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Dutch Law DBA: The Purpose, the consequences and the (in)securities



Now that the proposed Deregulation Assessment Working Relations Act (DBA) has passed Parliament the VAR Certificate has become a relic from the past.

In more than 10 years of its existence, clients who hired contractors in the possession of a VAR-wuo or VAR-dga, were protected against any possible PAYE liability (tax and social security contributions). If it turned out that the contractor was in fact to be considered an employee of the client the financial consequences were entirely for the account of the contractor whereas the client was completely kept out of it. This unlimited protection no doubt played an important role in the significant increase of flexible labour we have seen over the last years.

However, presumed abuse by fake self-employed contractors caused politicians to call for adjustment of the system. The VAR Certificate was issued based on assumed future facts and circumstances. Even though these facts and circumstances in practice often turned out to be different, because of the unlimited protection of the client, actual application of the relevant legislation proved to be difficult.

DBA has become effective as of 1st May 2016 with a transitional period until 1 May 2017. In this period the Authorities will inform and advise both organisations and individuals about the new regulations and will not immediately start policing the correct application. As such clients will not be confronted with a possible retrospective liability. However, in the transitional year both the client and the contractor have an obligation to make sure that the working relationship, if necessary, is transformed in such a way that it can no longer be classified as employment. However, should you decide to not adhere to this obligation you may still very well end up with a retrospective liability when the working relationship can in fact be classified as employment.

The new Act intends to offer certainty to both the client and the contractor about the classification of the working relationship should the work be carried out in accordance with a Template Agreement. At this point in time a number of generic Template Agreements as well as a number of industry related Template Agreements have been published on the Authorities’ web site. Furthermore, with the implementation of DBA the responsibility of both the client and the contractor for a correct assessment of the working relationship will be more balanced thus enabling the Authorities to improve their policing facilities.

Groups of clients and contractors as well as individual clients and contractors, can ask the Authorities to approve their agreement. The Authorities have indicated that they will only look at the elements that are essential for the classification of the working relationship. Is it employment or will the contractor be working as self-employed? This will make clear whether PAYE is due or not.

According to the Authorities everything that is allowed now will still be allowed in the future and what will not be allowed in the future is not allowed already. They claim that working with a Template Agreement clarifies what is possible and what is not. Whether that is the case still remains to be seen. Until now the uncertainty only seems to have increased.


The elements to be taken into account when assessing the working relationship are linked to the criteria for employment, these being 1) does the client (employer) have authority over the contractor (employee), 2) is the contractor (employee) obliged to personally perform the work and 3) is the client( employer) obliged to pay wages.

In order to be classified as self-employed it is important that the agreement contains, amongst others, but not limited to, the following clauses or clauses of similar meaning:

The contractor accepts full responsibility for the correct performance of the work. He will be liable for any damage relating to his performance and will indemnify the client against all claims for compensation.
The contractor plans and performs the work independently. He does not come under the management and control of the client. The client neither gives instructions nor imposes regulations relating to presentation, interaction with the client’s clients, working hours and corporate identity by means of a corporate dress code, logos on company vehicles and business cards.
The contractor takes care of his own tools, equipment and training.
The contractor is allowed to be working for a number of different clients at the same time.

If the agreement contains these or similar clauses it will very likely be approved by the Authorities as a Template Agreement. Should the work indeed be performed in accordance with these clauses the working relationship cannot be classified as employment and the client cannot be held liable for PAYE.

The use of a Template Agreement is not obligatory. Even when you do not work on the basis of a Template Agreement or when these clauses have not been put in the contract if the work is performed in accordance with these clauses the client is still not liable for PAYE. However, the advantage of using a Template Agreement is that both parties gain clarity and certainty about the nature of their working relationship.

As a member of Bovib (Brancheorganisatie voor intermediairs en brokers) TCP has been involved deeply in drafting an industry specific Template Agreement for intermediaries that was sent to the Authorities for their approval. By using this agreement for the placement of contractors with our clients we prevent a future discussion with the Authorities about the nature of the working relationship. After all, it was clear from the beginning that the contractor classified as self-employed.

However, should the work not be performed in accordance with the clauses in the Template Agreement the Authorities could still claim employment causing the client to be liable for PAYE. In such a situation employment can only be assessed retrospectively.

This means that a simple administrative check (is there a copy of the VAR in combination with a copy of the contractor’s passport on file) is no longer sufficient. The client will have to be aware of the content of the work in order to be able to assess whether a Template Agreement can be used. Furthermore, during the term of the contract the client will have to check continuously whether the facts and circumstances relating to how the work is done have changed.

Deemed employment

If there is no employment under Employment Law PAYE may still be due. After all, under Tax Law the working relationship may be classified as deemed employment. These are situations that do not necessarily meet the conditions for employment, but have been categorized as such in Tax Law. Therefore, PAYE is still due. We are talking here about contracting, those working from home, those working personally for more than two days per week and being paid at least 40% of the legal minimum wage as well as temps and others who work for a third party through an intermediary.

However, in some situations DBA offers the opportunity to exclude the applicabaility of deemed employment. This should explicitly be agreed in the Template Agreement.

Also in case of working for a client through an intermediary deemed employment (between the contractor and the intermediary) can contractually be excluded. For that it is important that the work is being performed in the practice of a trade or the independent practise of a profession (presumption of proof). The client (intermediary) can assume this to be the case if he records both the contractor’s registration with the Chamber of Commerce and VAT number. Furthermore, the client and the contractor should agree on the liability of the contractor towards third parties, a non-competition and/or non-solicitation clause and the risk of non-payment.

Given the fact that Bovib represents the interest of intermediaries it will not come as a surprise that deemed employment in the Bovib Template Agreement is excluded.

However, the presumption of proof does not apply if the contractor works for mainly one client on a number of (successive) contracts for a longer period than, given the nature of the work, is considered normal. In that case the contractor’s autonomy and independence is questionable. In other words, if the contractor works through one single intermediary for only one or a few clients for a longer period he will be without doubt deemed an employee. This means that the client will be liable for PAYE.

The limited company contractor

A special kind of intermediation occurs when the contractor performs the work through his own (management) company that employs him as a director-shareholder. In that case the client does not enter into a contract with the individual (the director-shareholder), but with the legal entity that in its turn will make the director-shareholder available to perform the work. As one of the elements of employment is the obligation to perform the work personally employment isn’t very likely in this situation.

Whether the limited company contractor can be considered to be employed by the client very much depends on the meaning that is given to the agreement and how it is implemented and whether that is sufficient to disregard the civil law reality (a contract between two legal entities) by looking through the legal construction and purely focus on the working relationship between the contractor and the client. Even though employment is not intended, it is still possible that the way the agreement is implemented and the meaning that is given to it constitutes employment. Should the director-shareholder be working in such a way that it meets the conditions for employment (authority, personal performance and remuneration) he will be considered an employee of the client. In that case the company through which the work is done does not have a real meaning.

When assessing the situation the focus should be on the reality of the company. In other words, are we dealing with a true entrepreneur or is the company merely a vehicle to avoid employment?

The role of the intermediary

As said, the focus is on the relationship between the client and the contractor. When the client hires the services of the contractor through an intermediary (like TCP) the intermediary is considered to be the client. In that case the contractor contracts with the intermediary and not directly with the client.

It seems that the actual client is able to avert all risks simply by using an intermediary. After all, the intermediary, being the contractual client, is liable for any possible PAYE that is due. But is that the whole story?

First it will have to be assessed whether the agreement between the intermediary and the contractor is DBA proof. That depends largely on the clauses in the (framework) agreement between the actual client and the intermediary. After all, the intermediary will have to mirror clauses from that agreement about the way the work has to be performed, liability, non-competition and/or non-solicitation and the risk of non-payment in the agreement with the contractor. When drafting the (framework) agreement both the client and the intermediary jointly will have to make sure that employment is out of the question. Only then will the intermediary be able to issue a DBA-proof contract to the contractor.

Certainly in situations where the deliberate separation between the formal and material or actual employer only serves the skirting of employment law rights (protection against dismissal) whereas the formal employer has no real employer’s authority it is possible to pass by and look through the legal structure. By doing so it is very well possible that the actual client will be faced with an additional PAYE Assessment.


The client will have to check his relationship with the contractor not only at the beginning of the contract but continuously during the term of the assignment. This means that the client will be facing a lot of new problems. Because of the unlimited protection of the VAR the question whether the contractor was considered an employee has been irrelevant for years. But now the rules and regulations relating to employment, that were in force for all those years, again become relevant. As such we are back to square one and DBA seems to be nothing more than old wine in new bottles.

In order to be certain that no PAYE is due retrospectively the agreement between the client and the contractor should be drafted is such a way that it excludes (deemed) employment. Furthermore, the contractor should be working in accordance with the clauses in the (Template) Agreement. If the contracts between parties are DBA-proof it is still possible, also after 1 May 2016, to hire the services of a contractor irrespective of his legal status.

However, from a recent study done by Randstad it shows that the average contractor who previously was working with a VAR is not DBA-proof. More than 90% of the contractors should be considered to be an employee. Therefore, in fear that their contracts will not be approved by the Authorities, many clients delay the use of Template Agreement.

Unfortunately, that fear is real. Of the 4000+ requests for approval the Authorities received until August 2016 only 370 were actually approved whereas a little more than 1000 were turned down.

All this creates a lot of uncertainty. As long as employment is not clearly defined there is room for interpretation and therefore a difference in opinion between the client/contractor and the Authorities.

Should the working relationship (irrespective of the legal construction) based on actual facts and circumstances retrospectively be classified as employment the client will be considered the employer and therefore liable for PAYE.

That uncertainty causes many clients to be reluctant to hire contractors and some even to no longer use the services of contractors. In several publications contractors have indicated that the number of projects have significantly dropped or that they are only hired as an employee of an intermediary.

TCP manages the hiring of contractors and makes sure that contacts are compliant whether that is the contract between the contractor and TCP or the (framework) agreement between TCP and the client.

When dealing with a true self-employed contractor we will, during the term of the assignment, constantly be monitoring working conditions. Thus making sure that the work is being done in accordance with the contract (that excludes employment). By doing so we protect the client against a potential PAYE liability whereas the contractor does not need to worry about his status as a self-employed contractor.

In case you are in any doubt whether the way the engagement is being done or indeed the conditions as to how the work is done are DBA-proof – worry not. There is one absolutely comprehensive way of ensuring the engagement is completely correct. TCP enter into an employment contract with the contactor and withhold tax and social security contributions through the payroll.

Are you curious what TCP can offer and looking for a way to continue your project in a DBA-proof fashion, please do not hesitate to contact us.

Would you like to find out more?

We enjoy sharing our knowledge with you. Although you can find information via our website online, please don’t hesitate to contact us directly.

Call or email James Beaumont Business Development Manager +44 208 5800 800

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