In the Netherlands, there are three types of contracts pertaining to work. These are:
- Employment agreement
- Contract for services
- Contract of work
Workers are classified based on the contract that is in place.
An employment agreement is defined as the following in Dutch law:
“Parties have entered into an employment agreement (relationship) when one party, an employee, commits himself to perform labor in the service of the other party, the employer, against remuneration during a certain period of time.”
There are three criteria that must be met for an employment agreement to be in place. These are:
- There must be a relationship of authority, i.e. the employer must be entitled to give orders about how work should be carried out.
- The work must be carried out only by the employee.
- The employee must receive renumeration for the work.
If work of at least 20 hours per month is performed for renumeration for three consecutive months, then there is a legal presumption that an employment agreement is in place.
Contract of Work
A contract of work is where an independent contractor agrees to produce work of a tangible nature for a sum of money which will be paid by the other party. There is no relationship of authority and the contractor does not need to perform the work personally.
Contract for Services
Contracts for services also involve an independent contractor. The activities performed will be anything that is not the creation of work of a material nature, the retention of property, publishing works or the transportation of people or property.
When determining whether a contract is an employment agreement or a contract for services, it is necessary to review the following (non-exhaustive) circumstances:
- how free the worker is to organise their work
- the nature of the remuneration
- whether payments are made directly by several clients
- the extent to which the worker bears an entrepreneurial risk
- the extent to which the worker supplies their own raw materials
- whether there is continued payment during vacation time, illness and leave
- the extent to which, in addition to the agreed work, other work is performed
- any deduction of social security contributions and payroll taxes by the (potential) employer and any payment of VAT by the worker.
Determining Employment Classification
To find out more about employment classifications, contact us for help and advice.