Employment status in the Netherlands

The different categories of worker

There are three main categories of employment relations, being i) an employment agreement, ii) a contract of work agreement and iii) a commission/contract for services agreement.

1. Employment agreement

An employment agreement will be deemed to exist where, i) the worker operates under a relationship of authority with the principal, ii) the work has to be carried out personally (exclusively) by the worker, and iii) the worker receives remuneration in the form of wages for his/her work.

2. Contract of work

A contract of work is an agreement whereby one party as an independent contractor agrees to produce particular work of a tangible nature for a sum of money to be paid by the other party. There is no master and servant relationship between the contractor and the other party and there is no obligation for the contractor to perform his/her duties personally.

3. Commission or contract for services

In principle, a contract for services (eg consultancy agreement) must qualify as a commission agreement as defined by the Civil Code.

On 01 May 2016, the Assessment of Employment Relationships (Deregulation) Act came into force. As a result thereof, parties will have to work on the basis of model agreements as provided by the Tax Authorities or their commission agreement will have to be approved by the Tax Authorities. If parties use a model agreement or an approved commission agreement and work accordingly, their relationship will in principle not qualify as an employment relationship for tax purposes. Otherwise, there is a risk that an additional levy and/or a tax penalty will be imposed in respect of the payroll levies due. However, due to recent discussions, a transition period will apply until at least 01 January 2018.

Legal consequences of the distinction

Both employees and the self-employed persons have the right to equal treatment and a right to a safe place of work. The employer or principal may also impose confidentiality clauses which bind the employee or independent contractor.

Employer’s liability

An employer is liable for damages caused by the employee to third parties if the damages are the result of a mistake by the employee, if the damages are enlarged by the tasks the employee had to perform and the employer had control over the employee’s behaviour that resulted in the mistake.

Categories of employees and agency workers can include: workers for an indefinite term, fixed term and agency workers.

Indefinite term

Employees employed for an indefinite period of time are those with employment agreements which do not have a fixed expiry date.

Fixed term

Parties are free to enter into consecutive fixed term employment agreements provided that the breaks between the employment agreements (the links) are shorter than six months, the total length of these employment agreements does not exceed two years and a maximum of three consecutive employment agreements are entered into.

Consecutive fixed term employment agreements with different employers who can be considered each other’s successors in respect of the work performed, will also be deemed to be consecutive employment agreements.

Employers are required to give the employee, whose fixed term employment agreement for six months or longer is about to end, one month’s written advance notice whether or not the employment agreement will be renewed as well as the conditions upon which the employment agreement may be renewed. Failure to do so will cause the employer to forfeit one month salary to the employee.

Agency workers

An agreement under which an employee is supplied to a third party by the employer, in order to work in the profession or operation of a business belonging to the third party and for the performance of that third party’s work under that party’s management and supervision in accordance with the orders/instructions given to the employee by the third party will be held to be an employment agreement between the “supplier” (uitlener) and the “agency worker” (uitzendkracht).

Employers who do not provide intermediate services on the labour market or only occasionally supply manpower services to other employers do - in principle - not fit into the category of “employer/supplier” mentioned above whilst temporary employment agencies, placement agencies and labour pools do. However, recent case law shows that a specific allocation function (the process of matching demand and supply in the job market in relation to temporary employment) is not necessary in order for triangular relationships to be determined as a temporary employment relationship. As a consequence thereof, the collective labour agreement for temporary agency workers (the ABU CLA) might in certain cases be applicable to these employees. In any event, all companies who second (occasionally or incidentally) employees to a third party and/or (occasionally) supply manpower services to other employees, should make a notification in accordance with he Placement of Personnel by Intermediaries Act (WAADI Melding). In the absence thereof, penalties can be imposed.

Further information is available here.