Work can be performed under various types of contract, with self-employment and salaried employment based on an employment contract being the main forms. (Sham) self-employment has increased enormously in recent years. The way work is organised in practice determines the final form of contract that is applied. It is important to use the correct form of contract for the type of work involved. To clarify this issue and to help determine when an employment contract should be opted for instead of a self-employed individual, the Act provides a legal assessment framework.

Specifically, these are the following two proposed legislative changes:

1.The legal requirement of 'working in the service of' (authority, based on an employment contract) is clarified through this Act. For this purpose, three main elements are included in the legal definition of employment contract to give substance to the phrase 'working in the service of'. The following three criteria, stemming from existing case law, are included:

  • the work is performed under work-specific direction by the employer;
  • the work or employee is organisationally embedded in the employer's organisation; and
  • the employee does not perform the work for his/her own account and risk.

When this will be the case will be further clarified by a government decision. The draft Act includes indications to be considered in this assessment, including:

  • Whether the principal is authorised to give directions and instructions on how the worker should perform the work and the worker should follow such instructions;
  • Whether the work is performed within the organisational framework of the principal's organisation;
  • Whether the financial risks and outcomes of the work are borne by and for the benefit of the worker;
  • Whether the worker has multiple clients per year.

2.This Act introduces a legal presumption in case of an hourly rate below € 32.24. If an hourly rate below this amount is agreed, it is presumed that an employment contract exists. If the worker claims an employment contract is in place, it is not up to the worker to prove this is the case, but rather to the employer to prove that it is not.

The projection introduction date of the Act is 1 July 2025. No transitional law is foreseen, which means that the measures included in this Act will in that case have immediate effect and therefore also apply to existing labour relations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.