay and entitlement to social security benefits like holiday and sick leave.
In contrast, self-employed professionals are responsible for their own work and income. They have the freedom to set their own rates and choose their projects, but this also means they bear more financial risk since they are paid only for the services rendered.
The main distinction between employment and self-employment lies in the degree of dependency and responsibility between the business and the individual.
What is false self-employment?
False self-employment, also referred to as disguised employment, occurs when an individual presents themselves as a freelancer but operates more like an employee.
This will often be the case, for example, if the freelancer fully participates in the client’s organisation for an extended period, is almost entirely dependent on that one client for income, or has little freedom in determining rates and working hours. The DBA Act, introduced in 2016, was intended to combat false self-employment. However, it caused considerable confusion in the market, leading the tax authority to immediately implement an enforcement moratorium. During this moratorium, penalties and retroactive tax assessments were only applied in cases of deliberate wrongdoing.
This moratorium will end on 1 January 2025.
Want to check if you and your contractor have classified the employment relationship correctly? Use our handy scorecard.
Enforcement of False Self-Employment
From 1 January 2025, the tax authority will begin actively enforcing rules on false self-employment, without the need for prior warning. This means they can immediately issue tax assessments and fines if false self-employment is found. However, note that any corrective action can only be applied from 1 January 2025 onwards, not retroactively.
Although the moratorium will be lifted, the government has called for a 'soft landing', with motions adopted to support this approach. These include targeted enforcement, focusing on forced self-employment, underpayment, and clear cases of disguised employment or situations involving migrant labour. None of these issues apply when using the Temper platform. You can read more in our article: End of Enforcement Moratorium: Targeted Enforcement Strategy Focuses on Problem Cases, Not Every Freelance Relationship.
When assessing whether disguised employment or false self-employment exists, the tax authority uses a holistic test, considering various factors. Below, we outline these factors to help you understand how the tax authority determines if someone is an employee or a freelancer.
Employment or freelance? Discover the answer in 9 steps
There is often overlap between employment and self-employment, as both involve paid work. So, how do you determine whether someone is employed or working as a freelancer?
The Dutch Supreme Court (Hoge Raad) established nine criteria in the Deliveroo ruling to help assess whether a person is an employee or freelancer. These criteria will also be used by the tax authority. However, none of these criteria are decisive on their own – they must be considered as a whole in what is called a ‘holistic assessment’.
Here are the nine criteria to consider, which you can use as a client when classifying employment relationships:
Nature and duration of the work
Simple, long-term tasks requiring little specialised knowledge often point to employment. Freelancers are typically hired for specialised, short-term projects requiring expertise.
✅ On the Temper platform, tasks are clearly defined with specific requirements. Most jobs are short, averaging 6.5 hours, aligning with the principles of self-employment.
Control over work and working hours
Employment often involves restrictions, such as being required to perform additional tasks or limited freedom to reject assignments or work for other clients. Freelancers have full control over their work schedule and how they deliver results.
✅ On Temper, professionals decide if and when they accept a job, with clearly defined task requirements set in advance.
Integration into the Organisation
Employment often implies a high level of integration into the organisation, such as attending company events or receiving long-term assignments that align with core business activities. Freelancers operate independently with shorter-term assignments.
✅ Professionals working via Temper are encouraged to work for multiple clients, with a cap of 660 hours per year per client.
Obligation to Perform Work Personally
Employment often requires tasks to be completed by the individual without the option for substitution. Freelancers, however, can appoint substitutes freely.
✅ Professionals working via Temper are free to arrange substitutes, without needing permission from Temper or the client.
How the Contract Was Formed
Employment contracts often leave little room for negotiation over terms such as fees or cancellation policies. Freelancers, on the other hand, have the freedom to negotiate terms.
✅ Temper offers a dynamic contract model, adjusted based on negotiations between the client and the professional.
Method and Timing of Payment
Employees often receive a fixed salary regardless of the actual services provided, while freelancers are paid based on an invoice, including VAT or VAT exemption.
✅ On Temper, professionals can negotiate their rate, and invoices are automatically generated for the work performed.
Amount of Payment
Employment often involves set pay rates in line with collective agreements or the legal minimum wage. Freelancers typically earn much more, often 150% above industry rates.
✅ On Temper, freelancers earn an average of 150% above collective bargaining wages, driven by market dynamics and negotiation.
Commercial Risk
Employees are often paid during illness or cancellations, while freelancers bear all commercial risks and are paid only for work delivered.
✅ On Temper, freelancers can mitigate risk by outsourcing receivables to factoring companies.
Entrepreneurship in the Market
Employees are often limited in working for competitors, whereas freelancers are free to engage in other business activities.
✅ Professionals working via Temper have entrepreneur characteristics such as VAT registration and work with multiple clients.
These nine points provide clarity on how the tax authority assesses employment relationships. Future enforcement of the DBA Act will also take into account relevant case law, including the Deliveroo ruling.
Do you have questions about these nine criteria and how they apply to your organisation? Contact us directly for personalised advice.
The Deliveroo Ruling
In this case, the question was whether the Deliveroo couriers were self-employed or employees. The Supreme Court ruled that the couriers did not work as self-employed individuals, but were employed. This ruling references the nine criteria mentioned above, which can be used to determine whether there is an employment relationship or self-employment. These nine criteria for determining the employment relationship must be considered as a whole. One of the considerations was how the work is integrated into the organization, but this is not the only criterion for establishing authority.
Important considerations in the Deliveroo case were:
- The algorithm used for allocating work gave Deliveroo significant control, unlike platforms such as Temper, where workers determine where and when they work themselves.
- The possibility of substitution had little practical value for the couriers, whereas free substitution occurs frequently on platforms like Temper.
These points are therefore very useful for you as a client. You can use these criteria to assess which type of employment relationship applies.
Freelancers on Temper: no employment contract
Are professionals working through Temper considered employees or falsely self-employed? The checklist above highlights the points that ensure freelancers hired through Temper are genuinely self-employed. Key indicators of self-employment include:
- Freedom in choosing work and working hours
- Freedom to arrange substitutes
- Negotiation flexibility regarding fees
- Bearing commercial risk
- Multiple clients (supported by the 660-hour limit per client)
Want to know more about Temper? Contact us for a demo and discover how you can build a reliable, flexible workforce around your business.
