January 1, 2025, saw the enforcement of the Employment Relationships Deregulation Act, also known as the DBA Act, begin. Businesses and recruitment consultants working with freelancers are already seeing its impact. Recent reports reveal a notable drop in the number of ZZP-ers (freelancers) in the Netherlands, with December 2024 experiencing a sharp decline in registrations. This trend reflects growing apprehension about the DBA Act's stricter enforcement. For agencies and organisations engaging with independent professionals, it remains a critical time to reassess your compliance practices to avoid penalties and reputational risks.
What is the DBA Act?
The DBA Act aims to ensure the correct classification of workers in the Netherlands. It's part of a broader initiative by the Dutch Tax Authorities to combat the misuse of freelancer status—particularly cases where workers are classified as self-employed to sidestep employee rights, tax obligations, and other regulatory requirements.
Why was the DBA Act Revised?
A previous version of the DBA Act was introduced into legislation in May 2016; however, it was criticised for not being effective enough to curb worker misclassification. The earlier version saw minimal enforcement of the law, often only in situations where direct violation of the Act was found. With the number of people registered as self-employed rising in recent years, the need for an updated version of the Act was increasingly apparent.
Over the past decade, the number of freelancers working in the Netherlands has grown exponentially by over 85%, with the Dutch Chamber of Commerce (KvK) reporting 1.2 million self-employed people. In the Netherlands, it is estimated that 13% of self-employed individuals may be classified as falsely self-employed, particularly in sectors like government, IT, media, and communication. Correct worker classification is imperative when working with freelancers and contractors to comply with local employment laws. Learn more about why correct contractor classification matters here.
What changes have been made?
The revised version of the Act sees the Dutch tax authorities carefully examine the working relationships between freelancers (or ZZP'ers) and their clients to determine if any are "falsely self-employed." A freelancer could be categorised under this title if they primarily work for one client but should instead be categorised as a direct employee of that company. The initial rollout is expected to target businesses that violate the new rules of the DBA Act rather than those genuinely working as freelancers. Therefore, businesses must fully comprehend and abide by the updated regulations or risk legal and financial fallout.
Under the updated rules, a person qualifies as self-employed if they assume financial risks, use their own equipment, possess specialised skills needed by the company, and are recognised as freelancers while performing their tasks. Additionally, freelancers should work with multiple clients and avoid long-term contracts with a single client to avoid violating the Act.
How is the DBA Act being enforced?
Now that enforcement is underway, organisations and agencies engaging with and hiring ZZP-ers, Dutch tax authorities will directly issue fines in addition to requiring corrective actions and additional tax assessments from those in breach of the Act. Those found to be violating the Act will be required to pay retroactive taxes from the enforcement start date. In cases of intentional rule evasion, the tax authorities in the Netherlands may extend retroactive assessments for the previous five years instead of resulting in extensive back-pay liabilities. Therefore, organisations must ensure their practices comply with the Act and safeguard their operations against the penalties associated with non-compliance with the updated DBA Act.
Why Are ZZP-er Numbers Dropping?
According to the latest figures published by the Dutch Chamber of Commerce (KvK), December 2024 saw a significant decline in the number of freelance/ self-employed workers in the Netherlands. December 2024 saw over 21,000 sole traders deregister from the Dutch Chamber of Commerce (KvK), while 14,500 new businesses were registered, resulting in a net decline of 6,776. Compared to 2023, new registrations dropped by 13%, and the number of freelancers ending their registrations surged by 50%. Despite this, the total number of sole traders grew by 3.1% in 2024, representing a slowdown from the 8% growth rate in the previous two years. This sharp decline in freelance registrations is no coincidence. With the DBA Act now enforced, organisations and workers are re-evaluating their practices to avoid penalties due to non-compliance.
Safeguard your Operations Today! Ensure compliance and correct classification with 3C Global Group:
Although the enforcement of the DBA Act has already begun, it's not too late to ensure compliance and protect your organisation. Failure to classify freelancers correctly can put an organisation in violation of the updated DBA Act, and it may face a range of serious penalties for non-compliance. Don't wait until your organisation faces penalties or reputational harm to address compliance. Contact our expert team at 3C Global today to schedule a free consultation and ensure your business is on the right path.
At 3C Global, we specialise in helping businesses and recruitment consultants achieve compliance when engaging with international contractors and freelancers across various countries, including the Netherlands. Our tailored services ensure that your operations in the Netherlands meet the requirements of the DBA Act, helping you safeguard your operations.
Ensuring your classification processes and agreements align with the law is more important than ever. Ensure compliance by contacting our expert team at 3C Global today!
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