The introduction of the Act on Deceitful Constructions has received slightly less publicity than the introduction of the Work and Security Act. Nevertheless, this Act also provides for some important changes, which will be particularly important for entrepreneurs in (garden) construction and transport. The purpose of this Act is, among other things, to improve the legal position of employees who work in sham constructions. Think, for example, of the Eastern Europeans who work in horticulture as temporary workers.
When there is a chain of commissioning relations or contracting for work, in which an employer-employee relationship exists at the bottom of the chain, the commissioning parties or contractors higher up in the chain can be held liable for the employees' wages. However, the legislator has taken the starting point that the first employer higher up in the chain is held liable. For principals (in a chain), this is important legislation to which they will have to adapt their processes and their way of contracting with contractors. The legislator provides the possibility to make a plausible case that a client cannot be blamed under the given circumstances, but in order to be able to successfully argue this, the client will have to show that he has reasonably done everything possible to prevent underpayment lower down in the chain. This can be done, for example, by working with a certificate or a hallmark, a careful procurement process and also by including clear provisions in the contracts requiring the contractor to comply with all legal obligations with respect to its employees.
However, there is often a misunderstanding that this Act on Dealing with Sham Structures also applies to the hiring of self-employed persons. This is not correct. The use of freelancers is excluded from the applicability of the Act on Dealing with Sham Structures. Companies that hire freelancers will have to deal with the abolishment of the VAR (Declaration of Employment Relationship). In 2015, a transitional arrangement will apply under which an existing VAR will remain valid. If a freelancer does not yet have a VAR, he or she can apply for a new VAR for calendar year 2015. The legislator's aim is still to have a new regime in place as of 1 January 2016, under which the Tax and Customs Administration will no longer issue a VAR. The bill has already been adopted by the Lower House and is now being considered by the Senate. The proposal is that, instead of the VAR, the Tax Authorities will publish model agreements on their website. If these model agreements are used by entrepreneurs for the hiring of self-employed persons and actually apply to the situation, the entrepreneur (client) does not have to withhold payroll taxes. This does mean that the self-employed person is not insured for the employee insurance schemes (WW, ZW and WIA).
If you would like to know more about the new legislation to prevent sham constructions and the regulations concerning the hiring of freelancers, please do not hesitate to contact us.