Employment status in the Netherlands: rules and checks to combat misclassification

This article was written by Aernout Zappey. Aernout is an Employment Partner at the Dutch firm Levenbach Advocaten and based in Amsterdam.

In the Netherlands, it’s estimated that more than 250,000 people designated as self-employed individuals should actually be employed under a regular employment contract. As of 1 January 2025, the tax authorities resumed audits to tackle false self-employment, which impacts all organisations that engage freelancers or self-employed people.

What is false self-employment?

False self-employment occurs when an individual is engaged as a self-employed worker but in practice functions and acts like a regular employee. This is done primarily to get a beneficial tax rate, but misclassification exposes employers to significant tax liabilities and other legal issues.

Key indicators of false self-employment:

• Working exclusively for one client over an extended period
• Limited autonomy in setting working hours or rates
• Strong integration into the client’s organisation (for instance, wearing company uniforms or using company resources)
• Financial dependence on a single client
• No entrepreneurship.

Why is this important for English companies?

English businesses operating or considering expansion into the Netherlands need to be particularly aware of these rules due to the potential financial and reputational risks associated with non-compliance. Understanding the Dutch approach to self-employment and labour laws can significantly impact strategic HR decisions, contract structuring, and overall operational efficiency.

Key considerations for English companies include:

• Contractual jurisdiction vs where the work is performed: Even if a freelance contract is governed by English law, if the actual work is performed predominantly in the Netherlands, Dutch employment laws and tax regulations will typically prevail. Employers may still face Dutch tax obligations and employment law implications, despite English jurisdiction clauses.
• Cross-border employment implications: English employers should carefully examine cross-border employment arrangements, especially those involving remote or hybrid working setups, as these can inadvertently lead to tax residency and employment status implications in the Netherlands.

Risks for employers

Tax risks:

• Additional assessments for income tax and social security contributions applicable to 2025
• No retroactive penalties unless malicious intent is proven
• In 2025, no fines will be imposed if employers have demonstrably assessed their employment relationships correctly.

Employment law risks:

• Mandatory wage continuation during illness (up to two years)
• Entitlement to holiday allowances and protection against dismissal
• Mandatory application of collective labour agreement conditions such as pensions and bonuses.

Tax and Customs Administration 2025 auditing procedure

The 2025 Tax Plan, adopted by the Dutch Senate on 17 December 2024, introduced several changes which came into effect at the beginning of this year. The auditing procedure now comprises five key stages:

1. Risk analysis: Companies are selected for audit based on data analysis and external agency reports
2. Company visit: Clients are informed about in advance about a pending audit and any identified issues and given the chance to rectify the situation
3. Informal recovery period: Approximately three months are allowed for corrections
4. Audit: Formal investigations begin if corrections are insufficient
5. Determination: If false self-employment is confirmed, additional tax assessments will be issued for 2025.

New criterion: external entrepreneurship

Since February 2025 (following a ruling involving the cab-hailing app Uber), external entrepreneurship has become crucial in assessing employment status. An individual will be more likely to successfully demonstrate self-employed status if they can show entrepreneurship, which may be evidenced by having multiple clients, making investments, registering with the Chamber of Commerce and maintaining a corporate identity.

How to prevent false self-employment status

1. Overview creation

Identify all self-employed individuals within your organization

2. Individual analysis

Review existing contracts (use compliant model agreements which have been reviewed by Dutch lawyers)

3. Perform job analyses

Consider factors such as substitution and integration, assess financial independence, document external entrepreneurship factors and check hourly rates. Rates below £33 per hour increase the likelihood of employed status

4. Evaluate organisational control

Assess the level of control exercised over self-employed individuals

5. Decision-making

Choose whether to continue the existing relationship (possibly with modified conditions), hire via an agency or offer formal employment contracts

6. Implementation

Immediately amend contracts and agreements to mitigate risks.

In conducting this exercise, it’s worth ensuring your agreements remain relevant to future legal standards. Set in motion processes to regularly compare actual practice with contractual agreements, and actively involve self-employed individuals in the relevant organizational changes.

While model agreements can help mitigate risk, they do not provide absolute security. Regularly ensure that practical work aligns with contractual terms and anticipate future legislative changes.

Looking ahead to 2026

Regulations are set to tighten further in 2026, including retroactive fines and tax assessments looking at the past five years. We are also expecting the introduction of the VBAR Act, which will feature a new assessment method (the “WZOP test”) and a legal presumption of employment for hourly rates below £33.

The VBAR act has been met with considerable criticism and is therefore being amended. However, when assessing whether someone is an employee or self-employed, entrepreneurship remains a valid criterion, in addition to the question of whether someone is under supervision and direction in their work and works at their own risk. Due to the amendment, its progress through the House of Representatives for assessment will be delayed. The law may now be delayed until 1 July 2026.

Comparing UK and Dutch regulations

There are clear similarities between the Dutch regulations and comparable English law rules (e.g. IR35 and off-payroll working rules). While both aim to identify disguised employment, Dutch law arguably places stronger emphasis on the actual working relationship and external entrepreneurship.

Take action now

Be proactive and use the transitional period in 2025 to thoroughly evaluate employment relationships and reduce risks associated with false self-employment. Ensure contracts are reviewed, and employees are informed promptly.

Although Levenbach Advocaten has taken the greatest care in compiling the information contained herein, it cannot guarantee that this information is correct, complete and up to date. Therefore, Levenbach Advocaten accepts no responsibility for the completeness or accuracy of any of the information and makes no representations about its suitability for any particular purpose.