Proposed legislation providing for introduction of sole tradership minimum fee

Proposed legislation providing for the introduction of a minimum fee to be charged by sole traders has recently been put out for public consultation by the Dutch Minister of Social Affairs and Employment, Wouter Koolmees, for stakeholders to respond to before the definitive bill is submitted for the scrutiny of the Lower House of the Dutch Parliament.

The idea of introducing a minimum fee system has been coined with a view to improving the position of sole traders who operate at the bottom end of the labour market, by enabling them at the very least to realise net earnings at social minimum level. The system is to feature an “independent contractor’s statement” to be used by the category of sole traders at the top end of the labour market, as confirmation beforehand vis-à-vis principals and contractors alike that the work relationship between them is not to be put on a par with that between an employer and an employee where it concerns payroll taxes and employee insurance premium payments. The independent contractor’s statement is not to be used in connection with false employment scenarios.

One thing that is worthy of note is that rather than confining the category of “sole traders” to natural persons without employees, the proposed legislation recognises legal entities whose sole employee is their director-cum-controlling shareholder as sole traders as well. Sole tradership status will not be available to any contractor who employs staff of his or her own having performed more than eight hours of work (each) on said contractor’s behalf during the three months leading up to the conclusion of the contract.

Minimum fee

The proposed legislation provides for the introduction of a minimum hourly fee for sole traders in the amount of 16 euros (exclusive of turnover tax), which is to apply whenever the sole trader performs work within the Netherlands under a contract that is not an employment agreement. Non-domestically performed work is likewise to be governed by the minimum fee system on condition that the sole trader and his or her principal should both be Dutch-resident or Dutch-based. The new system is moreover to provide for administrative penalties to be imposed on principals who are found to have flouted the minimum fee requirements.

The proposed legislation involves the minimum fee likewise applying to legal entities whose sole employee is their director-cum-controlling shareholder and to anyone who works under a so-called false employment format. “Minimum fee” is to be defined as the net residual amount following deduction of any such costs as are directly attributable to the contractual duties in question. The minimum fee obligation likewise applies where duties are performed at the behest of a private client (rather than a commercial operator).

Independent contractor’s statement

It is essential for the principal and the contractor in the run-up to the latter’s actual performance of the work to produce a signed and dated statement in confirmation of their intention to conclude an independent contractor’s agreement between them. The contract between the two sides – the term of which may not exceed a 12-month period – is required to include a reference to the principal’s Commercial Registry file number. The contract needs to be provided with the signatures of the contractual parties and kept on file as part of either party’s administrative accounts. The hourly fee for work performed is to amount to at least 75 euros in the event that use is made of the independent contractor’s statement. The contractor is to provide his or her principal with an overview of the following details:

• the total amount due and payable exclusive of turnover tax;
• such hours and costs – subdivided into transport costs, material costs and miscellaneous costs – as are directly attributable to the contract;
• the hourly fee for work performed, to the aforementioned minimum of 75 euros (each);
• the respective dates of commencement and completion of the work.

Contracting parties’ respective obligations

The proposed legislation features a number of obligations to be satisfied by sole traders and the latter’s (commercially operating) principals.

It is up to the sole trader to provide his or her principal in advance with an estimate of the direct costs and the hours to be worked, thus enabling a calculation of the hourly fee to be made. It is likewise up to the sole trader – both while the work is ongoing and on completion thereof – to furnish his or her principal with an overview of hours worked and costs incurred, for the principal to verify. The principal is moreover under the obligation where the costs incurred and/or numbers of hours worked have turned out greater than the original estimate(s) to make up the shortfall if the sole trader’s hourly fee would otherwise drop below the set minimum.

It is up to the principal on the sole trader’s completion of the work to ascertain whether the obligation to pay the minimum hourly fee has been satisfied. The corroborating records and the proof of payment are to be included in the principal’s administrative accounts. Any contract that is concluded for a term in excess of one month will in principle involve monthly invoicing by the sole trader and monthly payment by the principal, albeit that the parties are at liberty to depart from this on condition that they should have agreed accordingly in writing and a maximum invoicing period of three months should be adhered to.

Effective date

It is hoped that the new system involving the minimum fee and independent contractor’s statement should take effect at the start of 2021.

Dutch version: Conceptwetsvoorstel invoering minimumtarief zelfstandigen